Category Archives: 4D»2B

Budgeting

Budgeting a construction project can be intimidating. To cover the full scope requires knowledge of all the parts and the process. This article is an overview of the total picture, which for some reason, is rarely discussed online but is a large part of the workings behind the scenes.

There are many websites that pretend to explain how much can be built at some “target” cost. This is a sales trick to maximize what is purchased by advertising a false end point. My approach here is to back up and look at the larger picture to allot reasonable values for the entire project and to explain what a complete budget looks like. This is more relaxing than the industry model where the stated budget is just the beginning followed up with continuing additions, selections, changes, hidden costs, and fees. The whole point of working with an architect is to plan the entire project so that there are no surprises!

House Construction Costs

House Construction Costs

Above is a representative budget for a new home. The first four items (oranges, yellows, and greens) compose the greatest portion of the whole, the construction contract. This is the amount of money paid to the contractor in return for the materials and labor required to build the home as well as his overhead and profit.

The next four bluish slices represent another category of costs that I lump together as owner costs. These expenses can be paid directly out of the owner’s pocket to avoid any additional markup by the contractor. However, in many contracts, especially build-to-suit and starter homes, these costs are included in the contract so that they can be financed in the mortgage. Because they are often hidden, the price for convenience is usually additional markup and reduced options.

For example, take the 6% shown above for furnishings, fixtures, and equipment. Average home builders sometimes allow owners a few options for selecting plumbing and lighting fixtures and appliances. These choices might amount to only 1% of the total construction budget. Everything else is included without options. Any change to them results in an additional costs. Conversely, in working with an architect, every item and component is selected and stipulated in the contractual drawings and specifications prior to the contractor coming to the table. Since the information is precise, no allowance needs to be provided. This greatly reduces wiggle room, markup, and change orders.

Another benefit of detailed documents is that the owner can purchase selected components directly and avoid contractor markup. Most homes have a considerable number of item purchased by owners after the completion of construction. This is the reason home improvement stores in areas with new housing are such big business. Additional items the owner might buy directly include maintenance items like filters and light bulbs, appliances, pools, patios, decks, outdoor kitchens, security systems, home networking, audio and media, yard lighting, and irrigation. With the architectural process, any of these can be selected for inclusion within construction and financed. Or they can be purchased directly by the owner to avoid markup, installation notwithstanding.

House Total Budget

House Total Budget

A complete project budget also includes design, shown as pink and wine reds. This cost is hidden in merchant grade residential construction. But it is highlighted in architectural homes because it is the avenue those owners have to design exactly what they want. In fact, as discussed in a previous article, Architect versus Contractor, clear documents are the best means for reducing unknowns and getting market competitive bid pricing. It eliminates gratuitous overhead and unreasonable profit, budgeted above as the two greenish pie sections. Specialty consultants, either hired by the architect or owner, use used for structural, mechanical, electrical, plumbing, civil, and energy engineering as well as landscape architecture and interior design. They may compose as much as 70% of the total design costs.

House Initial Budget

House Initial Budget

One final but critical improvement to the budget includes contingency, shown above in grey and bright red. These are funds allocated for unknowns, and are split into two parts: design and construction. During early stages of design, less is understood. When I first sit down with a client, I allot as much as 20% of the budgeted construction costs to design contingency. This is about 12% of the entire project budget as shown on the chart above. After the first meeting to review schematic design, we already have a better idea of what the goals will be, so the contingency is reduced to 15%. After the design development phase, it is reduced to 10%, and then to just 5% at the construction documentation phase. By the time the house is ready to be bid by several contractors, we have spent so much effort resolving the design and details that the design contingency can be eliminated.

A construction contingency is allocated for unknowns discovered during construction. For new homes with thorough surveys and geotechnical investigations, we allow about 5% for unforeseen issues or optimizing adjustments during construction. For smaller homes or additions, we might reserve a bit more at 8-10%. For complex renovations, or unique sites or situations like historical structures, recommended construction contingencies may be as high as 10-15% to make sure undiscovered conditions do not undermine the entire project.

Throughout the project, contingency is either spent on changes or it represents a savings on the total cost. This is a much better system of budgeting than predicting 5-10% overruns, isn’t it?

