When a project costs more than what was budgeted or contracted.
A cost overrun occurs when the actual costs incurred on a project exceed the budgeted or contracted amount. Cost overruns can result from scope changes, design errors, unforeseen conditions, productivity losses, material price escalation, or poor estimating. In lump sum contracts, cost overruns are absorbed by the contractor; in cost-plus contracts, they may be passed to the owner depending on the contract structure.
Unexpected rock excavation added $310,000 to the site work budget, triggering a differing site conditions claim to recover the cost overrun.
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