INSIGHT | 2017

Do Architects Really Understand Construction Costs?

November 5, 2017 AT 10:24


In order to gain leverage over design professionals, some general contractors promote the idea that architects don't really know what things cost and generalize that most architects are always telling clients that dream projects will cost much less than they actually do in the end. Is this idea fiction or truth?

We suggest that the notion of a design professional (namely architects, as well as professional engineers who design structural, mechanical and electrical systems for buildings) not knowing "what things cost" is really more about them not knowing what the same thing costs a specific contractor to deliver. As an architectural practice, we take on several projects a year with a handful of different contractors of varying labour rates, abilities and resources/subtrades. We see and track what the local marketplace is doing from year to year and have an exact idea what clients are paying for different levels of quality (workmanship) and for products or materials (which fluctuate).

For example, a project tendered for a previous client at $450K is priced out at $630K by a different contractor 30 days later. Is the project way over budget because of the architect's "over-design" or budgetary incompetence? We don't believe so, but at what price should an architect design to? Should the architect assume that the client will end up hiring a medium to high-end custom residential contractor or instead simply budget based on a bid from the last project?

The following is a simplified example scaled to a small job: You ask a trusted contractor friend what they think you should budget for painting the exterior of your house. Having worked with several different painting trades, your friend knows low-end painters who would do the job for $15K and the most skilled painters who wouldn't touch the job for less than $50K. However, he informs you there are plenty of painters who would do the job for $30K and perform with acceptable workmanship so that is what he suggests to budget for. You proceed to follow through and obtain two painting bids that come back at $39K and $43K. When you ask the painters why they are "so expensive" they respond that your contractor friend "just doesn't know how much things cost" and has no business telling a homeowner how much painters should charge. Now you have lost trust in your friend who appears to not have a clue about local pricing.

As an architectural practice who designs several projects a year (more than most custom residential contractors build annually), our general monitoring usually provides a conservative indication of what industry pricing is anticipated to be forecast than many contractors could provide prior to a detailed bid from thorough construction drawing information. Notwithstanding this, we can't always predict (or control) what a specific contractor is going to finally ask for at a given time due to changes in building commodities, operations, overhead or profit which vary from one year and specific contractor to the next. As a matter of dealing with this variability - as a means of proactive risk management - we feel the best strategy is to work with a contractor earlier in the design development process (or at least the construction documentation phase), rather than relegate the contractor's important role to the final bid and end construction phase. We also often recommend "cost-plus" contracts which are typically more transparent to owners with a set general contract fee over a determined schedule.

When updating budgets as client scope decisions are made, today's best practice suggest an architect's Opinion of Probable Construction Cost should be within 15% of the final bid. But which bid? And how can the architect reasonably control the final bid of another party?

Clients are really in control of the budget because they make the most decisions.

From the architect's perspective, there is no reason homeowners or contractors need to feel a design that comes back over-budget is suddenly worthless or need be entirely re-worked. It is to the architect's greatest benefit (as a matter of business sustainability) to make cost predictions as close as possible to the tender price and avoid time spent making unpaid revisions to account for overages (beyond the 15% threshold). A project delivery process that verifies potential costs at key milestones should circumvent big surprises as progressively clear drawings and major specification information is more and more determined. Additionally, there is a balance of benefits and cost occuring thorughout a design - for example, if you are designing a private residence for someone, architects have to help define what the client's "ultimate dream plan" is in concert with how much it is likely to cost far in advance of actual construction. Limiting a client's blue-sky ideas too early in the design process prematurely scales back on project potentials being explored and assumes they will never invest in their home again. This is seldom true as some people who have defined their project needs accept an "over-budget" design where only two-thirds can be built initially, understanding that - in their circumstance - to achieve their full vision will require a phased approach over time at higher cost.

Even if a client can't afford the entire dream in the present, if they are committed, the client has a reasonable understanding of what it will take to achieve their overall plan and the financial requirement to realize it in full. In these cases, it is reassuring to reposition the project as a "master plan" for the near future, and budget for the scope that is buildable now and what has to be deferred. Having detailed construction plans can mean you have the insight for decisions to build the initial project knowing what best serves the future (for example, installing a steel beam with capacity for the entire structural load for phase 2). It is more beneficial for an architect to advise doing the project in phases than to say, "I'm sorry, but you're way over budget and going to need to completely re-design your project."

When clients still demand a particular project scope using certain materials, employing a certain contractor, or other cost items beyond the architect's control AND maintain they have a fixed budget, the architect is put in a very difficult position. It is always problematic when homeowners accuse the architect of "over design" yet are willing to risk the time of those involved and refuse to pay the determined price. Rather than phasing or scaling back the project with a responsible contractor, they often mistakenly choose to reduce quality to get them closer to what they want. Architects (and contractors) sometimes become convenient scapegoats for a client's inability to scale back desire in the face of lack of funds.

For some clients, aiming high and trimming back is a legitimate strategy to get the client as close as possible to achieving their stated design goals.

Often it is difficult to know if the client's project requirements or budget should be the controlling factor. Sometimes the client is not open to telling you - a terrible starting point for a lengthy relationship requiring mutual trust. It is not uncommon for clients to describe a $600K project but later inform you of their $300K budget. In these situations, it is best to be professional and (gently) tell clients they cannot afford what they want from the start (at risk of upsetting them or being fired) rather than press on in ignorance to design exactly what they want in hopes they come up with additional funds or plan to scale back or phase the project down the road.

In other instances, some architects do focus more on the design than the budget implications. Many clients also seem to figure out how to get the money when they are enamoured by a particular design solution. Responsible or not, some architects are pre-conditioned by the type of clients they attract to not pay a lot of attention to an initially stated budget as decisions by the client during design stages are often subject to change.

Project budget and expectations for adhering to it should be made clear at the project onset.

While many design-build contractors claim to have the greatest control over budgets - moreso than architects working with a separate contractor - in actual practice this is not usually the case. Design-build contractors typically design only "what the client wants" often resulting in a bid price that is fundamentally a bad value, over budget and in need of scaling back - only to realize they were working extermely hard to attain a flawed, crestfallen design as well.

WHAT IS THE BOTTOM LINE?

In a methodical and engaged process, clients are really the ones in control of the project budget because they make most of the final design decisions. You need to be clear with your architect as to whether the budget or scope of work/design is the controlling factor. Your architect needs to provide meaningful feedback on your design decisions and can offer strategies to realize your ultimate project vision over time through a phasing plan or by mitigating the cost implications through appropriate revisions that hone design priorities. Do not assume the architect performed unprofessionally if the initial bid costs were higher than anticipated as there still are a lot of variables beyond an architect's control in advance of a tendered bid.

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Learn more about the Important Benefits to Working With Architects and other insights on our website including important planning and pre-design considerations prior to starting a project and how architects and builders typically work together to achieve your building goals.

Nothing is more exciting than designing a new residence, commercial property or tenant improvement for yourself or business. Nothing will affect the success of your project more than the right architect with the best skillset and knowledge. Our practice utilizes an engaging Discovery Consultation to help clients make real progress and reach their building goals without wasting precious time and money or repeating steps.

If you feel ready to discuss your early project ideas, please contact Principal Architect Spencer Court to find out more about our blueprint for success or to begin your tailored proposal to get you on track making real progress.
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