There are two final categories of items not shown in these graphs: site costs and financial costs. Both vary widely depending on the situation. Site costs may be $50k or $5m depending on the size, location, configuration, availability of utilities, and regulatory requirements. Likewise, some owners pay cash and have advantageous personal relationships to reduce legal and real estate costs, while others may finance large portions at market rates.

I hope this article has explained the difference between the cost of a home and the initial budget recommended to complete it. By move in day, they are one and the same. But a precautious approach at the beginning is the best way to ensure that day has a feeling of accomplishment in financial responsibility.

Please leave comments below with your thoughts!

Edited 2014-08-26 for minor grammar and clarifications.


Share: Facebooktwittergoogle_pluslinkedinmailFacebooktwittergoogle_pluslinkedinmail Follow: Facebooktwittergoogle_pluspinterestlinkedinrssinstagramFacebooktwittergoogle_pluspinterestlinkedinrssinstagram

Architect versus Contractor

For over twenty years and in both boom times and bust times, I’ve debated the merits of the various contract structures with my colleagues. With few exceptions, I have not found a better method than competitive bidding.

Is my article title hyperbolic? Your answer depends on how combative you view the design-construction industry!

The process of design and construction has essentially just two different approaches, seemingly at odds with each other. This article will explain how both perspectives are dealing with the same problem, but from opposite ends. And I will clarify why Johnston’s method really is better.

Amy Johnston’s book, What Your Contractor Can’t Tell You, is quickly becoming a classic. Originally published ten years ago, it is balanced view of the subtleties in the home construction industry. Having been on both sides of construction contracts in commercial and residential projects, I recommend it as a good introduction.

I like to say that you don’t need an architect for a house if you know:

  1. Exactly what you want
  2. How it all goes together
  3. How to precisely explain it to a contractor

If these are true, you have effectively completed the design process and are ready to begin construction.

On the surface, some prospective new home buyers will feel pretty confident in what they are looking for. The difficulty begins in the next two steps. There it is discovered that the particular details for implementing their dream unravels. Without a lot of experience, it seems easy to believe in the contractor who constructs houses for a living. Surely he will be able to handle the problems. That’s perfectly true… as long as cost is no object.

Let me say that a different way. A good contractor can solve any problem if there are no restrictions on cost. You are free to make any change or delay in the process as long as you accept the expense of the adjustment.

Obviously, for most projects outside of an Apple store or a Gates house, an unlimited budget is a ridiculous notion. It is the management of finite financial resources that sets off the entire controversy.

Many an owner has had an expectation for some standard, feature, condition, or level of quality that differed from what the contractor built. If this item isn’t clearly documented in the agreement between the parties, there is no legal requirement that it be provided.

Gary Larson Cartoon

Suddenly a heated debate broke out between the king and the moat contractor

Far Side, by Gary Larson

The ubiquitous change order is a legal device to change the scope, cost, or duration of a contract. For anything unspecified, a change order should always be provided for every adjustment. Tens or hundreds of items can be added to the initial cost. For change costs exceeding the funds approved by lenders, these must come directly out of the owner’s pocket.

But what about items that aren’t clear? Can there be a system for balancing the expectations of both sides to avoid these often contentious, sometimes litigious debates? By what standard can an owner establish expectations that are fairly measured by the contractor? Johnston explains:

[A good bid document set] gets the design team to define a tight scope of work in a timely fashion and you gain comfort with a fair price from a qualified contractor.

Architects create contract documents—drawings, specifications, general and procurement requirements—that form a legally binding agreement between an owner and a contractor. These very precisely define what the owner wants and what the contractor is to build.

Unfortunately, houses are the least sophisticated buildings that are constructed. As such, they are more prone to suffer from insufficient documentation than any other building type. Many commercial contractors avoid residential construction altogether because they don’t want to compete on such vague terms. Contrary to popular belief, most contractors really do want to perform at a very high level and give owners top quality construction. But without good definition, they risk a less reputable firm underbidding them by cutting corners where they wouldn’t. This problem is self perpetuating, so the better contractors avoid the work entirely. When they do take it, they are under constant pressure to find savings because they will have trimmed their profit margins unrealistically thin just to win the project.

