How to calculate and execute the project budget?

Author: Nikolay Elagin

Rubrics: Project management

– How to comply with the financial framework of the project?

– To make the calculation of the budget correctly.

I am often asked whether it is realistic to stay within the planned budget during construction or relocation. In my experience, most of the budgets we have made have been executed precisely or with savings. What should be taken into account in the calculation of the budget and what are the professional tricks for the exact execution of the budget?

Бюджет проекта

The right project budget determines its success

What is the budget of the project?

What is the project budget?

It is a comprehensive assessment of all project costs, from idea to commissioning or relocation. The budget takes into account all the financial costs of the project. And if the project schedule I would compare with the heart rate, the budget is definitely the blood of the project. Proper budgeting is the key to successful implementation of all plans and tasks without exception.

We prepare a preliminary budget at the stage economic expertise.

Today I want to focus on the practical aspects of the preparation and implementation of the budget.

What is the budget of the project (for example, moving)

We add up the budget of all costs at key stages of the project. Let's say we need to calculate a moving budget. We contribute the following costs to the plan.

  • Lease, including: the risks of withdrawal from the contract, double lease, if it occurs due to the large volume of construction, rental costs for a new office.
  • Design: development of a design project, engineering design and preparation of a working package of documentation.
  • For operation after commissioning: utilities and operating costs.
  • Management costs.

We calculate how much the design will cost, we detail how much the construction costs, project management, construction control.

In addition to these project costs, there are operational costs that can add up to significant amounts. Here are a few items of such costs:

  • the cost of the move (packaging, transportation, rise to the floor);
  • furniture, including non-standard;
  • office supplies: soap dispensers, towel holders, hand dryers, etc. ;
  • blinds and curtains;
  • kitchen equipment;
  • IT-equipment.

If the growth of the company and the number of its employees was the reason for the change of office, it is likely to increase the cost of life support office. Cleaning costs, water for coolers, security will increase Do not forget that you will need a change of address, registration in the new tax.

We always take these issues into account when budgeting for the customer and specify them in the list of expenses without a specific cost. The customer can fill in these articles on their own or instruct us to budget.

The interior design of the office, in particular branding or phytodesign, is not included in the services of the General contractor. The customer can do it on their own or again to instruct us under a separate contract.

After all the future expenses are taken into account, the result of the efforts is summary table and schedule of all the upcoming expenses, both capital and operating. This is the project budget.

Составление бюджета

The ready budget takes into account capital and operating expenses

In my projects, I work only with the budget, which I made myself, and the customer accepted and approved. I am not interested in the budget, which is generally available to the customer, because I have no goal to pull all the possible money. My goal is to make the highest quality, efficient and effective project. I named the price for which this project will be implemented by 100 %, the customer accepted it.

How accurate is the project budget?

I sometimes hear the question: "What if we go beyond the budget?»

In most cases, Office Time's project budgets are completely accurate.

The reason for the high accuracy of calculations is simple: we consider the budget not on theoretical "market prices", but on our real projects and costs. We are practitioners, or rather, practicing experts. Therefore, our prices are not taken from"prices on the Internet." This is the actual operating position of the equipment and materials.

I have a useful technique in my Arsenal: I always consider the preliminary cost with a coefficient, I lay the percentage of expenses higher. In the process, the price is usually optimized.

A real example: I have already optimized my budget for one of the current projects by 44 % (in monetary terms – by 600 thousand). But in another section of the same project, the customer "demolished" part of the costs, although the functionality of the project will still require them. Therefore, the optimized funds will help to close the resulting budget hole.

The preliminary budget drawn up by us does not change in a big way, except that the customer himself wants to allow overspending.

All our budgets are implemented 100% or with savings. At the same time, those that are implemented at 100 %, also in most cases had savings, but many customers, seeing the savings of 1-2 million, decided to spend them on previously unplanned improvements. For example, instead of the film to use marker paint, which is more expensive and looks aesthetically pleasing, although functionally both materials are the same. Or instead of blinds hang Roman shades. Or, as it was in one of the projects, the customer decided to spend the saved money on the purchase of furniture above the class that was planned by the budget.

In some cases, there is an overspending

And yet overspending sometimes happens, but it happens only at the request of the customer. If a person wants to Cabinet table made of natural wood or handmade lamp of a certain manufacturer, ready to pay for it – I can not refuse him. Although in this case, I will certainly offer alternative options that fit into the budget.

Real example. The customer wanted certain lamps in the office. I offered him a few alternatives, but he wanted these. They cost 10 times more than the options offered, but he wanted them, and that's his right. Such moments cannot be taken into account in advance in any budget, nevertheless they happen.

Причина перерасхода бюджета

The reason for budget overruns may be the desire of the customer, such as the requirement of exclusive furniture

Techniques to save real budget

You can save money on materials or technologies, but in order to optimize the budget without losing quality, you will have to become an expert in construction. There are a number of professional techniques that will allow you to stay within the planned budget.

Working with contractors and suppliers

The budget depends on the level of companies that the customer invites to tender. Famous, large and expensive contractors have their own specialists, equipment and resources on the balance. Medium-sized companies have full-time employees, and large construction equipment and complex tools are rented. Small contractors, as a rule, neither regular employees, nor regular equipment have and work by a contract method. They are the cheapest.

Choosing a certain category of contractors, you can adjust the budget.

There are mechanisms that we use to evaluate suppliers 'or contractors' offers and to keep the cost budgeted. For example, from experience, I know exactly how much profit the contractor puts in the tender offer, so I can estimate how much his proposal is "the last" or there are resources for optimization. We prevent excessive cheating and this seriously saves the budget of the customer.

When we analyze the project, we compare not only the selling prices, but also the purchase prices from different suppliers to fit into the budget.

Работа с подрядчиками и поставщиками

Expert analysis of suppliers ' price offers will help to save the budget

Working with designers

At the design stage it is necessary to take into account not only aesthetics, but also operational nuances. If the designer offers a carpet that looks perfect, I need to know whether it has fire safety, whether it can be operated in an office environment with high loads and so on. Therefore, when developing project documentation, I always analyze what the engineer or designer offers. I always ask, from what materials and what money they cost, analyze the information obtained, based on their knowledge of the market and the prices on it. All this also helps to keep finances within the budget.

have already talked about how to save the budget for construction.

Бюджет требует четкого расчета

To calculate the budget, you need to clearly understand the sequence of actions at all stages

One of the main rules of budgeting and subsequent implementation of the budget is constant monitoring of each action and task. You should always have spare options to replace too expensive technology or design solution. The preliminary budget of the project can be made on their own. But in order to detail, optimize and implement the project, while remaining within the budget framework, the assistance of experts will be required.