PROJECT ESTIMATE BUDGET

A detailed budget should be prepared every time capital is to be spent, being the case of a single new construction or addition or a big Strategic Plan or Feasibility Study.

MAPE prepares estimate budgets that, when supplied as part of our Program Management package, may reach ±6% of precision, which is unthinkable for most program managers.

A detailed budget containing all the steps and items pertaining to a project, and with proper cost estimates, is vital and may bring some real problems is not done properly:

• If the estimate budget is underestimated or if it does not account for all the steps:
  • It makes feasible a project that has no chance to have a successful course, for it shows a too optimistic (small) investment.
  • There will be a shortage of funds to finish the project, leading to increased financial costs due to emergency funding increases or, worst case scenario, the freezing of the project.
  • The original Return On Investment (ROI) rate will never be reached, leading to financial losses to the owner and eventual shutting down of the operations.

• If the estimate budget is overestimated, with foreseen expenditures bigger than the market price, two scenarios may occur:
  • The increasing of the building area or the utilization of more sophisticated material (if there is an excess of money in the budget, why not?).
  • The increase of the need for funding, with the subsequent need to present more guarantees and reducing the expected ROI.