In our last article we discussed the importance of: knowing what you want in a home, organizing relevant documents before hand, engaging the service of an architect or design consultant, and preliminary interaction with financial lending institutions. This article goes a step further by highlighting the importance of budgets and estimates in the preconstruction phase.  Budgets and estimates often go hand in hand; after all the estimate gives us an idea of how our budget should be structured.  For construction purposes a budget refers the financial plan for your entire design/building process, i.e. how your money will be spent. Whereas an estimate gives an idea what the total project will cost.  It is the dollar equivalent for all the work it takes to design and build your new home.

Generally a building’s overall cost can be calculated by considering it’s size in square feet and the types of materials used on the intended building e.g. whether concrete or wood.  The “price per square footage” is generally derived by dividing the total expenditure for the project (i.e. building, residence etc) by the total size in square feet.  It thus follows that if your neighbour spends 450, 000.00XCD for a residence of 1400 square feet then the building rate or price per square foot would equal (450,000/1400) which is 321.00XCD. This may lead you to question why your own 1400 sq. ft. home costs more or less than that of your neighbour.  Considering the aforementioned equations this is a logical trend of thought, after all if the houses are the same size and both made of concrete what else can cause a price variation?  Most people immediately blame the contractor, assuming that his rates may be excessive in an effort to derive maximum profit.  Upon further inspection one may realize that while one house looks like a regular “pad” the other may look like it came straight out of a designer magazine.  This is where costs associated with finishes (often classed as "soft costs") come in.

Soft costs generally refers to expenses that are not considered direct construction costs.  These include architectural, engineering and financing fees as well as other pre and post construction expenses.  In this case we look at “finishes” which fall under post-construction expenses.  For the purpose of this article we refer to both internal and external finishes such as exterior surfaces (paints or troweltex), windows and doors, counters millwork and cabinetry, lighting, appliances, ironmongery, tiles, bathroom accessories, and plumbing to name a few.

Previous conversations with your architect or designer should give them a fair idea of a client’s taste.  Unfortunately a clients tastes and a client’s budget aren’t always in sync with each other.  Globalization and technological advances have made clients much more aware of the numerous options that are currently available.  Clients are thus overwhelmed with what they would like to buy as opposed to what they can really afford and of course what is appropriate. Flooded with thoughts such as “what am I going to choose?”, “This one looks fabulous but the one yesterday was just as good.” , “What are the pros and cons of this purchase?”, clients are often left flustered.  People who are fortunate enough to engage an interior designer or an architect with such knowledge are normally spared this task. Decisions are never easy however the right consultants can help you get it right for you and your pockets.

Whether constructing a small or large edifice, consultants can save you more money than you may think.

The choice of finishes will vary from client to client and can differ dramatically from one project to another.  Unlike hard costs such as structural material whose values are fairly stable influenced only by such factors as increased taxes or other national economic decisions. Factors such as location and environment (e.g. distance from sea), the style or theme of residence and family needs among others can all influence your choice of finishes.  This is thus one reason why your neighbour’s house may cost more or less despite having the same square footage.  It is thus advisable to have an idea of what finishes you would like to use as early as your preconstruction phase.  This allows you to obtain quotations for your choices from relevant suppliers thus making it easier to develop a budget for your estimated costs.

It is always important to have a proper cost analysis and detailed estimate prepared in an effort to determine the real value of your designer’s creation.  This may assist in choosing the right contractor for the job.  Contractors themselves can provide credible cost analyses.  If you wish to pursue a tender process (i.e. having several contractors bid on your job) it is recommended that a quantity surveyor be given this task.  The quantity surveyor can develop and control a budget through the use of a bill of quantities. This document uses an established rate to calculate costs for given activities.  Thus a Bill of quantities will list the various construction processes as well as provisional sums (approximate values given to items not fully specified or decided upon) and corresponding quantities.  

Use of a bill of quantities minimises conflict of material quantities and focuses on a pricing system which allows completion of tasks. The bill of quantities document also provides flexibility as it can be issued to various contractors for a tender process. In this case individual contractors provide pricing values for the construction processes listed.  The client can then choose the contractor who may not necessarily have the lowest price but whose bid makes more financial sense to the client’s needs.  Quantity surveyors are also employed to prepare building contracts, project schedules and manage the construction process, by monitoring how financial aspects of the construction project progresses.

As the client it is in your best interest to always be one step ahead of your lending institution

So let’s assume we’ve engaged the most suitable contractor for the job through our tender process.  What’s the next step? If the client isn’t versed in construction it is recommended that a project or construction manager be employed to represent the interest of the client.  Even if the client is versed in construction s/he may not have the time to ensure that what is being done is actually what s/he requested. A project manager will communicate with the contractor on the client’s behalf.  Cost overruns may be caused by a number of different reasons including inflation, delays in material ordered and of course poor planning.  A manager’s role includes conducting regular inspections as well as dealing with daily mishaps and making decisions in the best interest of the client while keeping the project on schedule.  They also hold regular meetings to coordinate tasks and payment certificates.

It is important to note that the bank’s representative loyalty goes first and foremost to his employer (i.e. the bank). His/her role is simply to inspect the property and to confirm that each stage is complete according to the Bank’s (or other lending institution) requirements, in order that the institution may comfortably release the necessary funds for the particular construction phase.  As the client it is in your best interest to always be one step ahead of your lending institution, ensuring that your project is on schedule and that the disbursed funds have been spent sensibly or according to your contract.
Last but not least let’s look at some extra tips to bear in mind that may be useful during both pre construction and the actual construction phase.

• Don’t overspend in any given area! Spread building finances appropriately over the life of the project. I cannot stress how important this is; avoid the temptation of buying expensive items if it will be to the detriment of completing a particular building task,
• If possible clean your building site daily yourself; this minimizes time wasted cleaning by your subcontractor. Every minute saved means more time to focus on getting the job done,
• Purchase fixtures and or finishes directly from the supplier and avoid the mark-up.  Bulk purchase to consolidate shipping can also be a cost saving. Notwithstanding discuss this with your architect or project manager to see if it is applicable to your situation,
• Get estimates and bids for everything before you start construction; and,
• Remember inflation is a reality; prices are volatile so having a financial reserve isn’t a bad idea at all.

Whether constructing a small or large edifice consultants can save you more money than you may think. Do things properly. If you aren’t versed in the fields of construction or project management don’t dwell on how much money you may save if you skip the consultant and work directly with the contractor.  I am sure there are more than enough unhappy stories and unfinished properties out there as proof of what that decision will cost you in the long run.

*** Colin Jenkins graduated with a Bachelor of Architecture (first class honors) from the La Universidad Central "Marta Abreu" de Las Villas, Cuba. He currently works with Roberts Construction and Engineering Co. Ltd in the disciplines of Construction Management and Consultancy, Project Management, Procurement and Architecture. Founder of Symmetry Design (Architectural Company), Colin may be reached at 1.268.724.0873 or colinjjenkins@gmail.com.