Cost optimisation is one of the key elements of construction and real estate development projects. This means that professional project management is essential from the very beginning of a development, as it can help make an investment sustainable and profitable. Instead of a short-term approach, the full life cycle of buildings is increasingly coming into focus. We spoke to Árpád Kégl and Miklós Horváth, experts from the Project Management Office of CÉH zRt., about the nature of cost optimisation, strategic thinking, the most important aspects of tendering, digital solutions, risks and value creation.


In every construction and real estate development project, a fundamental question is how investment costs relate to revenues. But how can the total cost of an investment be professionally determined in advance?

KÁ: The overall scale is already determined during the preparation and design phase. This is when the project’s cost structure can be shaped most effectively, taking the client’s objectives into account, while of course changes may arise along the way. Cost, in the broadest sense, is influenced by scheduling, technology and quality, among other factors, and if we consider the full life cycle of a building, operation should also be included. This is why it is essential at the beginning of a development for the investor to be supported by a cost-conscious project manager who views the entire process in line with the overall strategic objectives. In CÉH zRt.’s project management approach, cost, schedule, quality and operability are therefore not treated separately, but as an interconnected decision-making system.


What are the advantages for an investor of involving a project manager in cost optimisation?

KÁ: Project management may account for only a few percent of the total cost, while site organisation costs themselves – such as mobilisation, craneage, fencing and similar items – can amount to as much as 10 percent. In other words, good project management applied from the start of the investment, combined with good scheduling, can immediately reduce site organisation costs significantly, meaning that its value is already returned at the very beginning of the project. The same applies to the selection of higher-value materials or the definition of construction technology: these items can result in substantial savings throughout the construction process.


What does cost optimisation actually offer beyond simple cost reduction?

KÁ: Cost reduction focuses only on price: making the built-in material or structure cheaper. Optimisation, however, creates added value, because we are no longer looking only at investment cost and simply trying to reduce it. Instead, we examine the full life cycle of the development, including later costs such as maintenance and energy use.


HM: The fundamental question is what other consequences a given cost reduction – for example in material procurement – may have on deadlines, quality and future operating costs. We must therefore think in perspective. It is not possible to successfully manage a development, and later the operation of the property, with a short-term mindset. It is cheaper to involve experts at the beginning, optimising costs during the design phase, than during the construction phase. Overall, project management accompanies the entire investment, because costs can be properly defined and sound decisions can be made at the beginning.


What specific aspects can lead to significant cost reductions?

HM: These include the construction method, building services and electrical systems, which means that it is important to define the required level of performance precisely and record the basic data. For example, in the case of heating and cooling, even a difference of plus or minus one degree can result in a significant cost difference. It may happen that a building is oversized in relation to the technology to be installed, meaning that the floor plan itself can also be optimised for the technology, thereby reducing costs. The choice of foundation method and the positioning of the building on the plot – which may influence the intensity of earthworks – can also be optimised. Many factors may arise whose modification during construction can be highly counterproductive, as it may lead to cost increases.


How decisive can the tender issued for construction be? Can it happen that the investor does not define the requirements precisely enough for the companies participating in the tender?

KÁ: A professional tender documentation is extremely important. For example, if we force the contractor into an overly optimistic and unrealistic schedule that they later cannot meet, modifying the schedule may lead to cost increases. In addition, risks that arise in the meantime may be shifted by the client onto the contractor. It is therefore also a strategic question which risks the developer transfers to the contractors and which risks they retain themselves, because every transferred risk has, or may have, a price. Just to give one example, we can mention exchange rate fluctuations, which affect material prices.


So it is not only in the tendering process, but also later in contractor agreements that careful attention is required. What should be considered?

KÁ: If the contractual framework is not balanced, meaning that risks are concentrated disproportionately on one party, then that party alone will have to bear the potential losses that may arise. This may include an excessively low price for a given work phase or material cost. A FIDIC-based agreement can be a very effective tool for handling such issues, as its specific purpose is to provide a balanced contractual framework for both parties.


Speaking of risks, how can the changes mentioned earlier – for example those relating to exchange rates, raw material prices or capacity – actually be managed?

HM: During the pandemic, for example, we applied price indexation for certain materials. This meant that in the event of a price change, the client and the contractor shared the additional cost between themselves in a predefined proportion. Price risk can basically be managed by creating reserves, or the investor may provide stockpiling opportunities or an advance payment to the contractor so that high-value materials can be procured and stored in advance. As for capacity risk, the solution may be that in the case of a well-prepared project, we communicate and coordinate in advance with the potential contractor market, so that it can prepare in time for the upcoming investment.


Let us return to tendering, as a good strategy may be the key to the success of an investment. What makes a good tender strategy?

KÁ: A good strategy helps to conduct a multi-criteria tender, where not only price competes, but also quality, professional capability and deadlines, among other factors. This means that the best overall offer can be selected, rather than simply the cheapest one, which may later bring unpleasant surprises. The contractual terms can also be made part of the competition in a tender, because, as mentioned earlier, transferred risks have a price. A realistic payment schedule is also important: whether there is an advance payment, and how payments are phased. These aspects must also be taken into account during the tender. Overall, realistic and comparable bids can be obtained on the basis of well-defined client requirements.


We should not forget technology either. How does the increasingly widespread use of BIM, or Building Information Modelling, support more accurate cost planning?

HM: BIM supports the project management and design work of CÉH zRt. in many ways. In BIM-based processes, the disciplines can prepare coordinated, high-quality designs, so we can be highly confident that these designs are clash-free and contain fewer errors. As a result, fewer issues need to be managed during construction and fewer additional works can be expected. BIM also supports the preparation of more accurate cost estimates and makes changes between disciplines easier to identify. Overall, in this integrated system, where all disciplines are represented together, it is easier to track changes and analyse their impacts.


Today, everything seems to be about artificial intelligence. How can AI be used in cost optimisation?

HM: Artificial intelligence can help with the checking, comparison and evaluation of designs and cost estimates, as well as with assessing the consequences of individual changes. We also use these solutions, as many design and engineering software tools now include AI-based features, meaning that they have already become part of our everyday work.


Finally, let us look at investments from a broader perspective. We have already discussed how a life-cycle approach can also provide a meaningful vision for the future. But how should this be understood in practical terms?

KÁ: We examine the development costs of a given investment together with the cost calculation for the full life cycle. This is why it is important to analyse several scenarios already in the project preparation phase, because the investor needs to assess the project as a whole and then decide between different options according to the development strategy. For example, higher construction costs may lead to savings in operating costs later, while cheaper construction may be accompanied by higher maintenance costs.


HM: To put it simply, insulating a building is more expensive than not insulating it, but insulation can save money on heating every year. If we look at the full life cycle, the costs will therefore pay off after a certain period of time. However, another possible consideration is that the investor may decide to use the amount that would have been spent on insulation – and which would have reduced heating costs – to install another machine in the facility, thereby increasing production. This may later provide a better return than saving on heating. These aspects therefore need to be examined comprehensively at the beginning of the project. We do not look at an item in isolation, and we do not aim to reduce a given cost in isolation. Instead, we review the processes comprehensively, taking all aspects into account, and optimise them over the full life cycle.


Source of the article: editorial article published on Economix.hu on 22 June 2026.