Construction Costs: Unknown

Contributed by Elias Saltz

​In my very first post on this site, the one titled, “Is Construction Broken?” I listed a few ways in which the profession of architecture is contributing to the ways in which construction is broken and needs to be fixed.  I’m providing the link so readers can go back and refresh their memories on the whole discussion but for the rest of this post I will be addressing one observation, which reads in part:

(Most but not all) Architects have very poor knowledge of how much construction costs, and use loose rules of thumb to try to determine whether or not their designs are within their clients’ budgets.  They rarely know how the details they create affect the project cost, and the resulting necessary Value Engineering (VE) costs them time, money and prestige. ​

As I’ve thought more about this, it occurs to me that this is one of the biggest problems facing the profession.  The Owner’s money is not an unlimited fountain and most projects have some sort of budget, either a hard limit or a ‘this is where we’d like to be’ type of budget. Owners rely on architects to curate the expenditure of amounts of money that massively outweigh the architects’ own fees. They also rely on architects to develop designs that meet their facility needs.
 
When architects begin with the ‘design concept’ as the primary driver, or if they have a personal ‘favorite move’, the client’s budget is already at risk.  Swoopy curves and other grand gestures may be considered the fun part for the architect and even for the building occupant, but complexity often carries a heavy premium.  I learned recently of an office that designed an S-shaped, low-slung residence with structural insulated panels (SIP) instead of normal framing and sheathing for the roof structure. Each SIP would have needed to be custom made in a trapezoidal shape. Is there any wonder this project was significantly over budget?  The resulting VE exercise cost the architects most of their interesting design as well as their (uncompensated) time, while it cost the client its seasonal construction window.  It also generally cost goodwill all around.

Similarly, when architects begin with an advocacy statement, urging clients to buy into “green” or other design fads, the resulting project incur added costs that are difficult to evaluate up front.  Whether the project delivers a return on the additional investment is not something that the architect normally has a stake in, nor an understanding of.
 
There are other common stumbling blocks:  Owners are sometimes not willing to divulge their budgets, or only share part of the picture.  Architects should make sure their clients understand that without something realistic to aim towards, they’re unlikely to meet the budget.  Earlier in my career I was involved with a 12,000 square foot tenant improvement project for a public entity that, after it was fully designed, was priced by a contractor $400,000 over the Owner’s budget.  Given that there really were only a few design bells and whistles in the job, I didn’t see how $30/sf could be cut out and later learned that the architect had an incomplete picture of what the budget included (an amount that the architect assumed included just hard cost also took in a range of soft costs and fees).  Had there been an understanding to begin with, the architect could have advised the client that the construction cost wasn’t reasonable and they’d either have to add dollars or shrink the project.
 
Construction costs vary and two nearly identical projects can have wildly different prices based on numerous factors, most of which are out of the architect’s control.  These include the general state of the economy, location of the job, availability of skilled labor, level of competition between subcontractors or suppliers, labor union strength, material shortages or surpluses, quality of the documents, method of procurement, and allowed duration for construction.  Given the myriad possible permutations it’s unfair to blame architects for not being able to accurately predict a project’s cost.  Contractors’ estimators who price work every day and have a far deeper understanding of the work climate are themselves sometimes surprised when a trade’s pricing is different than predicted.  Given this, it’s not particularly surprising that architects routinely fail to design within budget. 
 
Still, architects have some tools at their disposal to help them keep their designs within budget:
 

• Historical data: If a 50,000 square foot hospital addition they designed cost $15 million two years ago, it stands to reason that a similar project will cost roughly the same, plus some escalation, plus or minus the previously-mentioned market influences that the architect can understand and evaluate in discussion with contractors.
• Comparable Materials: We understand that building materials have a spectrum of costs. For example, cast-in-place terrazzo costs more than porcelain tile which costs more than vinyl tile; curtainwall costs more than storefront. Having an idea of the per installed unit cost for construction materials can help keep project on budget.
• A large portion of the cost of a project is in the unseen but necessary components. Architects should have value vs. performance discussions with their HVAC, electrical, plumbing and fire suppression consultants.  There are many ways to heat, cool and light a building, and budget can drive those decisions.

 
These are good starting points, but the best resource architects actually have are their industry partners:
 

• Contractors can be hired to perform preconstruction services (or they’ll perform them without a fee as part of greater project involvement through construction) and can evaluate the project’s cost throughout the design phases.
• Manufacturers’ reps can tell architects whether or not particular materials are being used in an economical way and advise on value improvements.
• Specialty consultants (for elevators, building envelope, etc.) have in-depth knowledge how to maximize and balance value and performance on the areas of their specialty.
• Specifiers, whether in-house or consulting, generally don’t have specific knowledge of current construction costs but can also help the project land in the right place on the value <---> performance spectrum.

 
Given their distance from the actual construction business, it’s nearly impossible for most architects to determine a project’s cost as they design, but given the numerous opportunities to ask for expert aid, it’s inexcusable for a project to come in more than a few percent away from a reasonable budget.