One in Six Projects Runs 200% Over Budget. Here Is What the Others Do Differently.
Research on nearly 1,500 projects found the average cost overrun was 27%. Most of those overruns did not start during the job. They started before work began. Here is what to fix before day one.
Research on 1,471 projects published by the Harvard Business Review found that the average cost overrun was 27%. That figure looks bad enough. The figure it hides is worse: one in six of those projects ran 200% over budget, on average. That is not a rounding error. That is a job that cost three times what it was supposed to cost.
The research covered large capital projects. But the pattern repeats at every scale - construction jobs, furniture installations, AV system builds, promotional merchandise campaigns. And in most cases, the overrun was not caused by something that happened during the job. It was caused by something that was not set up before the job started.
The Four Gaps That Show Up Before Anyone Starts Work
Budget overruns tend to share the same handful of root causes. Most of them are visible - if you know where to look - before the first delivery arrives or the first crew member sets foot on site.
The scope was never frozen. The quote went out, the customer accepted it, and work started. Nobody wrote down exactly what was included and what was not. When the customer asks for something extra - a small change, a different finish, an additional line - it happens without a formal agreement. By the time the job closes, three or four of those "small changes" have been absorbed into the job at no charge.
No cost budget was set at job level. The sale price was agreed, but nobody translated that into what the job was allowed to spend on materials, sub-contractors, and labour. The team has a revenue figure to aim at. Nobody has a spend figure to stay under.
Supplier costs are not tracked in real time. Purchase orders go out - or do not go out - and supplier invoices arrive when the supplier is ready to send them. Often that is after the job has closed. By the time the real material cost lands, the job profit calculation has already been filed as a win.
There is no mid-job review trigger. In most small businesses, job costs are reviewed at two points: when the quote goes out and when the final invoice is raised. Everything in between is invisible. If the job is running over, nobody finds out until it is too late to do anything about it.
What to Get Right Before Day One
Fixing budget overruns does not require new software or a project management qualification. It requires four decisions made before work starts.
Agree the scope in writing and put it in the job record. One page is enough. What is included, what is excluded, and what will trigger a change request. Share it with the customer before work starts - not just after.
Set a cost budget at job level, broken into at least three lines. Materials, sub-contractor or supplier costs, and direct labour. The numbers do not have to be exact to the pound. They need to be close enough that whoever is running the job knows when they are drifting.
Raise a purchase order for every supplier cost before it is incurred. A purchase order is not a formality - it is the mechanism that captures what you expected to spend before you know what you actually spent. Without it, the only number you have is the invoice, which arrives after the fact.
Set a check-in point at the midpoint of the job. This does not need to be a meeting. It needs to be a moment where someone pulls the job costs, compares them to the budget, and decides whether anything needs to change. Halfway through is the last point at which there is still something to do about it.
Make the mid-job review a calendar event
Schedule the cost review when you open the job, not when you remember to do it. Setting a fixed date at job opening costs nothing and prevents the review from being skipped when things get busy.
The Conversation Most Businesses Skip
The most consistent difference between jobs that run to budget and jobs that do not is whether the person doing the work knows what the budget is. In most small businesses, the price exists in the quote. The cost target exists nowhere.
That gap - between what the customer is paying and what the job is allowed to spend - is where most overruns live. Closing it does not require a system change or a process overhaul. It requires a conversation at job setup that most businesses simply do not have.
Start having it before work starts, and most of the problem goes away.
Sources
- 2026 Project Cost Overruns - Reasons, How to Prevent and ManageMaster of Project Academy · accessed 2026-07-16
- Cost Overrun: Causes, Prevention & Warning Signs (2026)Clockify · accessed 2026-07-16
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