How to manage your Building Budget
Tips & Advice

How to manage your Building Budget

Your project may be the biggest investment in recent years, so understanding costs and controlling risks is very important. For successful and happy projects, expectations and available funds have to match.

First some assumptions / parameters

- this is not about a new build project where residential development is nil rated for VAT

- it is not about the option where you, as the client, may opt to ‘project manage’ or even ‘contract’ the works yourself; though the AYH menu of incremental services does not rule out such a possibility, this is when you choose a builder or contractor to build and run the project for you.

So what should you consider when contemplating a project budget? 

1. OBJECTIVES

· List the order of your aims, and ask your architect about how capital costs might be determined, this will inform the core of a “budget” through understanding objectives.

· Consider ways in which you could formulate a spreadsheet? It need not be complicated, but you should understand its components, their relevance and interaction.

· Understand the “tripartite” diagram of cost-time-quality. We all want to achieve high quality at low cost, in the least amount time but is this feasible?                                                          It is generally recognised that in the realisation of most building projects we have to settle for two out of these three factors as the key objectives and recognise that these priority aims will influence the third.

2. CONTROLS

· Description and information are at the heart of controlling objectives and risks.

· To manage the budget and to obtain the maximum value you need to understand the process of building, and where the money goes. This is done through commissioning your architect to produce the appropriate drawings, specifications, schedules and contracts.

3. BUILDING COST

· This is what you pay someone to do the work, and it should be under the terms of a proper building contract. Within your budget allocations, there might however be items that are client sourced and supplied directly into the works, such as kitchen fittings; sanitary wares, ironmongery and electrical items etc.

· Be careful to make sure services connections are organised in advance to avoid delays.

· Avoid and making alterations to the design or specification once the work has started as this can be unexpectedly costly.

· Allow for the costs of alternative accommodation if nature of alterations and works inhibits staying in residence.

· Provide for contingencies - allow for the unforeseen in the execution of the works; “it’s life” and best to allow for things costing a mite more and taking a bit longer.

4. FEES

· Seek the best and most creative advice to maximise value.

· The scope of architect and consultant services required to realise your aims will be dependent on your own initiatives and capability to contribute to the process.

· Determine and plan for the fee costs of the primary consultants; architect and quite usually a structural engineer (whose input may be required for Building Regulation submissions)

· Allow for other fees such as Surveys, Measured Surveys; Statutory Fees (planning applications & building control inspection), Insurances (mortgages?)

· This component of project costs is dependent on nature and scope of the building works but it is common to apply a percentage factor of between 12 -15%

5. VAT

· Allow for paying VAT as most reputable builders and services suppliers are not likely to be exempt.

· The cost of works is likely to be discussed outside of VAT, as this is charged through your builder’s invoices and added to the architect/contract administrator's valuations and certificates.

· Consultant fees and costs are likely to be quoted exclusive of VAT; and when assessing the components of your overall project budget check VAT status in statutory and other fees.

6. ESTIMATING COSTS

· Online information and your architect can help with basic “ballpark” building cost estimation using devices such as our cost estimator and cost per unit area data.

· Working backwards from established available funding less the above-associated costs divided by unit cost indicators can be a guide to how much space can be created or altered/renovated.

· Be conscious of limitations in these “ballpark” estimating methods as the variables of your personal brief and a particular existing context may have considerable influence on cost.

7. SPECIFICATION ANS SCHEDULE OF WORKS

· Though it is sometimes possible to execute works based on just drawings - well developed and annotated - when competitive tenders are deployed to test cost and seek the best value, the drawings should be complemented by specifications that describe the works in a scheduled format.

· While the process of tenders provides comparative bids from selected builders/contractors the detailed pricing of items in a “Schedule of Works” enables the critical aspect of control, and understanding of what has been contracted, as well as the inevitable management of design development change and variations.

· Priced schedules are useful for the valuation of periodic payments and in architect administered contracts they provide the basis for cost control through interim and final certification.

8. WHERE TO SPEND, WHERE TO SAVE, WHAT TO DELAY?

· Simplicity and good design are concomitant with style and beauty.

· Phasing of works is a means to match budgets with aspirations where it is necessary, but if not done with proper consideration of future phases it could lead to higher expenditure in the longer term.

· Don't get caught up with wanting to change everything in your home because you have made some changes to it. Be mindful of its market value, as the enjoyment of your enhanced home may be of primary value but exceeding the market value of the property could be a constraint on life’s future opportunities.

In a culture of Black Fridays and Cyber Mondays it is worth reflecting on a quote from John Ruskin:

“It's unwise to pay too much, but it's worse to pay too little. When you pay too much, you lose a little money - that's all.

When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.

The common law of business balance prohibits paying a little and getting a lot - it can't be done.

If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”

 

This is, of course, true for both the cost of building as it is for the cost of good architectural advice, that why so many people come to Architect Your Home

 

Tags budget, home renovation

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