How To Control Your Construction Budget

Somehow, we have found ourselves in the throes of spring this year - it's mid-MAY! MAY! Really?!

Spring means construction is ON like Donkey Kong (yes). Early projects are well on their way (except, of course, for the Oak Brook project...) and summer projects are expectantly waiting for us. Another reality of this time of year is that we get inundated with calls for NEW projects - a lot of people ready to put an offer in on a house and want preliminary pricing, investors with land now want to develop it with multi-unit buildings, and homeowners ready for a new look.

All of these projects sound awesome! As always, they come down to one thing: money, money, money.

Whether you have $50,000.00 or you have $5,000,000.00, budget is the single most important factor when evaluating a construction project. Just because a client has $1M doesn't mean there is another $1M if things go wrong. Yes, we have goals for the project. Yes, we need the space to be a spectacular final product. Yes, we care about sustainability and community. Yes, we care about character and preservation. The fact is, we cannot address any other factors of a project without addressing the budget first.

So, regarding preliminary pricing, you can reference How to Estimate Your Renovation.

I'm going to be talking about a much harder concept - controlling your budget.

You have an idea for a project, you have the building, and you have a budget. How do you maintain your budget? How do you make sure that your $450k doesn't turn into $600k?

Here's a few ideas to help:

1. QUALIFY YOUR ARCHITECT. Okay, you're doing a major renovation so you need an architect to define your scope. ALL ARCHITECTS ARE NOT EQUAL. Listen closely: DESIGN is NOT where you should be cutting costs. I understand, that extra $10-15k could buy your tile! Stop it. Right now. Knock it off. NOT spending that extra $10-15k will cost you $50k. I promise. A good architect will have a strong understanding of construction cost. A good architect will have a strong understanding of construction itself. A good architect will want to work with your GC.

(Our architect working with us at the Hyde Park Condo)

A good architect will have DETAILED drawings showing functional installation of utilities (HVAC, Electrical, Plumbing) and structural components. I cannot tell you how many times I have walked into a project where a client is bidding 3 or more GCs with drawings that don't show what needs to be done. Oh, you want to move that skylight? One GC is going to price moving that skylight, great price! One GC is going to price the purchase and installation of the new skylight window, what's the brand and cost of the window? Does this including framing? One GC is going to price with the assumption that they will need to re-frame the entire ceiling to accommodate the new location of the skylight, is that necessary? So, now you've got a low bid, a confusing bid, and a high bid - which is your best bet? Your job just got a lot more difficult. A good architect will not put you in that position. The details will be there. The bids are apples to apples.

(This is an actual structural drawing showing a dot as a major structural beam.)

Also, any architect who tells you that they don't do drawings of utilities or detailed carpentry drawings because the GCs are just going to do it their own way or should know how to get it done without them is an architect you should walk away from. In the same breathe, that level of detail takes time and we know what time equals. An architect's time is a good use of your money.

2. COMMIT TO YOUR SCOPE. So often, I speak with clients who want an incremental number. "I want to know what we can do for X, and then X+ $50k, and then X+$150k." or "OMG! That budget needs to come down $100k!" It doesn't work like that. You're not buying a cable package. There is no WANT, there is only NEED. If you are doing a renovation project, you're taking down walls right? You're taking up floors, right? You're putting in bathrooms, right? Okay, so once everything is demolished, it HAS to be built back up. The walls NEED drywall, that drywall NEEDS to be painted, the floors NEED a finish material, the bathrooms NEED tile. There is no halfway. Any GC who tells you otherwise is treating their base bid as a jumping off point - a place to START. It's not a maximum bid. If a GC is telling you something that's too good to be true, it is. Let's face it - we are not bringers of good tidings when it comes to budget.

Now, many bids do include Alternates - maybe we install a more expensive hardwood? maybe we add on a deck? maybe we build a custom bookshelf? That's controllable - those things are not contingent on other things. When we're talking about major scope items: layout changes, replacing utilities, replacing the roof, these are not mutually exclusive. The most dangerous thing you can do is think you can add that stuff on as the project progresses. No, that'll cost you a fortune. Know your scope, commit at the beginning. First, if you don't have a great GC, you've now locked in with that GC and now you have very little leverage to negotiate pricing for a change order because you won't be able to bring anyone else in to do that work. You'll have to bring someone else in after your project is done and they will need to rip stuff up to do it which will then cost you more. Second, if you have a great GC, that GC has allocated a certain amount of time for your project and adding major scope items that impact other items mess up the schedule: time. You know what time equals...seeing a theme here? It's a bad deal for you.

Have a martini, go for a workout, take a bath, call a psychic - whatever you need to do, wrap your mind around your scope and commit.

3. FINISHES, FINISHES, FINISHES. Whenever I have a client that needs to reduce their budget, I immediately refer them to finishes. Why? See Item 2: when it comes to labor, there's no halfway. Lucky for you, we live in the age of technology - at your fingertips, you can find a vast array of finishes to choose from. While I still strongly recommend hiring your architect to help with interior design, if the budget is too high, work with them to change out the fixtures. Perhaps Delta instead of Kohler, perhaps porcelain tile instead of marble, perhaps poplar instead of oak mouldings, perhaps solid core composite doors instead of solid wood doors. These changes can save you tens of thousands of dollars.

(See how we installed smaller cabinets and built them up with mouldings? Economy appliances. Ceramic tile backsplash. That end piece of the island is actually an upper cabinet.

Thanks to our HGTV designer, Susan Klimala!)

4. ESCALATING SCOPE ITEMS. Beware of escalating scope items. These are scope changes during the project that create a domino effect. For example: let's say we do demo and find that there is an original window from 1888 that's been covered up and hiding behind the walls. Of course you want to restore it! Here's the deal: the answer is "yes", the question is "how much?". Of course it's possible to restore that gem to its original glory! Ask your GC to walk you through what it will take to get that done. First, you have to remove the window without breaking it, then you need to get it restored by an artisan, then we need to open up the wall from the exterior to make a window opening, we may need a lintel, we're going to need to change the size of a cabinet. Do you see what I mean? One scope item triggered many others. These are things that can drastically increase your budget in one fell swoop.

5. CONTINGENCY. Okay, you have a great architect. You have your scope fully defined. You've had a martini. You've priced your finishes. Now, add on 25%. You may not use this, you need to have it there just in case. There are still a lot of factors that you can't control: 1) unknowns that can't been seen until demo finishes, 2) city/village inspector requirements, 3) opportunities for scope improvements that will make a big impact...say, restoring an original window discovered. You don't want to bypass an opportunity like that because you don't have the budget.

If you do these things, you really shouldn't have many surprises. When you're taking on a major project, you want to be realistic about your budget so that you can enjoy the transformation! You're spending a lot of money, this should be fun. If you do all of this and you find that your finances are still REALLY tight, then wait. Don't get yourself into something where you can't get out - remember, there's no halfway.

Want to see more projects? Check us out at Integro Rehab!