The solution for both the owner’s concern for costs and the contractor’s avoidance of being unfairly undercut starts with acknowledging that homes are becoming more sophisticated. Not too long ago, owners had no expectation for high performing envelopes, mechanical systems, or finishes. Even today, what the US market considers good is far below average in Europe. I shudder every extreme temperature day at the miserable quality of our current home that we bought just ten years ago. And it was “custom” built in 1991.

A thorough design process followed by detailed contract documents define the work precisely and allow little “wiggle room” for those that would cut corners. In fact, architectural documents can be so complete that several quality contractors can price them project and come to the same conclusions about what exactly is legally obliged for the project. No guesswork and no concerns mean the mandated level of service and attention to quality can’t be undercut by anyone else with less ethical intentions.

Johnston says this about the documentation effort:

What makes it daunting is that this process requires you to get all your design work done up front, then get those designs into a bid package that any builder can understand.

Indeed, good builders don’t mind competing in fair circumstances. For example, I recently designed a sophisticated laboratory project with a budget of more than $6 million. Seven bidders participated. My 138 drawings and 1,338 pages of specifications were precise enough that the lowest three bidders were all within 0.3% of each other. Extrapolate that to a $630,000 house—only $1,700 difference between three contractors.

Bid pricing uniformity indicates a uniformity in the opinion on the scope of work. When the documents define all the components and conditions that an owner wants this carefully, there are few surprises during construction. There may still be some clever efforts to get around those stipulations, but the project scope is legally clear and objectively able to be defended against shenanigans.

I’m confident that bidding creates a total project savings, too. While the design effort is a little more involved, it pales in comparison to the savings obtained through a competitive bid. Add to that all the change costs avoided during construction. The additional spent on quality architectural documents so significantly offsets the potential costs of unknowns that nearly all experienced and sophisticated commercial owners use some form of competitive bid environment on their projects. Of course, contractors select their subcontractors the same way!

The downside? Careful design adds some time before construction can begin. For the rare fast track project, these cost savings are sacrificed for time and construction starts early. But for all other projects, savings are preferred through early design. Design in the middle of construction to close open issues certainly doesn’t pay as Johnston concludes:

However, whether through this contract structure or any other, you will have to address these issues at some point. It’s safer to make the decisions and face the budget realities at this early stage and with your wallet closed.

Figure it out before you start. Use high quality design and documentation of that design to resolve every aspect of the project before signing a construction contract. That’s what the pros do. You should be able to understand each component of your project and have concluded decisions, even down to color selections. Anything left undecided could be a potential change during construction.


Share: Facebooktwittergoogle_pluslinkedinmailFacebooktwittergoogle_pluslinkedinmail Follow: Facebooktwittergoogle_pluspinterestlinkedinrssinstagramFacebooktwittergoogle_pluspinterestlinkedinrssinstagram

Code Check

Back of House

Back of House

I often receive inquiries about providing permit drawings requested by local authorities for new tenants, small renovations and upfits. Business owners are moving into a new space and the local Authority Having Jurisdiction (AHJ) has required permit drawings sealed by an architect to gain legal occupancy. This can be a relatively simple process. But it can also be complicated by only a detail or two. Here are some of the more typical complicating factors.

Existing Information

Permit drawings are almost always required to be scaled. Architects produce documents that are special in many ways, but one of the most important is that they represent three dimensional space in both measurement and proportion. This enables the drawings to accurately reflect required dimensions such as distances to a fire exit, clearances, area sizes, quantities of materials, and so on.

When a space is already existing, such as in a shopping center or office tenant space, it is important that this existing facility information be presented as part of the permit submittal. Sometimes a landlord already has CAD information of the building and site, which saves time. But when this existing information is less than what the AHJ will require, the architect and his consultants need to conduct a field survey to obtain the outstanding information.

Gas meter

Gas service and meter

These drawing components include typical items required on the average building permit set.

Building Code Summary — This is usually near the front of a set of documents and is a large listing of the building code requirements and existing building measurements used to explain the original or most recent building permit for the property. It prescribes the basic building construction type, occupancy classifications and uses, information about fire partitions and barriers, emergency exiting plans, and much more.

