On Total Project Budget – Not your build cost alone
When we meet a client for the first time, the issue of cost usually comes up within the first 20 minutes. In the mind of the would-be home-owner commissioning an architect, Project Budget means everything, but in the mind of the architect, when we ask what is the Budget, what we usually mean Construction Cost, that is, how much would you like to spend on the cost of the project build. We usually have to ask our prospective clients if they have considered all the other things that go into their Project Budget, and usually the answer is no. I make the distinction that the Construction Cost is the actual build cost of the project, distinct from all other professional services, fees and permits.
But first, a strong dose of reality
I have had a few conversations with prospective clients, and I am sad to report that on more times than I’d like to admit there is a strong perception buried deep within the zeitgeist that architects are directly responsible for inflating the cost of building projects.
I just want to say something straight up…
This myth is plain proverbial in the extreme.
Ok, I got that off my chest … breathe out nice and slowly…
I think this perception is inflated because of the obligation clients are faced with to pay fees for professional services, so it becomes a question of values rather than worth.
There is a bit of internal conflict that architects experience when meeting clients for the first time. Assuming the meeting is going well, there is a lot of enthusiasm and excitement about the prospect of working on a new project, there is also a fair amount of selling of one’s own abilities as well – if we turn up to an Initial Feasibility Meeting, we want the job. But when the question of stated budget comes up for a house renovation to include 2 new bedrooms, new open plan living room, kitchen and bathrooms plus some new joinery to all the other rooms in the home all for $350,000 + gst, and it all seems a little bit thin. All of a sudden those feelings of uncertainty and pessimism on the entire prospect being viable start to arise, and I’ve experienced this numerous times.
The stated budget figure is as much created through rationale and emotions – it could have been created through worry about over-capitalisation, or present financial capacity – and that’s totally understandable, but this figure often has little to do with the brief.
During the first meeting, how much should the architect say? Tell the truth now and potentially lose the job… or learn about the truth much later down the line and potentially lose whatever trust and faith from the client in what you do (even though Budgets are the realm of Clients, this is for another post…).
Just because you want only to pay X for Y, doesn’t make it so.
This part of the role makes me feel like a messenger that is delivering bad news, and one that’s about to eat a bullet in the form of losing a commission because of the reality of Cost and Budget are not aligned.
Cost and Budget are not the same
I would try to look at this from another perspective, when we work with clients, we suggest that investing in the design process early on is critical in establishing a likely cost of works with the assistance of a Quantity Surveyor to prepare a cost plan for the client. Ideally, this happens at all stages of the Design Process. At a minimum, for me to have talking points on Cost and Scope aligning to Budget, a Cost Plan has to be created at the end of the Sketch Design process for a base-line for all future reviews to be established.
In our office, we prioritise designing to the Brief first, and to the Budget second. We always endeavour to tell our clients if we think the two are not in alignment, and when this is the case, present some viable options to bring the Scope and Cost down, and we always ask the client that make a decision on this.
Now I say this because we are talking about your money, and Clients need to manage this. How is the best way that you to do this? Give your architect the resources they need by engaging a Quantity Surveyor to be part of the team to assist in providing costing information based on the design drawings, as well as assisting you in making decisions that relate to cost to help you manage your budget for the project.
We want clients to be actively involved in the decision-making process. After confirming the Brief, after doing some early design work and with the input of a Quantity Surveyor to show where the Brief and the Budget align, and if not, how this can either be reconciled by…
1) Increasing the Budget (in other words, accept the current Construction Cost Estimate)
2) Changing the Quality
3) Reducing the Scope
4) Combination of some of the above (say… 2 & 3)
5) (Stage the works)
Changing the Quality is a relatively superficial technique, and often a painless way to bring the cost down… but not by much. It assumes the overall form / footprint of the building doesn’t change, but say instead of stone benchtops, timber veneer finishes to joinery, imported tiles from Italy and expensive stand-alone baths from Bridge Road, well maybe we look at alternatives that are locally sourced, already pre-finished and off-the-shelf instead. I have found this to be more effective during Tender Negotiations instead as ways of drastically trimming the cost. I must admit this strategy feels a bit like buying a prestige car (you pick which brand), but instead of leather seats, Bluetooth, skylights, and keyless start, you’ve gone down to the ‘executive’ model. It’s still the same ‘car’, it still looks the same, it still ‘drives’ very well indeed, but it just feels a bit… sparse….
When I write Reducing the Scope, what I also mean is, how can we as architects combine some of the areas to achieve the same functional output. Or put it another way, can we build less? We are designers after all, we should be able come up with something interesting and meaningful that addresses the competing needs and constraints most projects have, within reason. Maybe the windows can be a bit smaller, or… maybe the spaces can be a little bit smaller, - you could combine some functions (i.e separate dining / meals / kitchen rooms combined into a larger ‘open plan’ is very common, but this approach could be applied to common areas, lounges / family rooms etc…) – this usually has a bigger impact on saving money than say having lesser quality finishes and fixtures. These are the sorts of things we would try to investigate, and our design skills guide our thinking on this. For me this feels like side-stepping in the car brand’s to get equivalent performance.
