Budget is always a major consideration for our commercial construction clients, and as a general contractor we devote significant time to the budgeting process. While we do our best to provide budget estimates that are as accurate as possible, there are inevitably times when projects bids come in higher than the client expected, or that unanticipated costs push the job over-budget. Here are a few signs that, in our experience, indicate your project budget is more likely to bust:
Skimping on Professional Services
In a best-case scenario, a general contractor budgets a job based on thorough architectural and engineered drawings that encompass not only the client’s design intent, but also careful planning for everything from mechanical systems to cosmetic finishes. We also always recommend our clients invest in a proper existing conditions survey, which will alert us to any site issues we’ll need to mitigate and plan for in the budget.
But in reality, the quality of plans we receive to work with at this stage varies widely. Clients may have not given their architect or engineer enough time to create a detailed set of documents; skimped on drawings assuming details will be decided along the way; or decided to skip an existing conditions survey altogether to save the cost. As an experienced general contractor, we do our best to ask questions and fill in gaps as we review plans and do a site walkthrough, but we may not anticipate every detail of the client’s exact design intent or plan for every site issue that can arise – both of which can lead to costly changes or additions down the road.
The best advice I can give our clients is to hire the best architect and engineer they can early in the planning stages, and give them time to do their job well. It’s well-worth the investment when it boils down to giving us the information we need to create an accurate budget.
Getting Too Specific on Specifications
Mechanical equipment is a big line item for any construction project, but it’s always a budget watch-out when a client’s drawings include manufacturer-based specifications rather than performance-based requirements. There are certainly situations when it makes sense for the client to go with a particular brand, such as when they have a national account covering all their facilities across the country. But for the most part, giving the general contractor the flexibility of bidding the job against performance requirements allows us to negotiate with different manufacturers and find the absolute best costs.
While this is most evident with big-ticket mechanical items such as vertical transportation, HVAC, fire alarm and life-safety systems and even plumbing and electrical, it really holds true for any product or material used on a project. General contractors are a great resource for suggesting substitutions that could add up to big savings and keep a project budget in check – from recommending an alternate, less-expensive finish material to create the same aesthetic as what is specified in the plans, to value-engineering nearly any project component. The key is to loop the general contractor in early and allow sufficient time in the initial planning stages to identify and realize these potential savings.
Competitively Bidding the Project
To be clear, we manage plenty of competitively bid projects that we keep well-within the client’s budget expectations. But in general, competitively bid jobs are much more likely to end up over-budget than design-build or design-assist projects. That’s because in a competitive bid the commercial contractor is only responsible for bidding exactly what is in the plans, not the overall design intent. If the client ends up wanting something other than what is in the drawings, it results in a change order. There’s a misperception in this industry that general contractors love change orders. In reality, they almost always cost us time and money – just as they do the client – because they usually involve making something happen in a hurry, whether it’s expediting delivery of materials or paying a subcontractor overtime so we can make the change and still keep the overall project schedule on track.
By contrast, in a design-build or design-assist project the general contractor is chosen at the project’s onset and creates a conceptual budget as architectural plans are developed. While changes and additional expenses do occur, there are fewer surprise costs because the contractor has been providing estimated pricing based on true, real-time market figures throughout the entire process.
Estimating costs for a commercial construction project is a complicated process, but if clients work with a trusted commercial construction partner and provide as much communication and detail as possible, there’s no reason the budget can’t stay on track