Construction budget: check out the steps and how to do it

The construction budgeting stage is a fundamental process in the planning and execution of civil construction projects. It involves analyzing and estimating the costs involved in completing a project, from the initial design phase through completion.

Its main objective is to determine the investment required to execute the project, considering all the elements involved, such as materials, labor, equipment, additional services, taxes, administrative expenses, profit, among others.

We've prepared this post to explain the benefits of construction budgeting and how to create one. Keep reading to get your questions answered!

What is the construction budget stage?

It's a process that estimates the costs involved in executing a construction project. This step is crucial for the planning and financial management of the project because it allows for an accurate assessment of the resources required, as well as monitoring expenses throughout the process.

During the construction budget stage, several elements are considered, such as:

• materials: includes all building materials necessary, such as cement, steel, bricks, sand, wood, pipes, electrical wires, among others;
• workforce: refers to the costs of workers involved in construction, such as bricklayers, carpenters, electricians, plumbers, painters, etc.;
• equipment: involves costs related to the rental, purchase or maintenance of construction equipment, such as excavators, concrete mixers, cranes and scaffolding;
• complementary services: considers the services provided by third parties, such as designers, engineers, surveyors, consultants, which are necessary for the development of the project;
• administrative expenses: includes costs related to construction management, such as licenses, insurance, fees, office rent, electricity and water expenses, among others;
• taxes and fees: includes taxes and legal charges applicable to construction, such as the Tax on Services (ISS), Tax on the Circulation of Goods and Services (ICMS) and social security contributions;
• contingencies: is a reserved value as a safety margin to deal with unforeseen events or price variations, preventing any changes from significantly affecting the budget.

What are the benefits of construction budgeting?

This plan offers a series of important benefits for the planning, execution and control of projects. construction. Next, discover the most relevant ones!

Financial planning

A construction budget allows for solid and detailed financial planning, providing an accurate estimate of the costs involved in each phase of construction. This helps define a viable schedule, secure adequate financing, and efficiently allocate available resources.

Economic viability

It also helps determine the project's economic viability. In other words, it allows you to assess whether the necessary investment is justifiable in terms of expected return, identifying opportunities for improvement, cost reduction and project optimization.

Financial control

The construction budget provides a basis for financial control throughout the project. It allows you to monitor actual expenditures against planned expenditures, identify deviations, and take corrective action when necessary. This helps avoid overspending and waste, and keeps the project within the established budget.

Decision making

This budget also provides valuable information for decision-making during the project. Based on estimated costs, those responsible can make better choices about materials, equipment, technologies, and construction methods, seeking the best balance between quality, deadlines, and costs.

Quality control

Construction budgeting is directly related to quality control. By estimating the costs involved in using different materials, equipment, and construction methods, it's possible to select options that meet the desired quality standards within budget constraints.

What does a construction budget need to have?

A construction budget must be comprehensive and include several essential pieces of information for an accurate assessment of the costs involved in the project, such as:

• description of the project, including information about the nature of the work, the scope of work, the location and any relevant special features;
• survey of quantities of all items required for the construction, such as materials, services to be performed and equipment to be used;
• unit costs, which represent the estimated price of each unit of measure for the item in question;
• cost composition, detailing the elements that make up the unit cost, such as direct costs (materials, labor, equipment) and indirect costs (taxes, administrative expenses, profit);
• price quotes obtained for the required materials, equipment and services;
• total budget, adding all the unit costs of the quantity survey items;
• financial schedule, which shows the distribution of expenses over time;
• observations and considerations, such as approvals made during the budgeting process, risk factors identified, additional information on specific items, or other considerations related to the costs of the work.

How to make a good construction budget?

Creating a good construction budget requires a careful and systematic approach. Here are some important steps to help you create an effective document:

• Start by gathering all relevant information, such as architectural, structural, electrical, and plumbing projects, among others;
• make a survey of the quantity of materials, services and equipment needed for the work;
• request price quotes at suppliers, contractors and service providers for quantity survey items;
• prepare unit cost compositions for each item in the quantity survey;
• add a contingency margin to the budget to deal with unforeseen events, price fluctuations and risks;
• review the budget carefully to check its consistency and accuracy;
• document all aspects of the budget, including sources of information, price quotes, cost breakdowns, and any additional considerations;
• track actual expenses during project execution and compare them with the projected budget.

As you can see, preparing a construction budget is an essential step for the success of your project, as it allows for financial control, economic viability, and appropriate decision-making throughout the construction process.

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