AGÕæÈËÓÎÏ·

A cost overrun, in the context of the construction industry, refers to the excess amount that needs to be spent over the initially agreed or budgeted cost for completing a particular project. It’s an unanticipated increase in costs that occurs due to various factors such as inaccurate estimation, changes in project scope, unforeseen challenges, or increase in material or labor costs. In essence, it’s when the actual cost of the project exceeds the estimated cost. It is critical to manage and minimize cost overruns as they can seriously impact the overall profitability and success of a construction project. Effective project management, regular monitoring, vigilant control measures, and contingency planning are some strategies to mitigate such cost overruns in construction projects.

A Surety, in the context of the construction industry, refers to a third-party entity that provides a guarantee or assurance to a project owner or client that a contractor will fulfill all obligations outlined in a contract. It is typically seen in the form of a surety bond, which protects the project owner against financial losses if the contractor fails to perform or complete the project as per their contractual obligations. The surety bears the risk of contractor's default and is legally responsible to either finance the project to completion or find an alternative contractor. The use of surety is common in projects, especially public construction projects, to ensure their successful completion.

Capitalize is a term used across various industries, including the construction industry, generally referring to the practice of funding projects with capital or money. In construction, to capitalize means to finance the project's expenses, such as materials, labor, machinery, and other costs, through capital. It involves converting expenses into assets that will contribute to a project’s long-term value. It's essential in construction project management as it is associated with acquiring funds to cover the infrastructure's total construction costs. A capitalized construction project implies that the costs will be spread out over the life of the project, not just in the construction phase. It's a crucial concept for construction companies as it significantly impacts their financial plans, resources allocation, and revenue recognition.