Project budget management

We continue to learn more about the processes that are part of our Quality Management System and one of great value is Budget Management. We will tell you about its role, the main stages and, of course, our recommendations and good practices.

In general, a budget could be defined as a prediction of the costs of a work. The objective would be for the prediction to be as accurate as possible, taking into account aspects such as the planning of the activities to be carried out during the execution of the project.

In the world of construction there are several types of budgets. We will mention two types classified by the level of advancement of the design: the first type of budget is known as an estimate, it is based on conceptual designs and it is used mainly for feasibility analysis. The second type is known as a work budget, calculated with developed plans, and it is used as a basis for construction.

To achieve an estimated budget, Mar Azul relies on its experience with similar projects and on its database of real costs of these projects, which allows establishing costs per m2 for each discipline with defined characteristics. Using these data, an objective figure is reached based on ranges of the total cost of the work and the items with the highest risk are defined.

For the work budget, Mar Azul also relies on its database of real costs of similar projects and, in addition, on consultancies with companies and suppliers with whom it has a good commercial relationship, achieving a more exact budget than the estimated . But this would be only the first step, since this budget is only a reference for a bidding process and request for quotations, where the reference budget is a key point for negotiation, review of proposals, and implementation of value engineering. After all this process, the base budget for the start of construction would be obtained.

At Mar Azul, we summarize the three best practices or recommendations that we can cite to prepare a budget as:

→ Key tools, such as an experienced human resource, for us one of our greatest strengths, as well as technological support through adequate software for calculating the budget and, of course, having the plans approved and as complete as possible. At Mar Azul, we rely on the best tools and software on the market such as
Procore y Esticom, which allows us to keep track of the quantifications throughout the budget review process and to better spread the information among all those involved. The use of these tools also provides the flexibility to change the quantification criteria (types of materials, dimensions, among others) in an easy way, saving time and rework.

→ Include clear references, both for quantities and unit prices in order to always have the traceability and basis of origin. Also, have trusted suppliers from which we can support ourselves to validate estimates and market values in real time.

→ Organization, by establishing the scope, planning the activities, and holding approval meetings, both with the assigned team and with the client, to find out their expectations regarding the project, since in many cases there are special items that the clients make special selection; all this in order to clarify any doubts that may arise, avoid confusion, and maintain the same approach in all stages.

Finally, it is important to understand that every budget is based on the documents and information provided by both the client and the designer and, definitely, the more advanced the design development we will have a higher level of definition of the same and we will be able to refine the uncertainty range of the budget estimate. However, in practice it is crucial, if not invaluable, to have an estimate from the start. Based on our experience and references of projects that we have previously managed, we can evaluate and compare to refine the degree of certainty of the estimates, so our main recommendation is an interactive review of all stages, to ensure that the parameters of cost established for the project and the recommendations of our value engineering are followed.