Why Construction Projects Always Go Over Budget

Every construction worker knows change orders are annoying but saves you from being yelled at for moving too slow.

Why doesn't everyone bid $1 then go over budget lol.

Back when I was general contracting for home renos and repairs, I always made a point to tell my clients I could offer them estimates, not quotes or bids. Nearly every plan and budget has to be revised once you start opening up walls and seeing what you're really dealing with inside.

Always only applies to Government civil engineering projects or when government bureaucracy burdens the private sector.

All the girls loved working in the big dig

Why estimate a cost at all? Why don't they just pay workers by the hour until the job is done?

I also work as an engineer and while I'd love for people to communicate confidence intervals instead of expected value, the problem is that people don't want to hear it.

I work on statistical modelling software for circuit design. We have several large competitors. None of them specify error bounds on their estimates. Their users don't even know what they are and, while they are aware that it's not perfect - they will often take those answers as correct without consideration of the possible errors. This becomes really apparent when they compare the answers from our software with that of our competitors and the numbers don't line up. As the newcomers, it's always assumed that the existing software is right and therefore we're wrong, but quite often it's the other way around, and often there's really no right answer; when taking into account the uncertainty, both answers are effectively the same.

We started providing confidence intervals on our estimates, but that worked against us very quickly. When you don't provide an interval, people assume it's exact. When you provide one, people start to question your accuracy. It's the same reason why scientists giving estimates and couching them in words like "could" or "may" are seen as waffling, while famous personalities claiming answers with certainty as seen as skilled and knowledgeable. People see confidence as a good thing without realizing that it's often just ignorance or deliberate pandering.

It becomes a prisoner's dilemma. If we were all aware and honest about what we know, we could make reasonable comparisons and plan accordingly. But as soon as someone walks up with the utmost confidence making unrealistic promises, people prefer their answers. So anyone who honestly tries to make meaningful predictions loses to those who just speak confidently.

I mean the simple solution to this problem is to hold the people in charge accountable for any overruns. Estimates will get real accurate real fast when actual people face legal consequences as a result of getting them 'wrong'.

Agree its a constant battle. I was taking one course once and best ways for bidding estimates for big projects over estimating a range . Shooting for the lowest number in range but comunicating with the owners of project how expensive it could potentially cost. This sends a message that yes everyone is committed on being efficient but there is always something that turn things costly

One major contributor to budget overrun is self selection. Projects whose cost is underestimated have a much greater chance of being authorized (and then going over budget). Projects whose cost is overestimated would deliver under budget - but they are seldom approved.

What a dumb system we all use witht the low bidding. This is an issue in Europe as well...

I have the Henson razor mentioned at the end (mine is blue) and I love it. It provides the best shave I have ever had and is super cheap to own

The engineer should use a “Maximum Probable Cost” as a kind of worst scenario estimate for the cost of the project 😂

If you don’t use the full budget you’re given, then the government may decide that the budget can be lowered the following year.

Current Vancouver (Coquitlam) project of the new SkyTrain maintenance yard was estimated to cost 330 million, now up to 1.3 Billion. I know someone involved with the project, and they say that on top of it being grossly over designed and engineered, part of the ballooning cost include 500 million is CONSULTING COSTS. bureaucracy and the need for everyone to get their fingers into the pie is what costs the most. If anyone wants to check in around 2026, I can guarantee you the cost will be around 3.5 Billion.

I feel like everything mentioned about cost, between minute four and five, could be thrown into some form of database, train an ai somewhere and sold.....

This video nails nuance

Corruption. Private projects rarely go over budget. Projects go over budget because they can.

We can fix this problem by having the payment 100% on completion. Easy.

My city started a bridge building probably in the early 90s, nobody really remembers. To the surprise of everyone, it was actually finished in 2024.

It used to take only 20 years to fix a road rated to last about a year or two. This is in Minnesota by the way.

Its the reason why I really hate common practice of quoting. How much will cost to make this? I do not know! I cant say what is hidden under 50yo render and boards! I cant say what happens in other contractors systems (lift, gates...). I cant estimate other contractors works (electricians, locksmith...). Even if all this is just 20K project to install access control in existing building. And for 20B project its million times more complex.

Government (here in Canada too) always chooses the lowest bid regardless of whether that company's bid will be the actual final cost. If you're the contracting company and you want the job, you bid low so you get it and then you do it for the actual cost which is always higher since they intentionally underbid.

I feel like this is a personal letter from him to you know who(s)

I still don’t understand if you your always over budget, do the math on average certain projects are over budget and apply a correction factor,

if i was governor of say colorado, id have them figure out the material needs first then as the state we would buy the needed materials and equipment, then have the contractors use our already purchased stuff, as we can save money with out bulk buys

In the thumbnail, the block the crane is lifting does not fit on the build as it is!

Henson, yep I use a new blade every shave. That's $0.10 a blade. $5.20 a year for me.

Incompetence that’s why. Any time the government gives out a contract for a construction project they will always 100% overpay for everything.

I got a Big Dig

Why not massively overestimate the cost/budget so you always come under budget? (This is ignoring politics)

If it’s on budget, on time. I don’t trust it

In Indonesia over budget is only for corruption

Now my politician is sending me this video explaining why his 300m bridge cost 400% more.

Over budget because it is run by the government. A good example is Space X vs NASA.

I hate the RFP process, it’s soooo long

Lol Big Dig 🍆

It always cost more . The customer wants the best deal and the buissness just want to land the job . I couod straight tell you how much these thinga ACCTUALLY go for but then i wont make ANYTHING . so they bid and start doing the work and realize .. "hey im working my a off. Wth ?" But thays different .you cateen get it done yhe rigt way you know why? I need more money . Literally .

Mega projects only like this in usa and it's allies. In China it's get done on time

Booooring

Do a video like this about the $10 Billion Hawaii Rail that's not done.

As a Quantity Surveyor its sad how you didn't even mention the role of a QS... well l get it, "Civil Engineers and Architects" have a "holy tendency" to sideline and down play the role of a QS. Guess what, that's one of the reasons why a lot of projects endup either unfinished or go over budget, all because a QS is never consulted. A Quantity Surveyor is a Cost Engineer solely trained to avoid such undesirable project outcomes. I have had a lot of friction with a lot Architects and Engineers who don't understand how inflation rates, economic indices , etc affect their designs and the overall project. Out of arrogance they react very flippant and dismissive only to get stuck when project funds evaporate. I'm really shocked how such a video from an esteemed engineer neglected to emphasize the role of Quantity Surveyor, its a shocker. Nobody understands cost estimates better than a QS.

It’s becouse if the pressure to regulate prices

You just spent 15 minutes explaining things that should be factored in to a tender, but aren’t due to incompetence or………… being incentivized to grossly underquote, particularly on government contracts.

How did they build interstate