Construction budgeting – is underestimating the best idea?

Nothing makes a better headline that ‘new project comes in under budget’ or ‘new project finishes months ahead of schedule’. Across the ditch in Auckland, two major projects were the targets of speculation about overestimations in budgets. The Victoria Park Tunnel was completed two months early, even when faced with the difficult task of shifting and replacing the Bird Cage hotel, a heritage-listed building. The Newmarket Viaduct, while still ongoing, is ahead of schedule and possibly under budget as well. Many have wondered if the expected construction times were exaggerated to create good press upon completion.
Most of this is, of course, idle speculation. After all, both projects went to tender and the competing companies would’ve wanted to offer the best price to New Zealand Transport Authority. Every construction management company must walk this fine line with time and cost budgets when submitting tenders. You want to give the client a realistic idea of how long a project will take and how much it will cost, but you also want to be competitive in the tender process. While financial modelling can answer some of these questions, nothing is more valuable than experience – unless some finds a way to bottle luck!

Author: Mr M Grochowski

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