Why So Many Office Refurbishments Go Over Budget and How to Avoid It

Office Renovation Budgeting

Cost overruns are rife in construction. Just 1 in 3 projects come within 10% of their budget. Unfortunately, office refurbishments are even more prone to cost overruns than other construction projects. 

Cost overruns are more than a financial setback; they can disrupt your operations, affect your culture, and even jeopardise your business case. However, going over budget in your office refurbishment is not inevitable. If you’re looking to refurbish your office, understanding why budgets spiral out of control and how to prevent it is crucial.

Since 2008, we’ve worked with countless companies across the UK to deliver office refurbishments on time and within budget. This gives us unique expertise in how to avoid cost overruns. Today, we’ll break down the impact of cost overruns, why they occur, and how to mitigate this risk in your office refurbishment. By the end, you’ll understand the factors behind cost overruns and how to ensure your proejct is not disrupted by going over budget.

The Real Cost of Cost Overruns

While cost overruns in your refurbishment would be stressful and frustrating, they could also impact your entire company. Overrunning costs could exceed budget levels, requiring a lengthy and complex procedure to obtain more funds. They could even begin to cause cash-flow issues for your company. This would reduce funds available for investment in other areas.

If you have a very rigid budgetary procedure, going over budget may not be an option. In that case, you may have to reduce the specification or scope of your project. This could mean compromising on design features, materials, or entire areas that we central to your project brief.

Recent research has found almost 90% of projects run over schedule – by an average of 20%. The negotiations and additional works associated with extra costs often lead to project delays. This, in turn, leads to extended downtime, as well as disrupting staff and impacting productivity.

Why Cost Overruns Happen

Poor Initial Budgeting

Due to a combination of inexperience, optimism, or short-term pressure, many internal budget estimates are unrealistically low. A study by PwC revealed that 55% of companies underestimate project costs by 10–20% from the outset. This means that even if nothing goes wrong, your project will probably run over-budget.

Unclear Project Scope

One of the most damaging causes of budget overrun is a vague or evolving project brief. This leads to scope creep, where unnecessary additional features or adjustments add up. This is especially common when teams don’t have a clear vision, if stakeholders continually request changes, or if there is not a clear accountability structure in place.

Hidden or Unexpected Costs

If you lease or own an old building, there is an increased risk of unforeseen costs due to complications with the building structure or utilities systems. Issues such as unsafe electrical systems, inadequate air conditioning, and even asbestos are common in older buildings.

Supplier or Contractor Issues

Supply chain disruptions, poor specification, or miscommunication in the design and estimation phase can lead to significant remedial works during the project. If there is significant cost pressure, some design & build companies may remove items from the estimate (but not the design), and add them later as a chargeable extra.

Poor Project Management and Communication

A lack of clear communication is a very common cause of budget overruns. Research has shown that poor communication can increase project costs by as much as 12%. Miscommunications in the design and estimation phase can lead to delays, missteps, and costly remedial works at a later date.

How to Prevent Budget Overrun in Your Refurbishment

Set a Realistic, Detailed Budget

It goes without saying that setting the right budget in the first place is crucial to not exceeding it at a later date. First, you should research benchmark refurbishment costs to understand what average costs might be. You can then work with your design & build partner to identify all anticipated expenses and budget accordingly. A detailed budget mitigates the risk of unexpected costs.

Establish a Clear Project Scope from the Outset

Before you can set an initial budget, you need to define exactly what is wrong with your office currently, what impact solving it will have, and how you will measure success. You can then use that to build a detailed project brief. This will allow you to remain focused on that throughout the proejct to prevent scope creep.

Choose a Reliable Design and Build Partner with a Proven Track Record

To keep your refurbishment within budget, it’s essential to work with a competent and trustworthy design and build company. An experienced partner will have established processes and relationships with suppliers that can keep costs down. A trustworthy contractor will also have a strong track record and aftercare package.

Conduct a Thorough Site Survey Before Starting

To mitigate the risk of unexpected costs due to building issues, it’s important to carry out a throughout survey of the building prior to commencing the works. This could be carried out by a specialist surveyor, or your design & build partner may provide such a service. If you do uncover structural or compliance issues at this point, remedial works can be factored into the budget.

Maintain Regular Communication and Progress Checks

Clear communication between your internal project team, the design and build company, and any other stakeholders will minimise the risk of surprises and missed issues. As well as regular progress updates and site tours, you should also maintain open lines of communication for reactive issues, to speed up decision-making and awareness.

Use Fixed-Price Contracts When Possible

To ensure you do not go over budget, you should work on a fixed-cost contract. This offers a set cost for the delivery of a specified scope of works. This means that cost overrun risk is transferred to the design & build company, and they have an incentive to keep their costs down – unlike with fixed cost contracts.

Implement a Contingency

Even having taken all the steps above, you should also assign a contingency sum to allow for unexpected costs during the proejct. These could be as a result of unforeseeable out-of-scope issues, or legitimate design changes you want to make. This provides without putting the core budget at risk. Typically, this contingency should be 5-15% of the budget, depending on the complexity and scale of the refurbishment.

Managing Your Office Renovation Costs

Office refurbishment cost overruns are more than a financial setback; they can disrupt your operations, affect company culture, and even jeopardise your projected business case. Preventing cost overruns occurring in your project requires planning, clarity, and collaboration.

By setting a realistic budget, defining project scope, and partnering with a reliable design & build partner, you can avoid unexpected costs and bring your vision to life on time and within budget. Implementing these steps allows your company to control costs, reduce downtime, and enjoy the full benefits of a refreshed, functional workspace without the stress and disruption so often associated with office refurbishment.

To take the next step towards your on-time, on-scope, on-budget office refurbishment, get your own copy of How to Plan an Office Refurbishment. We’ll help you understand all that is involved in renovating your office by walking you through the process step by step. By the end, you’ll have a better understanding of what will be involved in your own office refurbishment, where you need to start, and where you need to learn more. To get started, download the refurbishment planning guide today.

To keep learning about office refurbishment costs, read How Much Will it Cost to Refurbish my Office?, How to Set an Office Refurbishment Budget, and How to Build a Business Case for Your Office Refurbishment.