Why Most Construction Budgets Fall Apart and How to Build a Pro Forma That Holds

If the budget isn’t real, the pro forma isn’t either.

We’ve reviewed countless development budgets prepared before a deal closes — and most of them are missing critical line items, underestimating scope, or based on assumptions that won’t hold past the first submittal. It’s not always intentional. It’s just not their lane.

For business owners, investors, or tenant-users, trusting early budgets without ground-truthing them can turn a good project into a bad deal fast. At HDC, we help clients pressure-test their numbers before they commit capital because that’s when the risk is cheapest to fix.

Here’s where early-stage budgets break and how to do it right.

1. Budgeting Without Site Context

No two sites are the same — and a square-foot price pulled from a past project won’t account for your site’s conditions, utilities, setbacks, or permitting environment.

If the site hasn’t been studied, the budget is a guess.

We evaluate site constraints, access, utility scope, and jurisdictional requirements early so our clients know what they’re walking into before they sign a contract.

2. Ignoring Soft Costs and Carry

We see a lot of “hard costs only” budgets passed off as complete. That ignores soft costs, permitting, design, fees, lender requirements, insurance, and owner-side oversight. It also ignores time carry costs during entitlement, construction, and lease-up.

A project that works on paper but fails in cash flow isn’t a viable deal.

We help clients build cash flow-informed pro formas that reflect how money actually moves.

3. Overestimating Value Engineering

Value engineering isn’t a savings strategy, it’s a damage control tactic. If the project only works after $400K of VE, the budget’s already broken. Worse, VE often cuts quality or long-term performance, which undermines your NOI or resale strategy.

Don’t budget a dream and then try to engineer it into a reality.

We help clients match scope to intent and design within financial constraints from day one.

4. Assuming the Contractor Will “Figure It Out”

Contractors price drawings, they don’t fix them. If the plans are unclear or incomplete, you’ll get change orders, delays, or pricing gaps. And if you’re relying on a GC to identify issues in a rushed bid cycle, expect blind spots.

A bad design passed to a GC becomes a bad bid.

We help tighten scopes, validate inclusions, and align delivery models to the financial model early.

How We Help

We work with developers, business owners, and private investors before they close, building budgets and schedules that reflect real-world conditions. Our input has saved clients from overcommitting, underbudgeting, or closing on sites that would never support their intended use.

If you’ve got a pro forma, let us test it. If you don’t, we’ll build one, based on actual numbers, actual site factors, and actual experience.

Better to fix it now than explain it later.