While some clients come to us with a clear construction budget in mind, very often they’ll have a good idea about what they want in their project but they are unsure how much it will cost them.
Establishing a budget early in the process will greatly help your project. It will allow your architect to design accordingly, it might impact on your forecasting, your timeline for beginning the project and, ultimately, the size and qualities of your final project.
The processes outlined here explains general advice for commercial projects (for simplicity, Local Government and Not for profit work has been treated as commercial work). Each project is unique, and your project might benefit from a more bespoke approach to establishing a budget, but this article will give you a good overview of the process and the key players involved in establishing a budget for your project.
So, let’s get started.
Construction Cost vs Total Project Cost:
First, it’s important to distinguish between the construction cost and the total project cost. The construction cost is the price in the contract you have with your builder; the price that the builder agrees to complete your project for. It includes their labor and professional knowledge as well as the materials in your project and will also include items your builder will source and install for you. This might be some key AV equipment for a new Town Hall, or the new toilet units for your amenities upgrades.
The total project cost includes the construction cost, but it also covers all other costs to complete your project. These might include authority approval payments (Development Approval and Building Permit Fees), consultant fees (architects, engineers, building certifiers, bushfire assessor) and additional landscaping or site works costs. It also includes any items you will supply. New furniture and kitchen appliances are a good example of such items.
Contingency Cost
An important, and often overlooked cost that we highly recommend factoring in, is a contingency cost. It is reasonable to expect that no matter the due diligence, careful planning and site investigations carried out, there will be some hidden costs involved in your project, and a budget allocation for contingencies is a prudent step in the budget planning process.
How much should you add in for these costs? There’s no one size fits all – each project is different. We’re always happy to have a conversation with you and help to answer what might be best for you.
Your Project Procurement Method
How you engage your builder matters
Although we won’t go into too much detail here, how you get your final quote from your builder will have an impact on how early you can go to them for costing advice. We called this builder engagement or procurement.
Generally speaking, the less ‘formal’ the engagement, the earlier you can start talking to them. If you’ve got a really small or simple project in mind and a builder that you know and trust going to them to price your project your builder might be a good path forward. We call this procurement method direct engagement. It can give you some more flexibility, but will typically mean less certainty over things like building finishes, fitting selections and overall quality that you require – not to mention that you’re not getting any other quotes to compare against. We’re not saying that the builder won’t do a good job or price fairly, they’ll just have less information when they price your project and you won’t have the surety of other prices to compare. For this reason this method of procurement is generally not an option for Local Government Authorities.
If you’re operating in the commercial sector, for the majority of projects you’ll engage your builder through a competitive tender. This means that your architect will produce a set of drawings and documents and will issue them to a range of builders for them to price up. This happens after the vast majority of design work has been carried out. While you can negotiate on elements of the design with your preferred builder after you’ve received their tender price, in reality it means there is less room in the project for their input. On the plus side, because all tenderers received the same comprehensive set of documents, they’ll be factoring in all the materials, fittings, and quality of workmanship into their price. This means you won’t have to negotiate on these later. It also means that you’re getting a range of prices on your project.
What is your budget for?
OK, back to establishing a budget. Generally, there are three people you can go to establish a budget for your project. Who you go to, and when, will depend largely on what the budget is for and the type of procurement method utilised. If you are a Local Government or not-for-profit or a commercial enterprise, you might be looking to establish a baseline cost to seek funding or to provide a report to your board. This would require a more formal process that would happen over a longer period.
However, if it’s a smaller project – such as an upgrade to your staff kitchen and toilet facilities, and you just want to have an informed discussion as a business, a more informal process might be more appropriate for you.
This article isn’t framed around who you should talk to first to establish a cost. It’s about who are the people in your project team that you can go to for costing advice. Also, we’re talking about a budget estimate, not a final quote – that generally happens when the design has been completed and you’re ready to start the building process.
A Builder
A builder can provide good advice on buildability, construction timeframes and a sense of overall cost of a project. They can work with you and your architect to find opportunities to save on costs and find practical solutions for your building. Discussions with builders can be very fruitful and provide immediate feedback on the buildability of your design and introduce some ideas that you and your architect hadn’t explored.
While you can talk with a builder very early in the project – particularly if you have worked with them before, or your project is of a very small scale, it is generally best to meet with a builder when a good amount of the design groundwork has been laid and you have a base level of drawings to show them. That is because they will have a clearer idea of the scale of the project, the types of materials it will be constructed of and the types of finishes you are considering.
If you are likely to procure your builder through direct engagement, speaking with them early is a good idea. Involve your architect in these discussions – that way your architect can include their input in the design. Once your architect has captured the scope in their drawing set the builder should have a clear enough idea of the project to give you a budget range.
