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WCPGW – Project budgets and costings

A member has written in to What could possibly go wrong asking

“How should I go about getting a good estimate of the cost of a project? My client doesn’t want to pay for a QS, they say it will cost too much and won’t make the project any better.”

Dear Member,

There seems to be varying views on budgets and costings, so I decided to ask around for you. One thing that everyone agrees on is that the client’s budget is a very sensitive issue. Then budgets are an issue for all of us when we are the ones paying.

A prospective client told me that you should never tell the architect the actual budget. The thinking behind this, they said, is that the architect will always spend more than they are told so if you say the budget is less it will finish up at the right amount. Also, the architect’s fees are based on a percentage of the project cost so it’s in the architect’s interests to make the project cost more. Should we all work on that basis?  No joy there.

 

Interestingly on that last point, I did a project for a real estate agent (their new office and an adjoining retail outlet) and he pointed the fee structure out to me. He said that when he makes a sale he gets more and the client gets more, everyone is happy, but the architect only gets more when the building costs more, he is not happy. He said that he would work on a way for the architect to get more when the building costs less, everyone happy. Great, I said, let me know if I can help. Sadly I’m still waiting.

The agent also said that the tender is like an auction, where everyone is bidding the get the project with a profit that they are happy with, that is market forces are at play. Ever asked an agent what a property would sell for at auction? Would be good if we could act that way with project costings.

A builder might say that they never tell the client what the costs might be at the start of negotiations because that will scare them off and the project will never go ahead. Better to ease them into it gently over a period of time. That will also allow an assessment of the project to make sure that all matters are covered and time get to know the client. If you ask a builder for an estimate of costs it is pretty safe to assume that they are keeping a bit up their sleeve so they look good compared with other builders. Also, have they allowed for the services to be upgraded and an adequate amount for prelims and overheads? If they are looking at sketch plans can they project all of the other items that will be needed? They also know that there will be more detailed info to come that will allow them to get right into all the costs to be allowed. No need for them to rush in with a big quote just yet.

I spoke with the ArchiTeam insurance broker Vincent from Countrywide Ausbrokers. He said that Allianz, the ArchiTeam PII insurer, prefers not to have a builder prepare costings, they believe that there is a risk of underquoting so the builder can get a foot in the door. Allianz say that the architect should always recommend that the client directly engage a QS. If the client says that they won’t be getting a QS then the architect should get a signed waiver from the client releasing the architect from any liability for cost over runs. The insurer is obviously very nervous about costings and why wouldn’t they be – I’m told that the single biggest complaint about architects is about projects exceeding budgets / costings.

My next port of call was with an experienced senior architect. The have been at it for a while, surely they will know. They said always be wary of taking on responsibility for something that the client is responsible for, that is paying for the project. They said it’s the client’s project and they have to pay for it. The architect is responsible for the design etc.,  but not the opinion of probable costs, that is the responsibility of the client’s QS. If the QS says the costing is too high the architect is responsible for getting it back on budget, no more.This architect also said that if the client refused to engage a QS that they would consider their positon in relation to the project because past experience tells them that the client could be overly difficult, that is, always knows more than the architect and will finish up wasting a lot of the architect’s time which will increase risks and decrease profits.

So I think the best direction is to decrease risks and increase profits. Could be more trouble than it’s worth if there is no QS.

Disclaimer – ‘What could possibly go wrong?’ is not an advice column, it is only general comment from ArchiTeam who are not aware of your circumstances with any issue that you may have. You cannot rely on these general comments, each member must make their own decisions about any action they should take and seek independent advice of their own if they are unsure.

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