Suite Layout — Where multiple tenants are in a building, many jurisdictions require a layout of all the suites in the building.

Site Plan — A site plan shows property lines, surrounding streets, drives onto the property, all parking spaces including accessible ones, walks, plantings and natural areas, fire hydrants and sprinkler connections, and the building, its entry and exits. Where multiple buildings exist on the property, clearances between buildings must be known.

Structural Drawings — These are often needed when new equipment is being added or changed above the ground floor or on the roof. They also explain where major structural components of the building are being adapted, such as with wall openings, wall-mounted equipment, or significant ceiling suspended items.

Architectural Floor Plan — This plan shows all the spaces in the building, including areas outside those of the intended project. Particularly of interest are the corridors, stairs, exit door configurations, and fire extinguisher cabinets. The architectural floor plan needs to correctly indicate all walls, doors, windows, stairs, and elevators at the correct sizes. It also includes furniture, fixtures, and equipment that are intended in the final space, including toilets, sinks, bathroom partitions, cabinetry and casework. Any other floor-mounted trade items in the sections below are often shown on the architectural floor plan as well.

Reflected Ceiling Plan — This is a drawing necessary to show the general ceiling configuration and height, lighting, exit lighting, exit signs, HVAC grilles, fire sprinkler heads, smoke detection, and alarm horns and strobes.

Building Elevations — For an interior space, this seems an odd necessity but some AHJs (like Raleigh and Cary) are very particular about hiding rooftop HVAC systems and want to see all the views of the building exterior. A roof plan might also provide this information.

Roof Plan — This plan is be necessary if HVAC or other systems have rooftop work in the project.

Fire Protection — Usually only for sprinklered buildings, these include sprinkler piping, sprinkler heads, calculations, and the valves, connections, and supporting equipment.

Plumbing — In addition to piping, plumbing drawings show fixtures like toilets, sinks, lavatories, and janitor sinks. Also explained are water meters, backflow preventers, building water and sewer connections, and the calculations supporting the design.

Mechanical — In addition to any HVAC units and related ductwork, mechanical drawings show important information regarding calculations for air changes, humidity control, ventilation provisions, and many other details related to the mechanical design of the building.

Electrical — These drawings indicate electrical power service and distribution, lighting and controls, services to mechanical systems, and all the incidental components requiring power such as appliances, equipment, and fans. The electrical drawings often include critical fire alarm systems as well as those for data of internal and external networks, phone systems, security, intercom, and even audio-visual.

These and plenty of other items could require illustration by the local authorities during permit plan review.

Change of Use

Although it doesn’t always require large changes in the building, modifying a space from one use to another can trigger further requirements or changes. By code, the use includes both the occupancy classification (Business, Assembly, Retail, Industrial, etc.) as well as the particular function within the spaces (warehouse to auto repair, accountant office to medical office, office space to retail space, etc.) The building code has particulars about many different functions so it isn’t possible to generalize about how these could develop. I like to research these at the beginning and even discuss potential conflicts with the local authority early in the process to avoid surprises during the final inspection.

Push bar

Push bar exit device

Code Changes

Even without changing occupancy or use, the building code itself is continually adjusting in reaction to scientific, political, and cultural interests. Officially this happens every two to four years, but subtle clarifications, amendments, or local adjustments can happen any time. Just because a space was compliant five years prior doesn’t mean it satisfies current requirements. And AHJs use new tenant occupancies and renovations to review existing buildings to reflect increasing concerns for fire safety, accessibility, plumbing fixture counts, and general life safety.

Renovations, Up-fits, and Changes

Each AHJ has slightly different stipulations for just how small an alteration can be before it requires a building permit. But it is safe to assume that only a few inches adjustment to the direction, width, or configuration of a path of travel in a room, along a corridor, through any door, around an object, or across the site to the public way will require a permit submitted with architectural drawings.

This process sometimes seems picky, even to this architect. But its primary purpose is to “safeguard the public’s health, safety and welfare”, in the words of the state statute by which architects are licensed. Since even the AHJ is not licensed, the building code review process basically pins responsibility on the architect to ensure compliance. The requirement for sealed drawings is the legal method for accomplishing this.


