The problem with construction budgets
Budgets from builders are often clear on the total and vague on how they reach it. A single line may say “foundations” with one figure, without showing quantities, unit prices or what is included. That makes comparison almost impossible, and it makes changes during construction hard to evaluate.
For a foreign owner the difficulty is bigger. The budget is in pesos, the terms are local, and the exchange rate moves. Being unable to read the budget is exactly what makes it hard to challenge.
What we review
Quantities. The amount of work in each item, measured against the drawings. Missing items and overstated quantities both affect the price.
Unit prices (APU). Each price is broken into materials, labour, equipment and transport. We check that every component is present, that the quantities of materials make sense and that the labour and equipment are consistent with the type of work.
Indirect costs. In Colombia these are commonly expressed as AIU: administration, unforeseen items (imprevistos) and profit (utilidad). We check that they are stated clearly and applied only where they should be, and that the contract does not charge the same cost twice.
Contingency. We look at whether the budget includes a contingency, how large it is and how it can be used. As a reference for planning, our sample budget format uses a 10% contingency line.
Price adjustment and currency. We check whether the contract allows price adjustments, under what conditions, and how the exchange rate affects an owner who pays from abroad.
Payment schedule. Payments should follow verifiable progress. We compare the payment milestones with the schedule and with the actual work.
Cost control while the work is under way
The audit does not end when the budget is agreed. During construction we:
- Compare the progress in place with the payment requests.
- Review every change order for its effect on cost and schedule before you approve it.
- Keep a budget-versus-actual view, with variances explained.
- Present the amounts in COP, USD and EUR, with the exchange rates used and updated in each report.
Deliverables
- A review of the budget with observations, sorted by their possible impact.
- A list of clarifications to request from the contractor or the developer.
- A budget format you can follow, in three currencies.
- Variance reports during the work, if you choose continuous control.
When to ask for an audit
- Before you sign the construction contract, when you can still change scope, price basis and payment terms.
- When the contractor proposes changes, to understand their real cost.
- Before a large payment, to compare it with progress.
- Before the final account, to check that everything paid for is in place.
What an audit does not do
We do not set market prices, and we do not replace the contractor’s or the designer’s responsibility for their numbers. Where useful, we compare against public reference data, for example the construction cost statistics published by the national statistics office (DANE). A cost audit reduces the risk of overpaying or of paying for work that is not there. It does not guarantee the lowest possible price.
To understand the structure of a unit price, read our guide to APU in Colombia. For the wider picture of what a house costs, see construction costs in Colombia.