In our experience, we worked for a client and we were given a project to manage which had been run for a few months. The budget for the project was broken down into material, labor, equipment and subcontractor costs. Referring back to the tender, we couldn’t find how the budget was derived. We asked the contracting parties (a client and contractor) to explain how the numbers were derived to a contract sum.
We simply found out that; both the client and contractor just sought and agreed on a contract sum. They had not produced and based on detailed bills of quantities, nor involved project managers to participate in the project work. The client and contractor proportioned various cost components, by guessing as they thought best without––prudent advice on project management.
However, there was no science in what they had done, because in a few months the project had run, they both made losses and lost money. They tried comparing their initial project progress reports with the budget and told us that; they had lost money because they applied unusual project approach. They regretted their actions and attributed their loss of money to lack of detailed bills of quantities and project management knowledge and skills, among others.
Ideally, each project is ought to have an accurate budget. The purpose of budget is to provide an estimate of the project cost a client is to pay to the contractors. On the other hand, budget helps the contractors to determine profit or losses they might make by implementing the project. We advised both parties that; the budget should be as accurate as possible and should be updated during implementation of the project contract. The budget has to take into account any changes in circumstances or errors made in the bills of quantities when the budget was first made.
We understood that; making a good budget plan is difficult for most clients, for both employers and contractors. Specific advice and good trainings are the solutions. However, Paradise Technical Services offers these tailored solutions, among other services.