Planning a Budget for Construction Projects

The Difference Between Construction Budget and Program Budget - Nabholz  Construction Corporation

A construction budget lets you manage the funding and ‘profit-cost’ planning related to your project. Managing construction projects requires excellent planning, organization, and implementation skills. To successfully manage a construction project, communication must be key across the workforce from contractors to developers. For a project to be successful, it takes professionals and suppliers to precisely plan and delivers a successful strategy.

One of the biggest barriers within construction is the strict timescales that are in place. It is so important to ensure your budget incorporates the time-sensitivity restrictions through setting project milestones. Planning a budget should be one of the first decisions you make, this will make any plans to follow a lot easier.


Why is a budget important? There are several reasons why budgets are crucial when it comes to planning the project and what it may entail. A big help when you come to do this will be from professional estimators and quotes from suppliers and subcontractors.

As previously mentioned, a budget can be very important in relation to the time scale of your business. Projects can usually be completed quicker if they have a higher budget, this is down to benefits like being able to hire people with higher skills or better use of technologies.


There are many different routes that can be taken when it comes to creating your budget and usually the best route for you will come from experience and trial and error. One of the most proven methods within construction is to divide the budget between hard and soft costs. This usually means the soft costs are any expenditures that aren’t directly related to the physical building of the project. They can also be known as intangible expenses; soft costs typically account for 30% of a construction project’s total budget. The other 70% account for the hard costs which include expenditures that are directly related to the physical construction of the building, road, bridge, or whatever project may be. As the “brick and mortar” expenses are tangible, fixed costs which often make them a lot easier to calculate and control.  By splitting the budget into these two categories allows you to better manage where your money is best spent. And once you can implement tighter cost controls within your budget the less impact and problematic it will make the issues that could arise from the costs you are unable to control.

What is Included?

Property This will include the building and scope of your project, which will include land, fees and taxes. This can vary massively due to location and type of land. It is best practice to try and keep the budget for your property investment as realistic as possible.

Equipment and Tools – Every construction project will require a piece of equipment and tools for various tasks. Depending on how the equipment is used they may be hard or soft costs. If you already own equipment or tools, they are regarded as capital expenses for accounting purposes. Based on the needs of the project, contractors may need to purchase their equipment from trusted suppliers in their area, a great way of keeping costs low is to purchase used equipment.

Materials – This cost can be a large portion of the budget and so it is a huge benefit that they can often be negotiable, especially if you have developed a good relationship with your suppliers. Again, like most aspects of the budget people like to break it down into sections, with materials it is usually split into site preparation and building structure.

Project Management – Construction projects require project management staff who are highly skilled and organised. The project management cost can include the salaries of your project team members and their office expenses, security staff, safety supplies and all other materials that are part of project management costs.

Labour – This will be the cost of your workforce including tradespeople, subcontractors, equipment operators, project managers, human resources and many more. Also included in this is the employee’s compensation, holiday, and sick pay.

Contingency – Planning for the unexpected is key as unforeseen costs can always arise on most construction projects so having this contingency plan in place and included in the budget cost is crucial. The usual guideline for such a plan is around 3 and 10% of the total budget, however, depending on the project you may feel 20% is required.

Omnia Machinery is an industry expert in used construction equipment and a trusted machinery trader. We stock a wide variety of quality used construction equipment to suit many different projects such as cranesroad equipmentquarryearthmovingconcretepiling and drilling and underground mining. We provide our customers with all information and pictures with their quotation before any sale is agreed upon. From inspections to shipping, we are here to support you through every step of the transaction and keep you informed throughout the whole process enabling you to purchase in confidence. Contact us today with your machinery requirements.