Share: Facebooktwittergoogle_pluslinkedinmailFacebooktwittergoogle_pluslinkedinmail Follow: Facebooktwittergoogle_pluspinterestlinkedinrssinstagramFacebooktwittergoogle_pluspinterestlinkedinrssinstagram

Dream

The Dream

The Dream

Getting the beginning of an architectural project right goes a long way toward making sure it finishes well. But the start is actually much earlier than when design begins. There can be a period, sometimes many years, of conceiving the need and capturing a clear vision that directs everything that follows.

This formative mental development is so necessary to identify and document that I’ve named it and delineated the goals. I call it “Dream” because it is a word that properly conveys the necessary exploration outside of physical bounds. It also expresses the bit of optimism required at the beginning of any project.

I like to think the architectural process is the concretization of thought. Architecture has been called frozen music because it represents a physical embodiment of an idea. It is important to understand that this inspiration is the primary reason for the construction more than any physical considerations. Certainly a house is for living, but every beautiful house comes into being with a different collection of higher aspirations than simply shelter from the elements.

Why identify these influences and background from where they originate? It often happens that there are fundamental interests below the surface of a feature request that, when fully realized, flower into better design ideas. When understood, this directs more consistent solution strategies.

For example, a garage requested to be small may be out of the concern for budget, but it is as likely to be related to something visceral under the surface, like the fear of clutter. Likewise, a large window might be ideal to enjoy a panoramic view, but it might also suggest a privacy concern, imply coldness (despite being triple-paned), or be perceived as a danger to children or birds. Another driver might be a specific date in the near future because the home is to being readied for a wedding. In each of these cases, the architect needs to understand the root cause rather than the effect, because an experienced designer can propose several creative options as alternatives.

The Site

The Site

The Dream stage is also when the physical site for the project is identified. For buildings, some form of arrangement for land is necessary. This may be a new purchase or be a parcel already owned.

The site itself could be selected according to the vision of the project, such a quiet pastoral setting on the edge of a field intended for raising children, horses, and watching birds. But the site might also be the driver, with the project inspired by the land itself. This would happen with a new home on a family inheritance, such as by a pond where the owner played as a child.

In any case, well designed architecture is integrated with the site and is evaluated by the architect to consider the warming path of the sun, predominate wind patterns, and views both from the site and to it. Exemplary natural features like cliffs, trees, or rivers could figure very strongly into the design, too. This exercise is referred to as site analysis, and it best happens at the beginning of a project so that the design can be informed by whatever opportunities are presented. A land survey is required before beginning this process.

For projects involving existing structures like additions, renovations, remodels, and upfits, a similar kind of analysis also takes place. Where no information exists, the architect and consultants are able to measure and research the building to establish its dimensional and material properties and suitability for the work. For newer structures with proposed projects similar to the current use, this is a relatively straightforward process. For older structures or situations where the new use is a departure from the existing, potentially extensive research and discussions with the local authorities are required by the architect.

The Creative Cycle

The Creative Cycle

The conclusion of the Dream effort is a feasibility check. Just as it is helpful to explore the inspirational seeds for a project without bounds, it must be balanced by a determination of how it will be tangibly accomplished. The necessary cycle of exploration and reality check is continual throughout design until construction begins.

In my process, project feasibility is refined and stated all along the multiple design phases so that unknowns are continually eliminated. This might involve quantifying the unknown with some contingent value during design. Project pricing will then solidify as each of these contingencies is decided. During construction, pricing can be further reduced by working with a contractor who provides substantiated allowances based on the design intent. Some contractors will also rebate a portion of price savings in exchange for finding efficiencies during construction.

Agreement with the final evaluation of feasibility by all parties is necessary to proceed. Arrangements for financing and purchase are assembled along with an overall project timeline. The architect also prepares a statement of cost regarding the project budget.

At the conclusion, the Dream is clear. The foundations of the project’s purpose are stated, as is the location for the structural foundations. With the feasibility resolved and agreed, the next step is to concretely define all the features.


Share: Facebooktwittergoogle_pluslinkedinmailFacebooktwittergoogle_pluslinkedinmail Follow: Facebooktwittergoogle_pluspinterestlinkedinrssinstagramFacebooktwittergoogle_pluspinterestlinkedinrssinstagram