Considering a serious building or renovation project? Surveyor Martin Quirke offers advice on controlling costs…
If you are thinking of embarking upon a building project, one of the major problems will be controlling the cost. This is because paying for, say, a house extension, is nothing like buying anything else. To relate it to buying a car, for example, you would have to get it designed as a one-off, have the local mairie approve your decision on colour and style, employ a car-builder to work in and around your home, drinking gallons of tea, and then wait 16 weeks to see how it turns out. And by the time it’s anywhere near finished you will have paid 95% of the cost without a road-test! If you can take on board how different a building project is to any other type of purchase’, you are halfway to understanding why you must learn certain rules of the game.By their very nature, building projects are costly so don’t be surprised if I mention the need for some important paperwork and the need for professional help. To wake up one morning and think you can project-manage a construction job is foolhardy, in my opinion. It is possible to buy your way out of trouble but here is the first lesson: you will pay extra if you go it alone unless you are highly experienced.
On a medium or large project, say from €100,000 and upward, I would always recommend the appointment of a chartered quantity surveyor (CQS). No doubt my chartered colleagues will argue with my baseline cost limit but as they are not writing the article, I get the final word for now. I will not go into their special skills here but suffice to say that on all major projects I have worked on, there has been a CQS as part of the design team. Their advice and expertise is highly valued in the construction industry.
On small’ residential projects involving a house restoration, extension or conversion, the involvement of a CQS is less common. In this article, I am going to assume that the client has appointed a professional as contract administrator’ but does not have the ideal design team of a carload of experts. So in this example, the sole consultant – be that building surveyor, architect, architectural technologist or engineer – has to look after the cost control as well as the quality, progress and statutory approvals and so on. Working out the budget
While at the pre-construction stage, and before the builder has been employed, work out what you can afford and tailor the project to suit. You will need advice for this. If you go it alone on this part you are asking for trouble. How will you know how much building work you can afford? You might want an extension of 100m2 but can you afford it? An experienced professional will have up-to-date data from recent similar projects from which to give you guidance on cost. You might think €100 per square metre is a fair rate but if there are no builders wanting to take on the project under €1,000/m2, your project is going nowhere.
Get a scheme design drawn up and take it along to the mairie for their initial advice and comments. If you get positive feedback then start firming up the design and think about the standard of fixtures and fittings you can afford. Keep refining and amending the budget until the design is finalised.
Now add a percentage contingency to cover the various unknowns’. Unknowns are mostly works underground such as foundations, drainage and the like. If your project is a loft conversion with no foundation work, you will not need the same contingency as one involving a large two-storey extension, for obvious reasons. Here again, I’d recommend professional advice. Anywhere between 5% and 15% is not unheard of for a contingency sum.
Controlling cost means being prudent but also realistic. Even though in France there is no independent building inspector visiting the site, your builder may have to make changes to the technical design depending on what he finds in the ground. It’s all very well stating that the foundations shall be one metre deep but if soft spots are encountered, for example, extra concrete will have to be thrown in or a redesign of the foundations required.
Make sure you have the utilities included in the budget. Remember that increasing the house in size will need more heat, more electricity, more water and so on. If the incoming services have to be upgraded, get firm quotes from the authorities and check for any builder’s work that they exclude, as your builder will most likely have to do it under their supervision.
Lastly, your consultant(s) will need paying so add in the relevant fees. Hopefully you now have a realistic budget and not a piece of fiction. Choosing a builder
I am assuming that by tender stage you have received the necessary building permit from the mairie plus planning consent if applicable. You should have lined up the utility companies to come in and do their bit too if needed. This will avoid delaying the builder, a common cost penalty.
If you are serious about controlling cost, you should tender the project to at least three or four suitably experienced builders to test the market. If you only get one tender, you won’t know how competitive he is.
The tender documentation must be detailed and comprehensive. This means you should have a decent set of plans and a technical specification for the builder to price. Be aware that the relatively brief technical notes needed for a building permit are not adequate for an accurate tender. You will need a works specification’, which is basically a written version of the project proposals listing every trade, material, fixture and fitting etc.
If your tender documentation is vague, you will most likely get tender figures that are equally vague, assuming you get any responses at all. I can’t count the number of worthless tenders I have seen when I am called in after a dispute has erupted on site. I act as a joint expert to sort out building disputes and I know when I see a lack of proper documentation that this was a dispute waiting to happen.
In most of these cases, the builders have quoted for completely different projects than the clients were expecting. It’s like asking a salesman to supply a four-door family car in red, expecting to get a top-of-the-range Mercedes, but he turns up with a Ford Fiesta. You have to specify everything you want in the tender.
It is no exaggeration to say that a professional works specification for a residential project up to €100,000 could be 40-50 pages long. The project drawings should include a measured survey showing the existing building plus detailed design and working drawings showing the proposals. These drawings could number anything from four to 10. They should be fully dimensioned and notated, not just visualisations with shadows and palm trees. The builder needs hard information, not a pretty picture. To keep the unknowns to a minimum, there should (where groundworks are involved) also be a sub-soil investigation involving trial pits or boreholes to assess the ground conditions so the foundations and drainage can be designed with some semblance of reality. A topographic survey might also be an essential component showing site boundaries, contours, trees and so on.
It’s all about providing a full package of information so that every single element is included in the tender, leaving the minimum opportunity for extra costs to creep in. On site
Deciding what tender to go for is not just a matter of picking the lowest price, at least not always. Look for errors and/or qualifications to the tender. Read the small print. Let’s assume you have picked the right one and now the project is under way. You have budgeted the project and tendered it properly and now the builder is beavering away on site. Then, after 10 weeks with the project now taking shape, you realise that the plans do not match your vision. So you decide that the WC would be better in the north-west corner and the windows are too small and you hate the bricks used in the inglenook, and how about a bathroom in the attic while Jean-Pierre is here with all of his artisans.
