An Introduction to Large-Scale Construction Project Budgeting

Budgeting is the backbone of any successful construction project, and it only gets more important as the project scale grows. Whether it's a skyscraper, bridge, or complex infrastructure, the larger the project, the more essential it is to have a carefully planned budget to guide you.

It’s easy to feel overwhelmed by all the factors you need to consider, but with the right approach and some careful planning, you can turn even the biggest projects into financial successes.

At The LGW Group, we’ve spent years helping with large-scale construction projects, offering services like concreting, cast stone creation, steel deck installation, and much more. In the guide below, we’ll show you how to plan, manage, and fine-tune your project’s budget to keep everything running smoothly.

What is a construction budget and what should it include?

A construction budget is a detailed financial plan that covers every cost involved in a project, from start to finish. For large-scale projects, these costs are usually divided into two categories: direct and indirect expenses.

• Direct costs refer to the expenses directly tied to the construction work itself, such as labour, materials, equipment, and subcontractor fees.
• Indirect costs include things like administrative expenses, permits, legal fees, insurance, and contingency funds for unexpected issues.

Having a well-planned budget helps you anticipate how much funding you'll need, keeps you on track with a clear framework, and helps you avoid common pitfalls that might catch others off guard.

When creating a budget for a large construction project, be sure to consider the following components:

Pre-construction costs

Before the first shovel hits the ground, there are several preliminary expenses you need to account for:

• Site and environmental assessments, soil tests, and surveys
• Design, engineering, and architectural fees
• Zoning approvals, building permits, and other legal documentation

Material costs

Materials are one of the biggest expenses in any construction project, so it’s important to consider both the quantity and quality needed. Key materials often include:

• Steel, concrete, and lumber
• Finishes like flooring and windows
• Electrical, plumbing, and HVAC systems

It’s also a good idea to include a buffer for price changes, as material costs can rise due to market shifts or supply chain issues.

Labour costs

Labour is another major part of the budget. Be sure to account for all workforce-related expenses, including:

• Salaries, wages, and overtime
• Benefits and insurance for workers
• Subcontractor fees

Since different skills are needed at various stages of the project, it’s important to break down labour costs by trade and timeline.

Equipment costs

Equipment costs cover both renting and purchasing construction machinery, as well as ongoing maintenance. For larger projects, be sure to consider the following equipment-related expenses:

• Heavy machinery (cranes, site tippers and diggers)
• Tools and safety gear
• Operation and fuel costs for the equipment

Contingency fund

No project ever goes exactly as planned. Unexpected costs are almost guaranteed, whether it’s due to material price changes, weather delays, or unforeseen site conditions. Having a contingency fund (typically 5-10% of the total project cost) will help you manage these surprises without derailing your budget.

Soft costs (indirect costs)

These costs are often overlooked but can add up significantly in large projects. Soft costs may include:

• Project management fees
• Insurance and bonding
• Legal fees
• Utility connections and infrastructure upgrades
• Marketing and sales expenses (if applicable)

How to build a large-scale construction project budget

Now that you’ve got a clear understanding of the costs involved, you can start outlining your project’s budget. Here’s a simple guide to help you get started:

1. Define the scope of the project

Scope changes are one of the main reasons for budget overruns, so it’s important to start by clearly defining the project scope, including all requirements, specifications, and deliverables. The more precise and detailed your scope, the easier it will be to accurately estimate costs.

2. Develop a detailed cost estimate

Work closely with designers, engineers, contractors, and suppliers to get accurate cost estimates for every aspect of the project. Use historical data from similar projects to improve accuracy, and consider using professional cost estimators to support the process.

3. Include all phases of construction

Make sure that every phase of the project is included in the budget, from pre-construction planning through to post-construction and closeout. Each phase can introduce new costs, such as:

• Pre-construction: Site preparation, permits, and approvals.
• Construction: Materials, labour, and equipment.
• Post-construction: Inspections, punch lists, and final approvals.

4. Identify funding sources

Secure financing or funding for the project, which may come from public funds, private investors, loans, or a mix of sources. Make sure your budget aligns with the available funding to prevent cash flow issues later in the project.

5. Build a cash flow plan

Make sure you have enough liquidity to cover expenses at each stage by creating a schedule that tracks the flow of funds in and out of the project. This schedule should be aligned with key project milestones to keep cash flow on track.

Best practices for managing and controlling costs

Budgeting doesn’t stop once construction begins. If you’re looking to stay on track and avoid unexpected costs, your best bet is to follow these best practices:

1. Regular budget reviews

Construction projects are constantly evolving, and costs can shift quickly. To catch potential overruns early, regularly compare the budget to actual expenditures. Hold monthly or bi-weekly budget reviews with key stakeholders to make sure the project remains on track.

2. Use construction management software

Use technology to simplify cost tracking, reporting, and collaboration. Construction management software offers real-time updates on expenses, making it easier to monitor budgets and manage costs effectively.

3. Track change orders closely

Change orders (modifications to the original project scope) are often a major source of budget inflation. Create a formal process to review and approve change orders, making sure they’re thoroughly vetted and costs are clear before proceeding.

4. Maintain open communication

Open communication between everyone involved in the project - project managers, contractors, designers, and clients - is key to keeping the budget on track. By staying in touch and addressing any financial concerns or risks early on, you can avoid surprises and keep things running smoothly.

5. Monitor project schedule

Time delays mean extra costs, so it's important to keep a close eye on the project schedule and try to minimise any setbacks. If things start falling behind, identify the cause and tackle it right away to avoid bigger financial issues down the line.

Work with the South’s most trusted concrete and metal decking specialists

By following the steps and best practices in this guide, you’ll be well-prepared to create and manage a budget that sets your large construction project up for success.

Looking for a construction partner to take on your large-scale project? The LGW Group is here to help! Our team of concrete experts can handle everything from massive pours to detailed flooring, and we’ll work closely with you to stay on time and within budget.

Need ready-mix, screed, custom concrete products, or metal decking? We’ve got you covered. And with our fleet of pumps, we’ll make sure your concrete gets exactly where it needs to be, right on time.

Let’s talk. Get a quote online or give us a call on 0117 958 2090 today!