02/23/2026

How Property Owners Can Mitigate Cost Overruns in Construction

Construction cost overruns are common. Over time, they’ve been perceived as an accepted reality across the industry. However, just because overruns are anticipated doesn’t mean they aren’t preventable. All it takes is the right combination of strategy, understanding and preproject discipline.

Landlords, property owners and developers understand how damaging an inflated budget can be to a project. It’s not just a matter of margins being cut. The larger scope of financing and ROI is also at stake for them. But how can property owners shift from increased spending to a more rigorous preconstruction process in construction project planning?

Exploring how property owners can mitigate cost overruns in construction can prevent budgetary issues before breaking ground. Proper construction budget management can use data innovations and protect property owners’ investments.

Common Causes of Construction Cost Overruns

Defining what leads to exceeding budgetary limits provides a stronger blueprint for preventing them. Whether it’s due to a systematic issue or human error, there are several causes for cost overruns in construction projects, including:

• Scope creep: Scope creep and construction project success are interlinked. Poorly defined project parameters and changes that exceed the original design can increase your bottom line.
• Inaccurate estimates: Relying on ballpark figure estimates without the support of data-backed historical benchmarking creates opportunities for unexpected oversights to occur.
• Unforeseen site conditions: Structural deficiencies, adverse environmental conditions and other unforeseen obstacles can cause timelines to shift and budgets to increase.
• Market volatility: External factors, such as fluctuations in the price of construction materials and labor shortages, can impact a preplanned budget.

Neglecting to have solutions in place to resolve these types of cost overruns can make construction budget management a challenging task.

How Budget Volatility Impacts Property Owners

Unlike contractors, property owners must face the financial challenges of capital allocation directly. Budget volatility and inflation in the construction industry create a ripple effect. Over time, property owners can face delayed occupancy, loss of anticipated future income and a lack of overall project clarity.

Beyond the bottom line, volatility in construction budget management also impacts credibility. Consistent overruns can lead to developers and owners’ representatives being associated with poor-quality projects among investors.

Cost Overrun Prevention Strategies

Preconstruction planning and risk management strategies are crucial for ensuring a project’s success. But preventing unnecessary construction cost overruns still takes attention to detail, foresight and actionable data to influence decisions.

Some robust strategies for accurate cost estimating to reduce overruns are:

• Comprehensive scope definition: Reduce potential costly misunderstandings with a detailed scope that clearly sets out responsibilities, assumptions and the project deliverables.
• Data-driven estimating: Rely on estimates that use historical project data from innovative software over speculative figures.
• Tiered value engineering: Evaluate options to ensure alignment with design intent and construction financial management goals.

Finally, consider implementing a tiered contingency fund that places some “just in case” money into separate design and construction categories. A healthy contingency fund provides a secure bedrock of financial support for unexpected issues without affecting the primary budget.

How Communication and Documentation Reduce Risk

A 2022 McKinsey study on maximizing value through preconstruction reported that project overruns were 79% of initial budget estimates, meaning they spent nearly twice what they’d budgeted. While projects across all sectors are subject to construction cost overruns, unauthorized spending can be prevented through the implementation of strict approval hierarchies.

Cultivate a project culture that prioritizes transparency above all else. Express the importance of a clear paper trail, including contracts, approvals and any meeting minutes. Communicate the need for financial reporting that updates the actual costs against the budgeted costs in real time. Doing so helps protect the legal and financial interests of property owners.

Technology’s Role in Construction Cost Tracking

Any available technology that streamlines processes and provides actionable data insights should be part of a modern construction project. Embracing innovations at the preconstruction stage makes tracking construction costs simple, agile and more insightful.

Some of the ways technology can assist property owners in construction cost tracking include:

• Project management platforms providing accessible insights on financial health 24/7.
• Proactive analysis to adjust project plans in real time due to trends and unexpected issues.
• Centralized financial data for cost comparisons and automated reporting.

Innovations like building information modeling (BIM) and virtual design and construction (VDC) are essential modern tools. By detecting obstacles and project clashes early, they reduce the chances of issues being a financial burden in the field.

Best Practices for Proactive Lifecycle Management

Understanding how to mitigate cost overruns in construction requires an open mind and collaboration with trusted experts. This isn’t a call to completely revolutionize construction budget management. It’s about reassessing some of the resources and procedures used to develop a stronger, more cost-aware plan.

Some of the most impactful ways of achieving a more proactive lifecycle management in construction include:

• Enlisting the insights of a construction manager at the preconstruction stage to confirm costs related to constructability.
• Vetting contractors based on their financial stability and safety records, instead of only using price as a deciding factor.
• Expanding your scope of view to consider the total cost of ownership (TCO), such as maintenance and support costs, not just the hard construction costs.
• Understanding that the most cost-effective bid isn’t necessarily always the cheapest one at the end of a project.

The goal in effective construction project planning is to ensure consistency. Implementing these best practices can provide strong and proactive construction budget management.

Construction Financial Management for Property Owners

Property owners should feel empowered and passionate about construction projects. By mitigating the risks associated with overruns, focus can shift to achieving results and long-term planning. However, achieving this requires a combination of proactive and transparent solutions working in tandem.

Clear scope, modern technologies and rigorous construction financial management are all vital parts of preventing cost overruns in construction. But enlisting the support and expertise of a trusted construction management partner is the first step toward preventing any unexpected problems at the beginning of a project.

Founded on the principles of honesty and trust, JRM Construction Management leads with transparency in all dealings with clients. By taking the time to understand our clients’ vision, we work to ensure that projects of all sizes, scopes and complexities become a reality.

Are you looking to leverage preconstruction insights to ensure budget certainty in your next project and beyond? Contact our team of experts today and learn how we can help secure budget certainty.