WCPGW - COST PLANNING AND NEGOTIATING
Dear What could possibly go wrong?
Cost planning - it’s doing my head in. There are just so many opinions on how to go about it. I saw a recent budget / tender issue was posted on the ArchiTeam Facebook page and there were 43 comments on it. Do you have any thoughts on what I should do about cost planning?
Dear ArchiTeam Member,
As an architect, I am always fighting a war against disorder. It starts with the initial interview, then brief and budget and doesn’t end until the conclusion of defects liability. My clients are rarely able to articulate it, but what they mostly want from me as their architect is firstly a fantastic design solution and then to smoothly run their project with order, balance and control. Good cost planning is a significant part of a smoothing out the bumps.
The client’s budget is an extremely sensitive issue and must be treated with great respect. It is also one of the make or break components of the project, if the money isn’t right then there is no project. So, first up, can the client’s budget get the job done?
Most clients have considered their project for a while and have some reference points on building costs but they are not usually thinking ‘project cost’, their budget could be just wishful thinking. Generally, they have no idea what this budget will get them for their unique project, it can be more a case of a comfort zone, investment value or an opening bid where they know more will be required. In any case, negotiations have commenced. It is crucial for the success of the project, and your services, to agree on an achievable budget based on the brief and site circumstances.
The client’s expectation is the first element to be managed/negotiated when assessing their budget and brief. What are the most important things for them, the core elements? These must be noted as such in the minutes of your meeting when taking the brief. This must be understood as to how ‘value’ will be seen by your client, both for the project outcome and your services. The highest value outcome will be if they can get everything in their brief delivered within their budget, not always possible, so you need to start managing expectations. A great value outcome will be if they get all their big things with an architect that gets them a chance at the other things. It’s all a part of negotiations.
Of course, you must be very careful managing expectations, but you must also be firm. They won’t be blaming themselves when the project descends into financial disorder, they’ll be blaming you. That’s why we have an architect they will say. And, the ARBV will be holding you to account as well.
The ARBV advises the consumer (aka your client) that it’s one of the architect’s many obligations to ‘Develop a design solution appropriate to your needs and budget.’
This is easy to say but not so easy to achieve, nonetheless you are responsible to get the brief and the money right.
At this point the question must be asked - do you feel that you have been adequately trained to cope with this? In a recent survey of architects carried out by architect and academic Dr. Peter Raisbeck, 65% of respondents said that they didn’t. That’s certainly a worryingly high number. If you fall into this category you must be very cautious and get yourself armed with the ‘how to’ manage cost planning. More on this later.
I always tell clients (and prospective clients) that initially, their budget is ‘aspirational’, this sends the signal that there is something to be negotiated. As such, their budget must be tested against their brief to make sure there is a balance to their project. It is only after this has been achieved that it can be said that the client has a realistic project. This must be completed and signed off by the client in the Pre Design phase. It is the first part of cost planning to get right.
A lot of architects say that they have a QS doing the cost plan, so job done. Ok, there are some good aspects with this, but it is still your responsibility to manage the project budget, the ARBV says so. You need to be able to specifically brief the QS, question, challenge, breakdown the components to ensure the QS report matches the project scope and extent. Watch out for ‘allowances’ in the early stages to make sure that they reflect where you are going as the project’s needs develop.
Where possible, I have the client directly engage the QS. This does a number of positive things for the project. It puts the QS into the independent category where they are directly responsible to the client. The client still needs you to explain the QS report. Make sure your client understands that the QS report is their opinion of the probable cost, not yours, and not a quote to do the work. When tenders come in there will be more differing cost valuations.
Your responsibilities are not just in the early stages of your services but throughout the entire project. Given that a client can bail at any point in time you need to constantly review the cost plan to keep it up to date.
The ARBV also tells your client that the architect must ‘communicate with you to ensure that you understand important steps in the project and important decisions taken.’
The cost plan is not a static document. During the project development through design and documentation and detailing, allowances and contingencies will be assigned and firmed up. Communicate with the client and let them know what is going on with this. No one wants surprises with costings. Some time ago I decided to more openly involve clients to a level that they could cope with. Letting them know that I was having problems in balancing their budget did a few positive things. They could see that I’m working hard to get things right for them even though unexpected issues had arisen. They could also see that the costing was not a simple matter, lots of services issues and contingencies to keep on top of. Some are more interested than others but they can’t say they weren’t told. They should appreciate the value of their architect.
There will always be a lot of changes that will most likely occur outside of the architect’s direct control e.g. planning approval conditions, services, client add-ins, consultants not worrying about costings, the list goes on. The bottom line is that the architect has to be on top of all these and communicate with the client to advise them of costing changes and review the scope/extent of the client’s project.
Make sure you very carefully minute changes, especially client instructions. Try and write it up in such a way as it could be understood by someone not involved in the project, the third-party test.
Now, if you are one of those 65% of architects who are not too sure about cost planning then salvation may be at hand. Dr Peter Raisbeck, respected author of many books on architectural practice, has agreed to be my guest in an ‘in discussion with’ CPD on Cost Planning and Negotiating. This will be Zoom event in mid-October for about an hour and available through the Association of Consulting Architects website, watch out for it.
Peter Finn, recent past ArchiTeam director
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.