J-Pierre says he can make the changes no problem but as there are no drawings for these changes and you want them done in his final few weeks on site, you had better give the go-ahead now! The budget and the tender, if they were anywhere close to start with, are now distant memories. By making significant changes to the project during the construction period you have upset the applecart in a big way. You have completely disrupted the builder’s programme and his scheduling of labour and, by the way, things like scaffolding are charged per day per element so you will be paying for every plank, pole and connection over and above the original programme. Just as J-Pierre was about to start plastering, he now has to re-do brickwork and build partitions, so he sends his plasterer, electrician, plumber and joiner onto another job and they won’t be back for ages.
Hopefully you are getting the message. By changing perhaps one small item or in this hypothetical case, many major ones, you have incurred extra costs and delays that are now out of control.
Using our analogy of the new car, with a building project there is no showroom to visit to see the finished article and have a test-drive. Unless you can read technical drawings perfectly, the chances of you making changes are high. Most clients change something and some cause huge disruption simply because they could not understand the design drawings and are now aghast at what is coming up out of the ground. A good way to avoid this would be to insist on 3D visualisations of your project from the start. These can cost hundreds of euros but could save thousands.
It is accepted that variations (to use the legal terms for changes) are generally inevitable but on a well-managed project, these should be minor. The text-book way that extras should be dealt with is as follows: You instruct your building surveyor to amend the drawings and specification and get a fixed price from the builder based upon his tender rates where feasible. You ask for confirmation of any affect on the programme, i.e. delays.
If you agree to the additional cost and/or delay, an instruction in writing is given to the builder confirming the cost. The contract sum is then adjusted accordingly. This way you are agreeing to the extra before it has been done and dusted, and you are aware of any programme implications.
One of the benefits of a works specification, as part of the tender and project documentation, is that the builder prices the various elements separately so that you have a basis upon which to value extras. This is fine in theory but depends upon you keeping within the trades and features of the original project. If you ask for a swimming pool to be added to a loft conversion job, there aren’t going to be many tender rates that can be utilised. Your impressively comprehensive works specification will not have a section on swimming pools so this is an example of how even the best laid plans…
Another potential cost-increaser is the overspend of provisional sums’. Often at tender stage, clients are unable to decide on every single fitting, fixture, d�cor colour, wall tile etc and these are left simply as a sum of money in the contract. For example, you might have €400 allowed for the kitchen wall tiles but when you actually go shopping, you realise that the only ones you like are hand-made in Monaco with genuine Picasso motifs on them. And now these will not match the lino floor-covering you specified so this has to be upgraded to hand-cut slate from the last working quarry in Peru. The moral is: if you have champagne tastes don’t have Babycham-type provisional sums.
Late decisions are another potential cost explosion. As mentioned above, there can be a whole host of items unresolved at tender stage. If the client does not make these decisions in a timely manner, the project is going to be delayed. Time is money, as we all know. The Monaco tiles and Peruvian slates could both be on 36-week delivery periods and if the project is now in week 10 of 12, guess who is going to pay for the delay? You’re getting the hang of this now, I trust.
I haven’t even touched on exceptionally bad weather, lack of technical information, labour shortages and so on. Some of which can be bona fide reasons for additional delays (for delay read cost) and might be outside a client’s control. Post-contractThe final account is often compared to a horse-trade. The builder asks for the maximum he thinks he can get and you want the original tender figure (or less) to apply, even though the project may have changed beyond all recognition. Normally your consultant will handle the final account negotiations.
In our residential scenario, you might be on your own without a consultant and relying on a gut feeling or natural aversion to paying for things that are now forgotten or unrecorded. The quality and quantity of your records will be paramount in negotiations. Record everything that involves expenditure including telephone calls, emails, letters and even on-site discussions.
If you have employed a consultant as contract administrator (CA), they will have the task of agreeing the final account. However, be aware that under the terms of fair building contracts, the CA does not act for you alone but for both parties. The CA should have a batch of written instructions adjusting the contract sum each time it was necessary and you will have been issued with certificates indicating any changes. The final figure will be decided by the CA and, hopefully, based upon good housekeeping throughout the contract period.
You can see that so-called extra costs on many building contracts are actually due to getting off to a bad start. If you plan well, take professional advice and do your research you will minimise the extras. It is far easier to cost-control a project if it has a proper set of contract documents. Checklist
• Start off with a realistic budget prepared with the aid of an experienced consultant. Do not increase the scope of the project without amending the budget. You only get what you pay for.
• Include a contingency sum related to the likely risks; again this will need the advice of an expert. If the unknowns are prolific be ready for them.
• Have thorough tender documents prepared with a comprehensive set of drawings and written descriptive, priced documents, such as a works specification, bill of quantities or a schedule of works. Include realistic provisional sums where elements are to be sorted post-tender. Go out and do some proper research on costs.
• Use a recognised form of agreement (contract). Pay only in accord with the contract, i.e. for works completed in accordance with the specification.
• Keep changes (known as variations) to an absolute minimum or be a grown-up and accept that changes can be costly. If delays are incurred by the changes this will also add cost.
• When deciding on variations get them priced and agreed before the builder carries out the work. Adjust the contract sum accordingly.
• Make decisions on time. If you want special, custom-made stuff find out what the delivery period is and order well in advance. If you delay the contract you will pay.
• Ask for regular financial reports from your CA, or the builder if you are going it alone. On a three-month project for example you should have at least two interim reports prior to the final one.
• Keep good records. Taking site minutes is useful as long as there is a heading “contract sum”. Your consultant should deal with this but if you are going it alone be organised and write copious notes whenever money has been discussed. Confirm each extra to the builder within 24 hours by email or text.