Grand Designs Australia

The Importance of Setting a Construction Budget Early on in a Project

Setting a construction budget at the beginning of a project should be a ‘must do’. It will act as the baseline for every decision you make during the project. Failing to do so may result in scope reduction and omission of key elements.

Mark and Karen Bartkevicius  are a very unique couple with a passion for old buildings and restoration. Together they pursued a two-year campaign to acquire an old electric substation, overlooking the city of Launceston, Tasmania. This project ended up being more than the journey of saving an old building and building a home. It became a project that provides a life string  to both of them, in particular Mark.

This once-in-a-lifetime restoration project of a Launceston icon came with its challenges. The ‘gothic’ Hydro Electric Substation has been in disrepair since the 1960s. Without a roof, it has experienced some of the area’s harshest weather conditions. It is the building’s unique architecture and its state of disrepair that provides the challenges for this project:

The epic task of marrying the old utilitarian architecture with a more contemporary approach that addresses the new use of the building and the comfort of the occupants. The ultimate reward is getting the balance right between old and new architecture.

  • Not having a clear budget from the start has meant that the Barkevicius’s have had to make some tough decisions to ensure the viability of the project. The disrepair of the old building and cost associated with bringing a building like it back to life has ultimately had effects on overall scope. The outdoor terrace and pool area were omitted from the project, leaving all their focus and budget on the restoration of the old building.
  • Setting a budget at the start is a ‘must do’  for all projects. A project budget acts as a baseline for all decisions made throughout the project. Here are three different paths you can follow to ensure you set an appropriate project budget from the onset:

1. Seek Professional Advice

Engaging a professional Quantity Surveyor from the feasibility stage of a project will assist in getting a preliminary estimate cost. This early engagement will ensure that the design is on budget and you are on track to proceed to the next stage with certainty.

At feasibility stage Quantity Surveyors use their knowledge of construction methods and costs to advise the owner on the most economical way of achieving their requirements. In some cases additions can be offset by other identified savings. This advice will prove invaluable in aligning cost to budget, practically in restoration, heritage and renovations projects where some of the work is unforeseen, which was the case in the Substation project for Mark and Karen.

2. Engage a Builder early on

There are benefits in introducing the expertise of a builder at the initial project-planning phase. Having them on board early will mean they can advise on cost planning and constructability methods, value management and project risk mitigation.

To keep track of cost and not be left at the hands of a builder you have already engaged, there is an opportunity to negotiate and lock in some prices with the builder before entering into a contract. Big-ticket items like windows, structure, roof, preliminaries and builder’s profit amongst other items can be fixed. The aim is to fix as many trades as possible to reduce your risk of going over budget. The remainder of the building trades can be tendered in a transparent process.

3. As owners, be responsible for your own cost research

Getting the budget right from the start is essential and doing your own research of market cost can assist you in keeping track of your budget. Before any work on site is started do your own research. Here are some tips and practices that will help you through this process:

Have a detailed package prepared
Do not skimp on plans or details. Having a well detailed and thought-out project documentation package will ensure that all items in the project have been thought about when working within a budget. It will also mean that when it comes to engaging a builder there will be none or very few unknowns.

To do this, make sure that all aspects of the building have been thought out, from the structure to any of the decorating items. The more information that is available the more accurate your budget will be.

Learn from other projects
Find a past project that was similar in type and scope and use that as your model. The Internet is a great source of current related information and there are many resources online that will assist you with your search. Search your local Council website for current and older projects in the area.

Once you find a project, reach out to the owners, builder or architect. You’ll find that often people are really happy to help you along your journey.

Know your Cost
This is an extremely important point and one that will take a little bit of legwork but well worth the work. Once you have a finalised design details reach out to different suppliers and trades to quote on each of the items. You will be able to put together a preliminary price that can be a great guide to setting and working with your budget.

Being aware of what materials, fixtures, fittings and labour costs will ensure that you are across what each of the items you are selecting and adding to your project cost. This will assist in making decisions that have cost implications throughout the project.

Prepare to change budget estimates
Most initial estimates are just that—estimates. With the common occurrences of scope creep, unexpected surprises and the nature of doing business, at some point in the project the budget can easily change.

This fact just reinforces the need to manage the project budget continually and be prepared to make some changes throughout the project to bring cost down to align with budgets if necessary.

Manage Scope
By far this is probably the most important points of all and one that you must be diligent about. Building a dream home is like planning a wedding or having a baby: you get excited and start adding items to the list that you think you need.

Keep control of the scope at all times and be prepared to make adjustments where needed to keep that cost in line.

Ultimately, increases happen throughout the building process unless you keep a close eye on every cent. The increases can occur at any stage of the project from planning to completion. Luckily, there are ways to avoid your costs from skyrocketing. All it takes is a bit of planning, a detailed design documentation package, professional advice where needed and a builder that is willing to work with you.

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