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15. Building Costs and Control
   

Why things end up Costing More

  • Sadly for us all involved in Construction, building cost prediction is not a science. We very rarely predict the exact cost of a building before construction commences. There’s an aspect of generally not being able to predict the future, but also that construction is acutely subject to the Fates. 

  • All the TV programmes you see usually feature self-builders at the end of their tether raiding their pensions, their children’s piggy-banks and their relatives’ holiday funds. It makes for dramatic television. But it need not be an issue and in most cases, self-builds result in no or little over-spend.

  • That buildings that come-in at or around budget is not an accident, it is the result of tight planning and control of what occurs on site.

  • The average building paper-work is full of issues that can’t be accounted for in advance. Chief of these is the weather, but also there is litany of things that can get delayed or stuck in the supply side of the process. Such things might be finding out an old well or sewer whilst carrying out the groundworks; a breakdown of a delivery lorry, or more seriously, failure of a supplier to obtain the building products in time, causing delay; Materials might be damaged and need replacing or they might just not work.

  • The main source of conflict in running Building Contracts is caused by work that is not mentioned in the Contract Documents but becomes necessary as the project develops. The arguments between parties usually occur along the lines of whether the contractor could reasonably be assumed to understand what needs to be done or whether something developed that could not be reasonably anticipated. Whatever, somebody needs to pay for it and it becomes the Architect’s job to sort it out an attribute blame.

  • Delays also need to be paid for. If delay is caused by bad weather, its not the contractors fault and the client will have to pay for the works to run-over their schedule. If however, the contractor is at fault in the construction and causes a delay, he will be expected to cover those costs.

  • The Courts are full of arguing parties involved in the Construction process - but more often because not enough care has been taken in the design or the anticipation of problems that might occur on site.  A good relationship between the Client, the Architect and the Main Contractor, with frequent contact is an essential to the smooth running and tight cost control of the project. 

  • Building Costs and the Control of those costs, whether in the mind or in practice, are the one big concern common to all building projects whether large or small, house or office block, private or government.

 

Keeping Control

Competitive Tendering
  • Competitive Tendering is the big tool in your Cost Control toolbox

  • By having building Contractors compete for your building work, you will likely ensure that you are getting the best prices

  • A Tender is a bid to provide your house made by a Contractor in response to an invitation by you to tender

  • The Tender will be based on the Contract Documents (see above) that you supply the prospective Contractor for costing

  • To Tender with a good chance of a keenly priced outcome, it is usually best to invite at least 3 potential Contractors. (See ‘Finding a Green Contractor’ above)

  • Your Architect will be able to advise you on the most suitable of contractors

  • Once identified, you (or your architect/quantity surveyor) will send out a ‘Tender Package’ to each of the selected Contractors

  • The same Tender Documents forming the Tender Package should be sent identically to the Contractors selected for Tendering. The Documents will likely include:
  • A letter inviting the Contractor to Tender
  • ‘Form of Tender’ - this is the document that the Contractor will return to you. As well as other details it will include the price that the Contractor proposes as well as the time he intends to take to do the works.
  • ‘Contract’ - Details of your proposed form of Contract (see ‘The Building Contract’ above)
  • ‘Preliminaries’ (referred to as the ‘Prelims’). The Preliminaries are not the works themselves, but the Contractors cost of doing the Works. They will usually include essential items like the builder’s profit and the cost of administration. The advantage of Prelims is that it helps identify the real construction costs in the rest of the documents.
  • ‘Schedule of Work’ - Schedules should allow the Contractor to identify the building Work and Materials that will be needed to complete the works and to calculate the quantities that will be required. They will price the listed items to determine the overall cost. It is always linked to the 'Specification'
  • ‘Specificaion’ - Describes the standards to which each category of work is to be carried out. They don’t include cost or quantity. For the Green Self-Builder, the Specification is the way of control of the materials and products involved in the construction.
  • ‘Drawings’ - The drawings will likely be a combination of layout and more detailed drawings that enable the Contract to understand was is expected.
  • There are some costs that you yourself as the client might include in the Tender Documents for the Contractor to take account of. These might include:
  • ‘Prime Costs’ (aka ‘PC sums’) - Is a sum of money that is already, ahead of the contract, allocated to a service by a specialist sub-contractor / supplier or statutory authority. This sum will not attract a profit by the Contractor, so it is essentially not part of the Contract. For the Green Self-Builder, systems such as solar panels, heat pumps, mechanical ventilation or even a complete structural system, might be included.
  • ‘Provisional Sum’ - As detailed as the plans and specifications can be, sometimes there are items or issues that aren’t completely defined - and therefore can’t be exactly costed. Instead an approximate sum is inserted into the contract, enabling the Contractor to work out what his cost is for including the item in the project. If later the actual cost changes then the Contractor can alter his own costs accordingly.
  • Having sent out the Tender packages to your selected Contractors, you will now have a wait of 2-4 weeks before the Tenders are submitted.
  • It is likely that one or more of the Contractors will have questions about the project that need a reply. If you answer, make sure all the Contractors are given the same information.
  • When the Tenders are returned, and the prices noted, there will be one Contractor is has submitted the lowest bid. In most cases this will be the Contractor you will select for the project. However before you do that, it is wise to sit down with your architect (and preferably your Quantity Surveyor) and check all the submissions.
  • You are not obligated to take the lowest quote - it might be for example the lowest quote proposes to take much longer than the other Contractors.
  • When you have settled on the Contractor you want to use, you can proceed to sign the Contrac
  • A vital part of the project to build your house is both knowing how much you can afford as well as how much the construction of it is likely to cost at any point in the design process.
  • Most self-builders will do without a QS, but in the larger construction industry they are an essential part of the design team - and often the closest consultant to the client where they provide essential cost information.
  • Although your Architect will be able to give you a very rough idea about costs, they are not trained to give you definitive advice. Instead, hiring a QS will help you make key design decisions based upon what you can afford.
  • The Quantity Surveyor can provide advice at the start of the project when you’re scoping its size and content; During detail design and tendering where measurements can made and likely costs established; They can also help you negotiate with the builder when there have been changes made (‘variations’) made, for whatever reason, during the build process.
  • If you can afford a QS, we would strongly recommend their services.
  • Finding a QS - Either your Architect will advise or you can find one by visiting the RICS website at www.ricsfirms.com and selecting ‘Quantity surveying’ from the scroll-down menu.
  • An alternative to a QS is to use a costings service such as:
  • The Build It estimating service www.buildit.co.uk/estimate
  • Estimators Online www.estimators-online.com