Effectuating Cost at the Most Strategic Time

When leading capital development projects valued in the billions over several decades, one consistent and compelling challenge always emerges: cost control. Though multifaceted, the challenge of cost can ultimately be distilled into a manageable framework—when addressed correctly and at the right time.

What Drives the Cost Challenge?

Several core questions shape the cost dynamic on any major project:

• How much capital is the client willing to invest?

• What is the defined base scope, and what are the priority elements within it?

• What is the schedule for delivering the project?

• What level of quality is expected in the final product?

The challenge lies in balancing all four.

From the very beginning, it is critical to secure alignment at the highest organizational level around these goals. Many projects that experience cost overruns do so because of unclear, unapproved objectives and a lack of rigor in the initial cost and planning process. Moreover, as new stakeholders come onboard or original participants shift direction, uncontrolled changes can destabilize the project, making it difficult to meet the original goals.

Keys to Controlling Cost and Achieving Success

Success requires early, intentional planning around four core pillars:

• Funding

• Scope and Priorities

• Schedule

• Quality

Each of these elements is deeply interconnected—changing one invariably impacts the others. Many clients mistakenly assume they can adjust one variable in isolation. That is never the case.

To influence and manage cost effectively from the outset, the project must include:

1. Focused Early Design Development

   An intensive early phase is needed where all key project components are defined using diagrammatic layouts and system narratives. These should outline the size and character of the project with enough clarity to produce a reasonably accurate cost estimate. Client engagement during this time is essential, with leadership making the difficult but necessary decisions about scope priorities.

2. Scope Discipline

   No project can accommodate every stakeholder's wish list. Leadership must focus on what stakeholders need, not what they want. This requires a holistic view and the discipline to make tough trade-offs to keep the scope aligned with the budget and overall project goals.

3. Appropriate Cost Contingencies

   A robust early cost model should include contingencies for:

   • Design evolution

   • Construction or manufacturing risks

   • Owner-driven changes or new scope

   • Cost escalation due to inflation over time

4. Defined Quality Levels

   Quality must be prioritized just like scope. Not every component requires the highest grade; determine where premium quality is essential and where standard specifications will suffice.

5. Realistic Scheduling

   The schedule should reflect the actual scope, design and review timelines, procurement cycles, and the market’s capacity to deliver. Overly aggressive timelines often lead to premium costs and diminished quality.

6. Integrated Funding Strategy

   Finance departments are often siloed, yet funding decisions must be made in concert with scope and cost planning. Transparency and collaboration between the funding team and project leadership are critical to ensure alignment and flexibility.

7. Cost Certainty Through Design Progression

   Most projects cannot be accurately costed until a minimum of 30% of the design is complete. Rushing to establish fixed costs too early undermines accuracy and confidence in the budget.

Case Study: San Diego International Airport Terminal 2 West – “The Green Build”

A prime example of success is the $1 billion San Diego International Airport Terminal 2 West Expansion, known as The Green Build. The project came in 10% under its target budget while setting a new benchmark for sustainability in airport design and construction.

From the outset, the team maintained strict focus on the four key elements:

• Funding

• Scope and priorities

• Schedule

• Quality

At the 15% concept design milestone, the project team validated scope and cost assumptions. By the 30% design milestone, a Maximum Target Budget was established. The final result: the project was delivered under budget, received over 40 major industry awards, and achieved an unprecedented level of sustainability.

Conclusion

The ability to influence cost is greatest at the beginning of a project. When all stakeholders commit early, make hard decisions, and maintain discipline across scope, quality, schedule, and funding, success becomes not just possible—but expectedly achievable.