Why Construction Projects Go Over Budget, and How to Stop It Happening to You

Why construction projects go over budget before work starts

When a job overruns, people blame the builder or bad luck. In our experience the causes are more ordinary, and they repeat.

1. Unfinished design. The budget was set on sketches. The real building has more in it.
2. The lowest tender. The cheapest price often won because it left the most out.
3. Gaps in the quote. Provisional sums, exclusions and "by others" items carry risk back to you.
4. Changes after signing. Every change is priced when there is no competition left.
5. Hidden conditions. Old buildings hide structure, damp, services and asbestos problems.

None of these is fraud. They are how the industry prices work under pressure. But each one moves money from "budget" to "extra", and you pay it.

Optimism bias: the official numbers

This is not only a private-sector problem. The Treasury has a name for it: optimism bias. Its Green Book guidance tells public bodies to assume early estimates are too low, and to adjust for it.

The upper-bound uplifts, as reproduced in NHS Wales guidance, are stark. Up to 24% on capital cost for standard buildings. Up to 51% for non-standard buildings. Works duration can run up to 39% longer on non-standard projects.

Those are not overrun rates. They are what the government tells its own appraisers to expect at an early stage, before risks are managed down. A refurbishment of an old London building is rarely "standard".

Your budget, the quote and the final account

Three numbers matter on every project. Most clients only watch the first one.

An illustration of how a budget grows

A client budgets £400,000 for a refurbishment, from a rate per m². The winning quote is £430,000, but £60,000 of it is provisional sums at low values. Opening up finds a rotten floor and old wiring: £45,000. The client adds a better kitchen and moves two walls: £55,000. The provisional sums settle £50,000 higher than allowed.

The final account lands at £580,000. That is 45% over the budget and 35% over the quote. Every step had a reason.

Design that is not finished at tender

A builder can only price what is drawn. If the drawings show a wall, but not the steel above it, the steel is not in the price.

Clients often tender early to save time. That is a fair choice, but it has a cost. The less complete the design, the more of the price arrives later as variations.

Before you tender, check three things. Is the structural design done? Are the mechanical and electrical services designed, not just "allowed for"? Are finishes chosen, or listed as "client to confirm"?

Our guide on how to brief a contractor for a commercial project shows what a complete brief looks like.

What changes after you sign

Once you sign, competition stops. The contractor is now the only one pricing your changes.

That is not wrong in itself. A change disrupts the programme, and someone carries that risk. But a change priced alone is rarely as sharp as the same work in a competitive tender. It often brings extra time, and extra time brings extra site costs.

The biggest source of change is the client. A new idea, a better finish, a tenant's late request. Each one feels small. Together they move the final account more than anything else we see.

The gaps in a quote that come back later

1. Provisional sums. An allowance, not a price. If it is set low, the quote looks cheaper and you pay the difference.
2. Exclusions. Items the quote leaves out, often in a list at the back.
3. "By others". Work that someone else must do, and someone else must pay for.
4. Daywork. Unplanned work paid at hourly rates, often without a cap.

We explain each of these in detail in our guide to provisional sums in construction. And if you want to know how some quotes are built to win low and recover later, read builder overcharging: how contractors win on price.

Hidden risk in existing buildings

New-build sites have ground risk. Existing buildings have far more. London is full of buildings that have been altered many times, often without drawings.

On land and old buildings these are called abnormal costs. Our guide to abnormal costs in construction lists the usual ones.

What we most often find when we open up:

• structural timber or steel that is damaged, undersized or missing;
• old wiring and pipework that cannot be kept;
• damp and rot behind finishes;
• asbestos in older materials;
• floors and walls that are not level or not where the drawings say.

None of these can be priced properly from a walk-round. They can be reduced with surveys and opening-up works before you sign. That is the cheapest money you will spend on the project.

Material prices add pressure too. The government's building materials index rose 6.4% in the year to August 2026, and structural steel rose 21.2%. A quote that is months old may not hold.

How to cut the overrun before you sign

You cannot remove all risk. You can stop most of the avoidable overrun by doing the work before the contract, not after.

A clear contingency is the most important line most budgets leave out. We usually advise 5% to 10% of construction cost, depending on complexity. Our guide on how much contingency a construction project should have gives a stage-by-stage view.

What we do on our own quotes

We price risk too. Every contractor does, and you should expect to see it.

When you read any builder's quote, including ours, look for where the risk sits. Some of it is in the price. Some of it is in provisional sums. Some of it is excluded and stays with you. A good quote makes that visible, so you can decide what to keep and what to close down.

Around 60% of our labour is our own in-house team, so there are fewer layers of margin and one team answers for the price.

Two things we do. Variations are only agreed in writing, and priced before the work is done, so you decide with the number in front of you. And for contingency, we usually advise 5% to 10% of construction cost, depending on complexity.

One client summed up the result in a Google review:

"Site was always left tidy at the end of the day and no surprise charges either."

For how we manage cost and time once work starts, read our guide to construction project management on time and on budget. For choosing a procurement route, see design and build vs traditional procurement.

Most overruns are visible before the first brick, if someone looks. Budget already slipping, or about to sign? Want a builder who prices the whole job up front? Book a site visit.