Understanding Construction Cost Variance – Causes and Solutions

Construction cost variance is a common problem for construction managers, but it can be managed with the right tools and processes. In this article, we’ll explain what construction cost variance is, why it happens, and how to manage it.

What is construction cost variance?

Construction cost variance is the difference between actual (actual) and expected costs. It can be expressed in dollars or percentage terms, depending on how you want to measure it.

The actual construction cost is what your project actually costs: how much money went out of your pocket and into things like labour, materials and equipment for the job site? The expected construction cost is what you budgeted for those items before starting work on your project; this may have been based on estimates from suppliers or contractors, or simply an educated guess based on similar projects elsewhere in town or regionally (or nationally).

Why does construction cost variance happen?

Construction cost variance is a common problem that can happen for a number of reasons. One of the biggest causes of construction cost is changes in the project scope, or what exactly will be built. If you’re building an addition on your house and suddenly decide to add another bedroom, that’s going to change how much money it costs.

Another common cause of construction cost variance is changes in labour and material costs–for example, if the price per square foot for lumber goes up significantly during your project because there was a bad storm that destroyed most trees at a nearby lumber yard and now they all have to import more wood from farther away (and thus charge more).

Hiring a reputable construction company

When you are ready to build your dream home, you must hire a reputable construction company in malaysia. There are many things to consider when hiring a contractor, but these tips will help you narrow down the best choice for your project!

Understand the project.

The first thing to do is to understand the project. If you don’t know what you want and how much it will cost, how can anyone else?

Make sure you have a clear idea of what your goals are for the project, as well as any constraints or limitations that might affect its outcome. You should also make sure that everyone involved has a good understanding of these factors–including yourself! This includes knowing what features are included in the quote, whether there are any extra charges for additional work (such as extra materials),

Get their references.

When it comes to hiring a construction company, it’s important to take the time to do your research. The first step in this process is asking for references from past clients. You want to make sure that they’re happy with the work done by your potential contractor, and whether or not they would use them again in the future.

Identify and understand the risks

The first step in managing risk is to identify and understand the risks. As early as possible in a project, you should create a list of all the risks that could affect your team’s ability to deliver on time, within budget and with quality. The second thing you’ll want to do is explain what each type of risk is so that everyone on the team understands how they can contribute during risk management meetings or discussions (for example: “What will happen if we don’t get this feature ready by launch date?”).

Create a clear, documented plan for monitoring, measuring and reporting on risk mitigation success or failure.

The first step in managing risks is to define the problem before starting on a solution. What do you want to achieve? What are your goals? Once you know what you’re working toward, it’s easier to figure out how best to achieve those goals.

Your risk mitigation strategy should be based on an ambitious goal that is realistic and achievable within 3-6 months of setting it up. For example, if one of your fitness goals is losing 10 pounds by summer vacation and another goal is running 5 miles without stopping at least once per week during winter break (which lasts two weeks), then this could be considered an overly ambitious plan because both require significant changes in behaviour over a short period–and both require sustained effort after those two weeks are over as well!

Mitigate risks in your project.

Risk management is identifying, analysing, and responding to project risks. It’s not just about avoiding risk; it’s also about managing it.

Risk management involves making informed decisions based on your understanding of your environment and the impact that various factors may have on your project. You can mitigate risks in your project so that they don’t become real problems later.

As you can see, there are several ways to mitigate risks in your project. The essential thing is that you need to identify them early on and plan for how they will be addressed. You should also try to avoid or transfer risk whenever possible so that it doesn’t become a problem later on down the line when it could have been easily avoided at the beginning stages of planning!