Sometimes there is a combination of Reducing the Quality and Reducing the Scope. This is quite a drastic and rigorous approach and needs to be done well to keep the original design intent. But we are seeing what we can get away with a bit less of, and prioritising which areas have the highest quality of finishes. This produces the biggest cost savings. Staying with the purchasing the car analogies (last one I promise), for me this feels like getting a smaller prestige car that still hasn’t lost any of its prestige.
Magic wand
Let’s face it, we can do some pretty amazing things… but architects don’t have a magic wand they can wave about and just make an unrealistic Budget somehow work because the Client says so. As professionals, we certainly have an opinion about cost but it’s always a guestimate and not to be relied on – building cost estimating is outside of our services. To reiterate, we always recommend Quantity Surveyors to be involved to prepare any cost estimates. Clients are critical to the success of projects, and if the project is contingent on budgetary constraints then clients must be involved in the decision making about which direction a project goes if the Brief is not meeting their Budget – it’s your money.
To address my earlier point, it has to be said that architects do not set construction prices – the construction industry does. This is driven by supply and demand and ever-increasing labour costs, and architects have no direct control over this.
What are the Costs that go into your Project?
The type of project, the level of complexity, scope, size, timeframe, client brief (or wishlist), site works and quality of finish required for the project all contributes to determining the Construction Cost.
There is no hard-and-fast cost per square meter, every project is different. You could use as a guide say between $3,500 – 4,500/m2 for residential alteration and extension projects that have a ‘good’ quality, with a generous understanding that these rates could go up or down depending on all of the above factors. Add some allowances for the builders establishment and site costs, escalation and contingencies (some of these are costs are related to time, otherwise, you should choose a generous percentage).
But let’s just say we had a residential alteration and additions project with an estimated Construction Cost of around $500,000. Some of the things it could include might be a new bedroom with ensuite, walk in robe, some refurbishments to the existing wet areas of the house, a new kitchen / meals area, laundry and a few improvements throughout the house including a lick of paint and some general repairs. Maybe it’s around 85 – 130m2 of ‘work’ throughout the project.
Beyond the Construction Cost, here are some of the things that would go into the overall Project Budget:
- Architects Fees (say, 9-15% of the Construction Budget) $45,000 - $75,000
- Consultant Fees (say, 4-7% of the Construction Budget) $20,000 - $35,000
- Council Statutory Fees Say $2,000
- Building Permit Lodgement Fees Say $7,000
- Demolition / Site Costs $10,000 - $20,000
- Project Contingency (say 5% of the Construction Budget) $25,000
Estimated Additional Project Costs $109,000 - $164,000
Exclusions:
- Loose furniture
- Asbestos removal, site decontamination
- Rainwater harvesting, solar panels
- Specialist AV / IT equipment
- Landscaping
- GST
If you weren’t to use a Quantity Surveyor to prepare cost estimates, who else could you ask?
For general advice to help determine your Budget, consider speaking to the following:
- Real Estate Agents
- Your financial institution
- Architects to prepare an Opinion of Cost
Could you ask a builder to help you prepare this?
See my article here on early contractor involvement. You definitely could, but understand they can only respond based on the amount of design information presented. If it’s some bold lines on paper, you would expect their estimate to be rough as compared to more developed, construction documentation drawings showing the extents, finishes, materials and fitments. Unless you are committeed to using a particular builder on your project, rather than just say “fishing” for figure, a fair dosage of salt would need to applied when reviewing these. If you are not using a Quantity Surveyor to prepare preliminary costings, how would you know if a builder’s estimate is competitive, and, offering value for money in the current economic climate?
To any builder out there reading this, I apologise in advance but I feel the public has a right to hear the next bit - How much is the builder trying to buy the job by giving the client a number they want to read?
Just to put it out there, a Quantity Surveyor doesn’t want to build the job – they’re a professional who gives you their best estimate on what they think the project value is worth based on the current design drawings - from an independent perspective. Client’s can make the decision to align the Cost to their Budget with our help.
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Therefore, give your architect a realistic budget for the project, and try to test this early and at every design stage with the help of a Quantity Surveyor so that you can manage the Project Budget, and your architect can realise your architectural ambition!
Redmond Hamlett is a Director (Project Architect) of WHDA, he regularly engages with the Australian cultural milieu in his design work and loves realizing architectural ambition on site. You can get in touch with Redmond on 03 7020 5784 or redmond@whda.com.au