How many Construction Projects go over budget

The numbers behind construction projects going over budget are truly staggering. Statistically, the odds of completing a project within the budget you set are not in your favor. In this blog, I will reveal the truth behind these numbers, why projects go wrong, and most importantly, how to prevent financial losses. Stick around for valuable insights that could save your next project! This is one of my favorite topic because it’s something we’ve been discussing for years at Elevate Construction and Lean Tact. Our companies, along with our podcast (now over 1,000 episodes), have long emphasized the importance of proper planning and project management. There’s even a fantastic book, How Big Things Get Done, that draws from over 16,000 case studies to back up every point we’ve been making. And believe me, the facts will blow your mind.

The Numbers That Will Shock You

Out of a sample of over 16,000 projects, only 47.9% were completed within the budget. The average over-budget figure is a whopping 65%! And when you look at the outliers, known as “fat-tailed” projects, the budget overruns can exceed 1800%. These are shocking statistics, but there’s more: only 8.5% of projects are completed both on time and on budget, and a mere 0.5% are delivered on time, within budget, and to the owner’s satisfaction. These are pretty horrifying numbers, but they reflect the reality of construction project management today.

A Tale of Two Projects

Let me illustrate this with two examples from How Big Things Get Done. The Train to Nowhere: A bullet train project in California was originally slated for completion in 2020 with a $33 billion budget. Fast forward, and the new completion date is 2030, with a budget exceeding $100 billion. The project is only set to complete 172 miles out of the 500 originally planned. After 14 years, they are more than $70 billion over budget and 10 years behind schedule. The Empire State Building: On the flip side, the Empire State Building came in under budget. The project was originally budgeted at $50 million, and it was completed for $41 million. That’s $174 million under budget in today’s dollars, and it was finished two weeks ahead of schedule. They succeeded because they planned meticulously, down to the number of bolts and rivets required. Why Do Construction Projects Fail? The reasons for these failures often boil down to three major issues:

1. Lack of proper planning.
2. Not using the right systems.
3. Teams without adequate experience and training.

But these problems have more specific roots, and I want to highlight a few critical ones: Fast Thinking, Slow Action: Too often, teams rush into projects without a solid plan. Thinking slow and acting fast means taking the time to thoroughly plan during pre-construction, which can help prevent disastrous outcomes. The Iron Law of Project Management: Projects almost always take longer than initially estimated. Pre-construction is the time to not only assess risks but also to rely on historical data to guide expectations. Pushing Fallacies: Many believe that pushing contractors or overburdening teams will speed things up, but this often leads to more delays and cost overruns. Lack of a 10th Man Rule: This concept, derived from the movie World War Z, suggests that if everyone in a meeting agrees on a direction, it’s the responsibility of one person (the 10th man or woman) to question the consensus. This helps anticipate issues and prepare for unforeseen problems. Solutions for Success If you’re wondering how to avoid these pitfalls, here are some practical tips: Maximize Pre-Planning: Ensure that your project plan has been thoroughly vetted and revised multiple times before starting. Don’t rush into construction before everything is ready. Hire Experienced Builders: Every successful project requires at least one master builder with the right experience. This person should have a team that has worked together before and knows how to deliver. Take Care of the Team: Success also depends on the overall team’s morale. Simple things like good site conditions, clear communication, and recognition of hard work go a long way. Find Your “Lego Piece”: Identify the repetitive elements of your project that you can perfect and prefabricate to speed up the process. Plan for the Unexpected: Always have a contingency plan and be prepared to iterate on your project’s design as needed. Use the Right Systems: Incorporate tools like tact planning, last planner systems, and Scrum methodologies to keep your project on track. Recognize Accountability: If your project is failing, the problem is likely internal. Own it, fix it, and work as a team to find solutions Final Thoughts The data is clear: most construction projects go over budget and over schedule, but this doesn’t have to be the case. By applying the right strategies, systems, and team dynamics, you can significantly improve your odds of success. If you need help with project planning, training, or support, Elevate Construction is here to assist you.