How can cost overruns in construction be calculated?

Cost overruns in construction are typically calculated by subtracting actual costs from estimated costs. This approach allows project managers and owners to determine how much more has been spent than originally planned. The estimated costs typically include various calculations based on project plans, labor, materials, and overhead, which serve as a baseline for budget expectations. By measuring actual expenditures against these estimates, it becomes clear whether the project is on track, under budget, or experiencing cost overruns.

While comparing totals across different projects can provide insights into performance and cost trends, it does not directly reveal details about overruns in a specific project. Similarly, adjusting initial bids for material changes addresses potential budget changes but does not fundamentally capture the difference between actual and estimated costs. Using government cost indexes can assist in understanding broader economic trends and might help in estimating project costs, but it does not measure cost overruns directly. Thus, the most straightforward and relevant method for calculating cost overruns remains the comparison of actual costs to the initial estimates.