Chicken or Egg?
This post is inspired by a recent interaction with a near client who was struggling with a typical budget chicken and egg problem. She had spent tens of thousands of dollars on designs that all came in massively over budget. She naturally wanted assurances that we could deliver a design she could actually use. Unfortunately, unlike her previous experiences, we would not guarantee final construction budgets. We did offer assurances that the projected scope of work was reasonable for the budget, but that wasn’t reassuring enough. But there are several good reasons a budget is an aspiration or goal rather than a promise, which we’re going to address today
At the beginning of a project, a budget is absolutely a goal. There are three things that will affect the final price. Those are the initial expectations, the choices the client makes, and the overarching economy. An experienced and honest designer looks at that list, and realizes that they cannot control any of these factors. We can help shape initial expectations, and we can advise on the choices during design. However, neither of those guarantees the budget.
Initial Expectations
Every project starts with initial expectations. This includes the scope of the work, the quality of the materials, and the level of care expected by the contractor. Unfortunately, many clients have unrealistic ideas. These are either based off of old numbers (I have no idea how many years people thought they could build a house for 100/s.f.) or a bad base (HGTV is notorious for glossing over or misrepresenting construction budgets.) That’s not the end of the world, as long as they are willing to reset expectations with more information. This is one of the reasons our client intake form includes a projected budget. The best time to reset expectations is before we start.
On some occasions, the expectations are in-line with reality and that makes things easy. But when they aren’t, we can discuss priorities. Sometimes the priority is a portion of the work and we can phase or scale it back. Sometimes the priority is the budget so we have to adjust other items in the design or scope to achieve it. Sometimes (rarely) the priority is the ask, and the budget gets adjusted to match. Any of these solutions can work, but it’s important before you start the work to have everyone on the same page as to what you’re designing and what is a reasonable range to expect the final product to be.
Design Choices
Scope creep is absolutely real. Especially for renovation work, you find that once you start, you will tack on additional items. Maybe the deck becomes a porch. Maybe you have to upgrade your electrical service to handle the additional loads. Maybe you find out you’re in the flood zone and have to retrofit the foundation or lift the house to achieve your goals. Sometimes you just fall in love with imported marble countertops and triple your kitchen costs. In any case, the choices you make during design will affect the final budget,
Even if you started in a reasonable place, if your choices keep driving up the budget, then you can end up with an unaffordable design. A good and experienced designer will try to keep you appraised of the impacts of your choices, when they’re in the loop. However, they can stack up in a way that makes it a bit of a surprise. How did a series of five thousand dollars add up to over a hundred thousand budget overrun. Well, twenty choices that individually weren’t so bad can add up to a real sum.
And in the end, we designers have no direct control, we can only advise. If you tell us that you want to add two bedrooms and a bathroom, while we might tell you that it’s driving your budget out of range. We also won’t stop you. After all, this is your project. We aren’t paying for it or using it. I remember a professor of mine saying that architect’s always have to have a justification of what they’re producing because at the end of the day, we’re creating art with other people’s money. And it’s true, we create the designs paid for and used by others, so we often are more advisors than deciders in the final design.
Overall Economy
Do you know the best thing that can happen to you two weeks before you build? Assuming it doesn’t affect your financing, a large recession or other economic shock that drops the price of building materials or labor. That’s a bit facetious, but the principle was very clear in reverse during the pandemic. Interuptions in the supply chains and unavailability of materials (and labor in our area) drove construction prices through the roof. We had a client who had a contract to build their house for around 600k. Through no fault of their own or even the contractors, the contract ended up modified to over 750k and they had to make some sacrifices to achieve that number.
The best way to limit your exposure there is to be flexible. Never build with a hard deadline you absolutely have to meet. Never fall head over heals in love with a material or detail. Being able to make changes or accept delays is about the only insulation you have from sudden shocks. Basically, don’t give a supplier, subcontractor, or builder leverage to extract concessions from you.
One thing that often happens, at the end of a design project as we’re going out for pricing and the reality of the project budget is coming into focus, is that we discuss how much care a client needs from their builder. Higher end builders sometimes are charging you for their brand name/reputation. Some clients are willing to take on more risk with someone less proven or well known for a savings. Sometimes they’re charging you for back office staff. Those staff help things go smoothly and ensure communication (at least in theory) and the guy with a staff of himself and a cell phone have lower overhead and costs. However, it will be more on you to deal with problems and to make sure your choices and selections are effectively and timely communicated. In an extreme example, we had clients who ended up basically doing the book keeping for their contractor to determine their own change orders because the builder didn’t have that effective back office staff.
Budget Impacts of Design-Build vs. Architect-Client
We didn’t mention this earlier, but there’s one last item to our inspiring client. Her unbuildable designs were both provided by two different design build contractors. You would assume that the contractors would have an advantage in the design process in that they’re in control of the build so design choices should be in-line with the budget. They should have the best budget feedback through design thanks to their in house experience. But that’s not how it works all of the time.
Although these builders were both good quality outfits that we have worked with in the past, there are some fundamental issues that probably worked against them in this instance. First, neither of them has a licensed architect on staff. They do have some experienced designers, but architects have a standard of care. One of their core competencies is the develop and monitor construction and design budgets, that you may not get, even with experienced designers.
Even if you had a very conscientious designer who used that experience on staff to keep a detailed budget through the design, they still don’t make the choices. They have no more control over the budget than the architect. The client is still the one making decisions and they still don’t control their subs or material costs.
In addition, the designer is working for the contractor, not the client. If they manage to come in under budget, does the client see it? An independent architect can advocate for the client on the budget. This can help to make sure that actual savings are passed along and not just increasing the profit on a job. We can also review contracts for whether or not they seem to be in line with other contractors in the area.
While we will always ask for a budget, and do our best to work towards it, we will never guarantee a final cost. If we did, we would be lying, because we cannot control it. If someone does promise to design a building that can be built for X, with no choices made yet, you should take it with a huge grain of salt. All but the most simple buildings are riddled with opportunities to adjust a budget up or down. And construction is complicated enough, that many times, a contractor who has underbid a job has plenty of opportunity to nickel and dime you later. Even worse, they might just walk off the job because no one wants to pay for the honor of working for you. In the end, communicating your expectations and listening to feedback from experts is your best bet to achieving your best value. Of course, that still doesn’t help you solve the problem of knowing if you can build your dreams for the budget you have access to. Sometimes, you just have to go down the process and iterate and compromise to get to there. We call that value engineering, and there’ll be a post about that soon enough.
