10 Things to Avoid on Your Commercial Project – Item #5: Unrealistic Budget

We all cringe when we hear that word. It has a negative connotation in our society due to its association with having to cut back in order to stay solvent. However, in the design process, “the budget” is your friend. Establishing a budget usually comes after the “wish list.”  After all, we want what we want, must discover what it costs, and then determine if we can afford it or borrow enough to get it. Most clients outside of the industry have no idea what the cost of construction is, or they remember that 10 or 20 years ago it used to cost “x.” It is critical to share how much money you want to allocate to a project with your architect. If they don’t ask in the first meeting, run! Designing without considering the budget is NEVER a good idea. Designing a project as if funds are unlimited will, more often than not, produce a beautiful set of drawings that will live its life on a shelf and produce a disappointed client that can’t afford to build the project.

A competent architect should have a reasonable handle on what construction costs are for the building type. A detailed construction cost estimate or take-off is required if the project encompasses renovations. There are a couple of ways to accomplish this: 1) your architect can hire a professional estimator as a consultant to get a preliminary cost estimate early on in the Schematic Design phase. This estimate can be updated in the Design Development and Construction Document phases to ensure things have not gotten off course as the design progresses 2) your contractor is involved during the design. Early on, this team approach can facilitate a smoother project and keep the project on budget. There are a number of other methods for doing this including Construction, Design-Build, Cost-plus Contract, or simply hiring the contractor for estimating services.

Once the probable construction cost is established, you may need to make adjustment(s). Increasing the project funds to meet the estimate or decreasing the scope of the project is one example. Phasing the project may be another method allowing for the financing of the project over time. It is never a good idea to “hope and see what happens.” Finding a contractor willing to sign a contract for an unrealistic amount can be considered a magical solution resulting in change orders (more $$) or an unfinished project (because the contractor underbid & doesn’t have the funds to finish). Choosing the lowest bid may not be the best choice. Those who do may end up paying in the long run and sacrifice months or years in completing the project. Architects can be your advocate in the process of reviewing and discussing contractor bids so you can make an informed decision.

In summary, have an honest and open dialog with your architect about your goals and finances. Listen to your team when they provide “real world” numbers and adjust if necessary.