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Construction glossary

What is a Cost Overrun?

A cost overrun, in the context of the construction industry, refers to the excess amount that needs to be spent over the initially agreed or budgeted cost for completing a particular project. It’s an unanticipated increase in costs that occurs due to various factors such as inaccurate estimation, changes in project scope, unforeseen challenges, or increase in material or labor costs. In essence, it’s when the actual cost of the project exceeds the estimated cost. It is critical to manage and minimize cost overruns as they can seriously impact the overall profitability and success of a construction project. Effective project management, regular monitoring, vigilant control measures, and contingency planning are some strategies to mitigate such cost overruns in construction projects.

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Other construction terms

General and Administrative Costs (G&A)

What are General and Administrative Costs (G&A)?

General and Administrative Costs (G&A) in the construction industry refer to expenses associated with day-to-day operations that are not directly tied to a specific project. These are necessary costs ...
Quick Ratio

What is a Quick Ratio?

A Quick Ratio, also known as the Acid-Test Ratio, is a financial metric prevalent in several industries including construction. In the construction sector, it's used to evaluate a company's short-term...
Contingency

What is a Contingency?

In the realm of construction, a contingency refers to a certain amount of money set aside to cover unexpected costs that might arise during the project’s execution. This allocation, usually accounting...

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