Budget and cost planning, with your architect

If handled well, a million dollars will build a million-dollar building – but not a two-million-dollar building. So, you need a budget that matches what you want to build. Sure, sometimes ideas, enthusiasm, possibilities, ‘maybes’ and ‘maybe nots’ will slowly push a project this way and that… Often beyond their original budget and path. This can be a problem. So, establishing and communicating (i.e. sharing) a solid and achievable budget and weighing it up against your needs and wants (your design brief) is important. This means a bit of work and commitment from the whole team.

A budget and a cost plan are a good idea

A good cost plan report is telling you where you’ll end up if you continue down the path you’re already on. And if that end point (a cost exceeding your budget) doesn’t suit you, then you should do something about it. Now… It won’t fix itself, wishful thinking won’t fix it either. Projects of any sort (in any industry) based on solid, sound, and feasible parameters with reachable targets are more likely to reach a fruitful conclusion than those that are vague, confusing, and hurriedly thrown together with little regard or rigour.

This means giving thought early on how the budget, the brief, the site, and the possible cost impact each other. If the initial design looks like costing more than you wish it to, then, your project may stall, wander off track and struggle to succeed. It’s not a surprising fact that sometimes grand and growing designs, schemes, briefs, ideas, or visions will be altered to suit a (not so grand) budget. Architects are asked to balance and satisfy both the brief and the budget. Like spinning plates at a circus, it’s tricky – but any investment in their advice and expertise is money well spent.

Get started before drawing too many drawings

A quantity surveyor (cost planner) is a professional in the construction industry. They have knowledge and skills in advising and managing the budgets and costs of a building project throughout all stages of design and construction. The earlier you talk with them the better, and the more helpful they can be. A cost planner’s work and advice are most effective and beneficial at the early stages of design – and before you’ve done too many drawings.

Budget and cost are not the same

While they are related, budget and cost are not the same. And, each need their own regard and management. How this is handled plays a critical part in establishing and maintaining a project’s chances of momentum and success. The budget is the resources (financial, for example, but could be another resource) allocated to an activity. Whereas, the cost (or financial impact) is a product (or result) of the design brief, the design formulated (the building), the inclusions, the site, the processes & procedures, and other considerations and circumstances. Where did that number come from? And what does it include? Vague and unrealistic budgets are hard targets to hit.

A budget needs to be well thought through and not thrown together hastily or based on some dinner party talk from 2 or 3 years ago. A million-dollar budget, that’s nice … But, what does it include? Is it a million dollars for everything? Or is it a million dollars just for the building? With the other costs – design fees & documents, permits, furniture & fittings, client supply items etc. – coming from a different budget? It’s good to know which. Construction budget and Project budget are not the same – though they do overlap. The latter (project) will include the former (construction) plus any other costs incurred that are not included in the construction budget. And, it’s always worth being clear if the budget does or does not include GST.

Three Contingencies

A contingency is a plan, provision, or reserve of resources, set aside to help handle the unexpected, and uncertainties. Building projects change, grow, and shrink. They have items moved, modified, squeezed, expanded, knocked down, put up, painted, re-painted, added, and deleted… And so, costs change as well. To help manage the money, contingencies are handy allowances in budgets, cost plans and contracts for some of these expected, unexpected, unknown, or undefined costs. In the early stages of design, contingencies are necessary. The site and existing building are still to be fully inspected, the soil test is yet to be done, the design brief may be provisional, the drawings are only sketches, the specification isn’t written, and the engineers have not yet had their say.

One contingency should be set aside for those things that pop up during design – aka a design contingency. This will be for minor changes to the design brief, or the discovery of poor ground conditions, or the news that the existing air-conditioning system isn’t any good for re-use. A second contingency should be left free to be only spent during construction for variations to the contract – aka a contract contingency. And, a third small contingency may be set aside for outside influences on a project that could spring up at any time – aka a project contingency. Another cost, report or engineer, for example.

Remember, budget and cost aren’t the same: your budget is the resource you allocate, while costs are the actual financial impacts influenced by design choices, site conditions, and other factors. Clear budgets and thoughtful contingencies are vital to managing the unexpected changes that occur throughout design and construction.

Author: Geoffrey Moyle, Quantity Surveyor, FAIQS, has been helping architects and their clients with their projects for over 40 years.