7 Causes of Project Budget Overruns & How to Prevent Them | KPMC

Infrastructure projects are the backbone of modern society, from highways and bridges to hospitals and schools. But these developments face a persistent challenge: budget overruns. Research shows that 9 out of 10 construction projects experience cost overruns, with an average overrun of 28%. For large infrastructure projects, the situation is even more dire, with projects potentially running up to 80% over budget.

This blog outlines seven common causes of infrastructure project costs escalating beyond plan and how effective project cost control, provided by our experienced team at Kubri Project Management & Consulting, can reduce exposure and help avoid budget blowouts.

#1: Inaccurate Cost Estimation

Poor estimating accounts for nearly a third of all cost blowouts on infrastructure projects. The issue often begins at the feasibility stage, where estimates are either rushed, based on incomplete data, or overly optimistic about pricing and productivity. Once locked into a contract, these early inaccuracies become difficult (and expensive) to correct.

Inaccurate estimations can result from several factors:

Limited historical cost data from similar projects
Underdeveloped project scopes at the time of pricing
Failing to account for market fluctuations
Underestimating material, labor, or equipment costs

How to prevent inaccurate cost estimation

Accurate cost estimation starts with a bottom-up approach that reflects the actual cost of labor, materials, equipment, and time. Leading cost estimation techniques include:

Parametric estimating: uses statistical models and historical data to predict costs
Bottom-up estimating: breaks down each scope component and builds it back up with real unit rates
Three-point estimating: accounts for best-case, worst-case, and expected scenarios

KPMC applies proven estimation methodologies that are supported by up-to-date market rates, project-specific risk allowances, and robust benchmarking. Our team aligns the estimated budget with real-life delivery conditions to ensure a solid foundation for project cost control from the start.

#2: Scope Creep & Poor Change Management

Uncontrolled changes to a project’s scope without appropriate adjustments to cost and resources are another leading cause of budget overruns.

Scope creep typically happens when:

Project requirements are unclear from the start.
Stakeholders introduce new elements or request additional features mid-project
Change requests are applied without a formal assessment or approval

How to manage scope creep

Set clear, agreed-upon project objectives from the start and implement a structured change management process. Every scope change should be formally reviewed and approved by relevant stakeholders before implementation.

KPMC’s scope change management ensures that every change is justified and approved before proceeding, which minimizes the risk of uncontrolled budget blowouts and protects project margins.

#3: Vendor & Procurement Issues

Poor procurement planning leads to two main problems: inflated prices and scope disputes.

When procurement is rushed or delayed, vendors can raise their prices to account for tight timelines and limited flexibility.
Vague or incomplete contract scopes create ambiguity, which leads to disputes over responsibilities and variation claims.

How to avoid procurement issues

Engage vendors early and assess their pricing structures and delivery capacity. Define scope clearly across all packages to eliminate overlap and ambiguity. And align procurement sequencing with project milestones to avoid last-minute awards.

KPMC provides procurement, forecasting, and contract review services that reduce risk across all tiers of the supply chain. We assess vendor performance and structure procurement timelines that support cost stability throughout project execution.

#4: Resource Mismanagement & Productivity Issues

When teams are overstaffed, underutilized, or misaligned with project requirements, their efficiency declines, and expenses rise.

Common issues linked to resource mismanagement include:

Task-to-skill mismatches: Assigning personnel to tasks they aren’t adequately trained or qualified for, leading to delays and rework.
Unbalanced crew sizes: Having too many workers in one phase and not enough in another creates bottlenecks and inefficiencies.
Idle plant and equipment: Machinery sits unused due to delays or poor coordination, driving up hire costs without delivering value.
Out-of-sequence work: Activities completed in the wrong order, resulting in rework and avoidable cost increases.

How to manage project resources properly

Develop a detailed resource management plan that optimally assigns personnel, equipment, and materials throughout the project lifecycle. Utilize project management methodologies to track resource utilization and identify opportunities for optimization.

KPMC strengthens project cost control through structured subcontractor management and the oversight of resource performance. We ensure that all resources are utilized effectively to minimize downtime and maintain financial discipline throughout the delivery process.

#5: Communication Breakdowns

Communication issues can jeopardize project budgets in 56% of cases. These breakdowns lead to duplicated effort and rework that push costs beyond planned budgets.

Communication issues can be:

Unclear roles or commercial expectations

Gaps in reporting or delayed progress updates

Misaligned deliverables between stakeholders

Poor coordination across disciplines and contractors

How to minimize communication issues

Implement a structured stakeholder communication plan that defines who communicates what, when, and how. Conduct regular cost and progress meetings and establish escalation pathways to resolve issues promptly.

KPMC provides disciplined stakeholder coordination as part of our commercial management approach. We establish communication frameworks early so everyone is aligned on project cost and scope. This avoids ambiguity and directly contributes to preventing budget blowouts.

#6: Poor Contract Strategy & Risk Allocation

Cost blowouts can also occur when contracts don’t match the project’s scale or complexity or when risk responsibilities aren’t clearly assigned.

A common example is issuing a fixed-price contract before the design is finalized; once construction begins, any changes or unresolved details can trigger variation claims, extra costs, and disputes. Similarly, if the contract doesn’t clearly state who bears the risk for delays, teams may shift costs onto each other rather than resolve the issue, resulting in slowed progress and increased budget.

How to build a dispute-proof contract strategy

Select contract types that match the project’s risk profile and complexity
Clearly define commercial responsibilities, risk ownership, and entitlement mechanisms.
Build escalation frameworks and structured variation processes.

KPMC reviews and structures contracts to support project delivery, not just legal compliance. We identify commercial risks early, advise on contract strategy, and ensure that risk is allocated appropriately across all phases of the project.

#7: External Factors & Unforeseen Conditions

Inflation, regulatory changes, weather conditions, and unforeseen site conditions can significantly affect a project’s costs. Weather-related delays alone account for over 10% of construction budget overruns.

How to prepare your project for the unknown

While these factors can’t be eliminated, their impact can be significantly mitigated through proactive planning. Key mitigation strategies include:

Conducting thorough site investigations during pre-construction
Including escalation clauses and buffers in contracts
Allocating 10–20% contingency in cost plans based on quantified risk
Monitoring market conditions and adjusting forecasts accordingly

KPMC provides Forensic Delay Analysis and commercial input into contingency planning. We help clients structure contracts and budgets that account for external risks, enabling them to continue delivering even under unpredictable conditions.

What KPMC Offers in Commercial & Contract Management

KPMC delivers commercial and contract management services grounded in real project experience, ensuring infrastructure budgets are based on solid facts and not assumptions. Our team combines structured processes with practical insight to reduce risk and improve delivery outcomes across every phase of a project.

Our services include

Cost Estimation and Forecasting: Detailed, market-based estimates that reflect project scope, risk exposure, and timing
Procurement and Contract Structuring: Contract strategies aligned with project complexity, scope clarity, and delivery certainty
Subcontractor Oversight: Performance management, compliance checks, and cost control across all delivery tiers
Variation and Change Control: Clear change pathways that limit unplanned cost impacts
Claims and Dispute Resolution: Evidence-based claims preparation and resolution support when challenges arise
Forensic Delay Analysis: Identifying root causes and aligning recovery plans with contractual obligations

Behind this capability is a team with over 70 years of combined experience across major local and international works. At KPMC, we recruit senior engineers with backgrounds in bridges, rail, roads, and civil infrastructure to bring global expertise to complex Australian projects.

If you’re looking to deliver your next infrastructure project with greater cost certainty, speak with the team at KPMC.