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BUDGET/COST PLAN - Part 1 of 3

It has been a while since I updated this space, one for the lack of intriguing questions and two for the lack of time.

I am back with a very basic question which was posed to me, it is simple, though the complexities of understanding it's true constituents is not as simple.

The question on hand today is, what is a BUDGET or a COST PLAN?
I would identify a budget or a cost plan as a systematic list of all conceivable project costs.
I use the word conceivable here, since costs that are not conceivable will definitely not form part of a budget.
A budget should be comprehensive to an extent to be able to capture all costs relating to the project, this includes but is not limited to the following:


  • A - Construction cost - which would involve all physical costs involved in the construction of the project.
  • B - Indirect costs - which would involve preliminary costs, consultant costs, legal costs, approval costs, mock up costs, marketing costs etc. If the budget is being made from the point of view of a builder/developer, the cost of land may also be incorporated.
  • C - Contingencies - which would involve provisional costs to be incorporated for any expected/unexpected deviations.
  • D - Escalation - which involves provision for market fluctuations in material, labour and fuel costs.
  • E - Taxes - which involves the provision for any governmental levies on the construction.
Therefore, an effective budget would be the summation of the costs A to E.

I am keeping this post short, though I will be dealing with the individual components mentioned above in separate posts including a post which would point out a minor difference between a cost plan and a budget.




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