Oregon Construction Contractors (CCB) Practice Test

In construction, what is a "cost overrun" best described as?

1. An increase in goods

2. A failure to budget

3. Exceeding budgeted costs

4. An unexpected delay

The correct answer is: Exceeding budgeted costs

A "cost overrun" is best described as exceeding budgeted costs. This term refers specifically to the situation where the expenses incurred during a construction project surpass the amount that was originally budgeted. Cost overruns can occur due to various factors, such as changes in project scope, increased material costs, labor issues, or unforeseen complications during the construction process. Understanding that cost overruns are directly tied to exceeding financial expectations helps crews and management prioritize accurate budgeting and strong project management practices. While increases in goods, failures to budget, or unexpected delays can all contribute to a cost overrun, they are not comprehensive definitions of the term itself. Only the situation where actual costs exceed original budgeted amounts accurately defines a cost overrun.