What is cost drift on a construction job?
Cost drift is the gap between the price a job was won at and what it actually costs: a subcontractor price that moved, quantities above the take-off, a cost code nobody reconciled until the final account. On 28 completed Australian infrastructure megaprojects, the largest contractors tendered a 9% margin and finished at a 7% loss.
How it shows up on a job
Nobody saw the job drift until the final account.
- Actuals are reconciled against the budget monthly, or only at the final account.
- A cost code is running over and nobody has compared it to the tender.
- Quantities are coming in above the take-off, a little at a time.
What it costs
Across 258 transport projects in 20 countries, roads came in 20% over budget on average: $1,000,000 on a $5 million job.
Source: Flyvbjerg, Holm & Buhl, Transport Reviews 24(1), 2004836 Australian transport projects cost $28 billion (24%) more than promised, and about a third of them went over budget.
Source: Terrill & Danks, Cost overruns in transport infrastructure, Grattan Institute, 2016Over a quarter of Australia's 200 largest builders posted an operating loss in the year to March 2022.
Source: Reserve Bank of Australia, Financial Stability Review, October 2022, Box C
What we don't know. Nobody has reliably measured what share of an overrun the contractor carries rather than recovering through variations. On a 9% margin, a 9% overrun that cannot be recovered takes all of it.
Why the published figures disagree
Most overrun figures are the owner's: measured from the first promise or the decision to build, before a contractor is signed, and paid by the client. What the contractor carries is measured far less often. The two figures that measure it put the swing at 16 points of margin on megaprojects, and about 40% of the extra cost by expert opinion.
| Figure | What it counts | Sample | Source |
|---|---|---|---|
| 9% margin to a 7% loss | The contractor's final profit at completion, against its tender | 28 Australian megaprojects over A$500 million, started 2000-2015 | Ryan & Duffield, 2017 |
| 40.5% | Contractors' share of the extra cost of overruns, by expert judgement | 52 Belgian public infrastructure experts | Molinari, Haezendonck, Van Rompay, Mabillard & Dooms, 2025 |
| 23% (median 12.3%) | Final over original contract value, mostly scope the owner paid | 16 Australian rail projects, one contractor, 2011-2014 | Love, Zhou, Edwards, Irani & Sing, 2017 |
| 24% | Final cost over the first promised cost: the owner's money | 836 Australian transport projects of $20 million or more, 2001-2016 | Terrill & Danks, Grattan Institute, 2016 |
| 20% | Roads, actual cost over the budget at the decision to build: the owner's money | 167 road projects among 258 transport projects, 20 countries | Flyvbjerg, Holm & Buhl, 2004 |
Every published figure on cost drift, with its sample and confidence grade: cost drift statistics. Every figure, worked through one $5 million job: what the five diseases cost a $5 million job. The full evidence, with every caveat: why the diseases are in this order.
How Demiton catches cost drift
Drift against the price you quoted is flagged at $50K, not $5M.
Your systems stay where they are. Demiton reads them into registers, and these are the ones that watch for cost drift:
Common questions
What is cost drift in construction?
The gap that opens between the tender and the actual cost of a job, a little at a time: a subcontractor price that moved, quantities above the take-off, a cost code over budget that nobody compared with the tender. It is called drift because no single line looks like a problem until the final account.
How much do Australian construction projects go over budget?
836 Australian transport projects of $20 million or more cost $28 billion (24%) more than first promised between 2001 and 2016, although the median overrun was 0% and about a third went over. That is mostly the owner's money, measured before a contractor was signed. On the contractor's side, 28 megaprojects over A$500 million were tendered at a 9% margin and finished at a 7% loss.
Who pays for a cost overrun?
The owner pays for scope it changes; the contractor pays for what it priced wrong or could not recover. On 16 Australian rail projects, scope changes caused 99% of the cost increase, most of it paid by the owner. Asked to split the extra cost of overruns, 52 Belgian infrastructure experts put 40.5% of it on contractors.
How do you catch cost drift early?
Compare committed and actual cost with the tender on each cost code every week, not at the monthly report or the final account. Commitments matter most: a subcontract or purchase order signed above its budget line is drift before a dollar has been spent.
How does Demiton catch cost drift?
Drift against the price you quoted is flagged at $50K, not $5M. It reads the systems you already run, so nothing is replaced.
The other four
- ReworkThe inspection failed. The next stage was already built on top of it.
- Missed claimsThe extra work was real, or it rained for four days. Both notices went in late.
- DisputesIt went to a lawyer, and the record for that week is empty.
- Lapsed complianceThe insurance lapsed the week the client checked.