Generally, construction projects are one of the biggest and most complex financial expenses that a company undertakes. These capital projects carry their own inherent risks, especially if there is no oversight in managing the costs of the project. These projects are liable to incorrect costs and overpayments since the general contractors and subcontractors can easily err. As a result, substantial overcharges can be incurred, and this is the main reason as to why many business owners choose to have a construction cost audit performed.
There is a significant margin for error pertaining to construction costs billable to a project. These errors often occur unexpectedly or may simply be overlooked. Cumulatively, these types of costing errors can lead to substantial overcharges to an owner. With a construction cost audit, these project areas that are prone to overcharges will be identified.
Economize and Safeguard
Through a construction cost audit, owners will be able to save money and at the same time be protected from the risks. The owner’s contract will be examined and the construction project’s overcharges will be identified. In addition, the components of the construction project will be thoroughly assessed to make certain that the general contractor or the construction manager and the subcontractors are rightfully and appropriately charging costs of the project. At the end of the audit, the construction cost auditor will make recommendations regarding how risks can be managed in a better way and ensure that the project financial controls are properly working.
Assess the Cost Areas
Labor happens to be among the largest cost areas of a construction project. Billing inaccuracies and oversight errors can lead to significant overcharges to the owner. Labor burden, acceleration, overtime, and impact claims are among the areas where billing errors and overcharges may occur. With a construction cost audit, the owner’s contract will be carefully reviewed in order to ensure that the demanded labor charges to the construction project are only fair and just.
Added Financial Controls
The owners of the construction project will benefit greatly in a construction cost audit. A good audit outcome will have a significant effect on their cost savings and investments since financial controls will be added. This will ensure that the budget for the construction project is being prudently expended.
Benefits of the Contractors
A construction cost audit does not only benefit the owner, but also the project’s contractor. This is because the construction cost audit will assure him/her that the finances are being properly managed and monitored. As a consequence, the existing rapport between the construction firm and the business organization will be intensified.
Performing a construction cost audit has its own merits. Therefore, a construction cost audit that has been properly performed will help deter fines, identify at an early stage probable compliance concerns and issues, prevent fraud, determine the areas that have to undergo process improvement, and support in promoting good publicity.
Moreover, after the suggestions are put into action and the findings are dealt with, the construction cost audit will promote adjustments and developments to the structure of the project management; carry out better adherence to current rules and regulations; alter and amend policies and techniques to integrate the current techniques or approaches by the project team and the owner’s principles; bolster and tighten project controls and internal controls; and lead the owner, contractor, and project team to a practice that involves continued progress and development.