Sometimes, going directly to a builder too early can mean that you are wedded to them before you have a clear idea of the extent of a project. This can make it more difficult to get a number of quotes when the full project scope has been determined. At times, builders will charge a small fee to provide an early cost. Often, this will be absorbed into the project if you elect to engage the builder to construct your project. A good architect can help manage this process by identifying capable builders and facilitating the meeting and design process.
As we’ve discussed above, its much more likely that you will find your builder via a competitive tender. With this method, there are more viable ways of establishing a project cost which we’ll get into soon. There is still an opportunity for your architect to go to builders for advice during the design phase, but this is generally for specific queries around materials, construction details, resourcing and timeframes – not general costing input.
An Architect
A good architect should have developed an intimate knowledge of the scope of your project and the broad cost implications of each element of the scope. They can access online cost data, and use their previous project experience to put together a cost report in the early stages of your project.
For a new building an architect can undertake a Feasibility Study, which typically includes exploring a few high-level concept designs (more than a diagram, less than a resolved design) and use this to establish a cost estimate based on a square meter rate. It would consider things such as building type, current construction environment, regional location, size of the project, level of building complexity, quality of finish, Bushfire Conditions, earthquake zones (which are common in the Wheatbelt) and heritage conditions. It can provide a valuable report of high level costing to stakeholders before formally beginning the design process. This allows your organization to begin seeking funding, or arranging internal budgets to meet the project cost.
More detailed cost estimates typically occur after initial Concept Design has been done. As our commercial and Local Governments clients usually operate under different risk and cost parameters than our residential clients, we generally recommend that after the initial feasibility study the cost reporting be undertaken by a Quantity Surveyor (QS). In many cases, it is best to have a QS undertake the feasibility study too.
Once the project moves onto formal design, although an architect can offer general costing advice, it is better to go to a Quantity Surveyor for more specific and detailed information.
However, for small scale commercial projects such as renovations an architect is less likely to offer costing services. This is because, even at the early stage of a project renovations are specific in nature. Costs depend on the amount and type of material to be demolished, the type of new building to go in and how it will mesh with the old building. Also, bathrooms and kitchens generally make up a high proportion of the costs involved in these projects.
So how does an architect help in the process of establishing a cost? Architects are best placed to synthesize the complexities of cost, site conditions, building requirements and best practice design into a cohesive building design and to produce a clear set of drawings that builders and Quantity Surveyors can use to base their pricing on.
A Quantity Surveyor (QS)
A quantity surveyor is a specialist consultant that will provide an in-depth review of the cost implications of a project. They have access to up-to-date pricing data that they use to drill into the different aspects of your project. A QS will also provide a detailed breakdown of all construction elements of your project and their respective costs; think – the individual cost for walls, roof, flooring, finishes etc. This can be an invaluable tool in finding cost savings in your project as it allows you and your design team to target specific aspects of the design to address any large costs. Finally, a QS offers objective and independent advice. They are not trying to build or design your project, their primary responsibility is to offer independent costing advice.
A QS can be an invaluable consultant in your commercial project. Working in tandem with your architect, they will provide detailed, accurate and up to date information on the likely construction cost of your project. Unless it is a very small project, most architects would recommend several QS reports throughout the design process, as they continually inform the ongoing design work your architect is doing. As the design gets progressively more detailed, the QS will capture the cost implications of each phase of the design process. This provides several checkpoints and allows your architect to adjust course accordingly.
Regional Context
If you’re like most of our clients, you have the added challenge of undertaking your project outside the metropolitan region, or even outside a large regional centre. Regional projects come with their own complex costs. Temporary housing for builders and subcontractors, freight of materials and other builder startup costs can impose an additional cost burden on regional projects. The cost of building in the regions can vary greatly. Type of project, distance from Perth and local economic conditions all impact project costs in their own way. In our experience, thorough project planning and an understanding of the local conditions can help to manage these additional costs.
What’s right for your project?
This really depends on the size and complexity of your project, your budget for construction, your project timeframe, the method for designing your project and the location of your project.
If you are undertaking a very small renovation, a good course of action might be to engage an architect to undertake a site visit, provide some specialist advice on your project and take a brief. This can be used as the basis for a concept design which you can use to start talking to builders and get a sense of costs.
On a more traditional commercial project a typical process would be to engage an architect to manage a feasibility study. This would include taking a brief for the project, undertake site investigations, develop a high-level concept design and have this costed by a QS. This might form the basis of a project budget. A good architect can package this costing together along with some drawings, images and project examples to take to communicate the initial project ideas to relevant stakeholders and funding providers.
Whether you’ve got questions about your project or are ready to start the design and costing process, get in touch with us at Office of Regional Architecture and we’d be happy to help you plan your next steps.