Budgeting for Your Building Project: Made Simple
Budgeting for design and construction is certainly not an interesting aspect of dreaming up a building project. Although it is not an aspect of the project you enjoy, it is, arguably, the most important part of a building project. This is one area of planning, where as the Owner, you may be tempted to carry out this process in the wrong order. Common mistakes when beginning the design on a building are: The Owner sets the budget before the Architect does any design work, the Owner wants a cost but does not want to pay the Architect for design, or the budget is never considered and after design is complete the scope has to be reduced in order to meet budget. We aim to aid future builders in the budgeting stage of their projects, read on!
THE BOTTOM LINE: Hire an Architect to develop the preliminary plan FIRST. Then from that preliminary plan, a cost estimator can be hired and a budget can be created.
Let's begin by breaking down a common misconception: Until the design professional is able to put the preliminary concept of design on paper, there is no way to estimate project cost with any accuracy. In most cases, the Architect will hire a professional estimator or Contractor to provide the cost estimate – this is due to ever changing industry costs. When a preliminary concept is created by the Architect, the estimator will still have to make several assumptions before a cost can be established. Due to the assumptions that have to be made to provide a cost, there will be shortcomings in the cost produced and this is due to the holes that naturally exist in a preliminary design. This is particularly true of design, bid, and build projects – which is a standard way of phasing a project. However, if the General Contractor is selected prior to design, the Architect would have the Contractor do the cost estimating as design progresses, at an arranged fee. This is the preferable method of contriving cost because it produces a more accurate cost and establishes a trusting relationship with the Contractor and any Subcontractors. We call this process Design-Build and it takes a Design team to make it happen.
In most cases, full dialogue between the Owner and the Architect will help the Architect design a project that meets the Owner’s desires for design and budget. Willingness to pay for appropriate planning and cost estimating will also aid the budget keeping process. The Owner also needs to be realistic about his or her desires. Of course, we know that some people simply don’t know what building projects cost and this is why having a trusting relationship with your Architect is key. It happens more often than not, that these warnings are not heeded and the Owner, Architect and Contractor are left with an over budget building that has to be cut back and cutting a building back to fit the budget costs more in design fees. However, the design fees are rarely the most expensive part – Construction Industry costs change and what was once reasonably priced may no longer be, due to elapsed time.
SOMETHING TO KEEP IN MIND: One often overlooked aspect of the project is the site development costs that nearly all projects have, but especially new buildings. Site Development includes parking, sidewalks, grading, addressing drainage and utilities. These costs come at a high price, add up quickly and often times a Civil Engineer is required. The Owner may want dedicated safe areas for building occupants during natural disasters or there may be constraints on the site that require thoughtful planning. The Owner may also wish to construct the building so that it can be expanded on in later phases – this is called Master Planning. Landscaping and irrigation are also a cost that should not be forgotten. The style and materials for the exterior are factors that can also have an impact on the site development budget. An accurate estimate of cost for site development will typically be involved and extensive, but necessary and smart to plan for.
TIP: Help your Architect create the preliminary design for your project by engaging them in a service called Programming. Programming is extensive research into your desires as the Owner. It is typically done hourly and consists of meeting and information gathering. Programming is done when all areas of the project have been discussed and there is a basic understanding of design. Every project needs Programming to some degree, although some programs will be more exhaustive. For example, a hospital would most likely require more programming than a large office building. In both cases, it is important to not skip the Programming phase because this is where issues are discovered and resolved.
In summary, these are the steps necessary to developing a design that can remain on budget until the end:
1. Know what you want in your facility, and know your target budget and hire an Architect to begin Programming.
2. It is obvious that costs for the building, and interior furnishings would be included, but don’t forget land and site improvements, design fees and as a standard, always add 5-10% of the construction cost for unseen expenses.
3. Next, you have developed a preliminary plan in the Programming phase with your Architect and now a cost estimator can be hired.
4. Be flexible. The costs related to building are often drastically underestimated, you may find that your budget does not allow you to do everything you had hoped. You can either increase your budget or take the option to reduce your scope. Once you have arrived at an agreeable budget, design can begin.