budgeting your project
Budgeting is critical to a successful project, but to be successful, it takes accurate input from the builder, realistic assumptions from the client, and the foresight from the entire project team to make meaningful changes early if preliminary estimates are higher than the client’s budget. Changes in design get progressively more expensive and impactful the longer in the process one waits, with changes in construction being the most costly.
We recommend starting with a conservative budget that includes a building contingency - a percentage of the Construction Estimate meant to cover costs that are unknown but predicted. There are almost always unforeseen conditions that arise in construction. And because of that these are actually foreseen unforeseen conditions (known unknowns). Furthermore, any unforeseen condition is almost certain to bring an additional cost to the client. It is possible diamonds exist below your building site, but it’s much more likely and only rational to assume and plan for, finding a buried oil take, unstable soils, or large tree roots well beyond the canopy of that beautiful 100-year-old maple you are trying to preserve.
The construction industry deals with known unknowns in two primary ways. Either the contractor provides a hard (not to exceed) bid that they cushion in order to absorb those costs themselves, or the client incurs those additional expenses as they occur. With this second option, an honest budget will assume a reasonable placeholder for these costs. The project budget consists of two types; direct and indirect project costs.
Direct Project Costs
These are costs directly associated with the construction of the project, including:
Construction Estimate (by builder): The work the builder is responsible for, which encompasses managing the project, construction, cleanup, procuring materials, disposal of waste, scheduling, coordinating inspections, and working with the client and architect throughout the project.
Direct Costs (by owner): Other direct project costs outside of the builder’s scope. This may include landscaping, fencing, PV system installation, rainwater catchment, or other specialty work done by professionals, not under the supervision of the builder.
Project Selections: Products purchased by the client and installed by the builder. Depending on the project, and the specific arrangement with the builder, this can range from nothing, all the way to including plumbing fittings and fixtures, hardware, appliances, surface lighting, and window treatments.
Indirect Project Costs
These are all costs necessary for the completion of the project, that are not directly associated with the construction of the project, including:
Design Fees: Professional services fees to your architecture firm
Land: Both the cost of purchasing a lot itself, if applicable, and also any necessary property scans, site surveys, lot line or easement adjustments, or any preliminary work to sewer lines or other utilities.
Consultants: The range of professional consultants needed for your project will vary widely depending on your needs, but may include a structural engineer, geotechnical engineer, mechanical engineer, building envelope consultant, Building Biology consultant, energy modeler, interior designer, lighting designer, or landscape designer.
Permit & System Development Charges: These are one-time fees to the Jurisdiction where the project is located meant to help pay for municipal facilities, which are necessary to obtain a building permit. They vary widely between project type and jurisdiction, and include, permit intake, plan review, Sanitary SDC, Stormwater SDC, Transportation SDC, Parks SDC, Water SDC, trade permits, and special inspection costs.
Certifications: Any third-party certification fees, including PassiveHaus and various levels of the Living Building Challenge.
Other: Catchall group to include any final anticipated expenses, including the project contingency, furniture, printing, modeling materials, and professional rendering fees.
After all these costs are added together, as the client you need to feel comfortable with this total estimated budget. If this number is beyond what you feel comfortable spending, then adjustments need to be made upfront to the scope, complexity, or quality of the design. There is no magic to this, you either take things out, use things that take less time (in design, construction, or both), or use things that are less durable, healthy, equitable, ecological, or some combination of the four.
We all want to believe there are cost-saving answers out there that also give us all the qualities we are seeking. It is important to keep in mind that the material which is the most durable, best looking, and least expensive without any significant drawbacks will become the standard material in a given locality for that application. Any deviation from that standard may have other benefits, but it will almost assuredly have known disadvantages and/or be more expensive. This does not mean all expensive materials are better (they are not), nor does it mean that we cannot use creative design strategies to achieve more value out of less (we can). Just that after the project team comes together to strategize on the design, if the overall budget is still too high, removing elements and reducing the scope of the design are the only ways to reduce cost without a reduction in the quality of the final product.
By facilitating this process early, thoroughly, and honestly, we can keep a project on budget, and remove much of the stress and anxiety that may otherwise accompany such a large and expensive investment.