Budgeting properly is key to a successful project, and knowing where to find the traps of additional costs is important
Project budgets are important to set early on – but the key to doing it successfully is knowing what to expect. In our industry, we regularly hear clients say, “I understand the construction cost, but how much should I budget for total project cost?” My answer is – it depends on several factors, many of which are unknown in early project development.
After exploring the initial design concept for Texas A&M University Corpus Christi’s Life Sciences Building, Stantec developed a cost-effective design solution that included additional teaching space and a more efficient structural system while decreasing overall construction costs.
So how do you budget for the unknown? Plan upfront. Instead of using a flat figure of 25-30% for project costs, break the figure down so you can better understand why you’re incurring these additional costs.
Here’s my list of top factors that affect overall project cost.
1. Organization. If your institution is part of a larger system, it isn’t unusual to allocate between 1–3% of construction in additional fees (and sometimes even higher) for the system’s facility planners, plan reviewers, and management staff.
2. Planning and Design fees. The complexity and size of a project has a major impact on the overall budget. Just to define the project, it may be necessary to create a campus master plan. Fees associated with creating specific programming and planning are usually allocated to the project as well. These costs could be 1% to 10% of the expected construction cost.
Architect’s fees, often calculated in relation to the construction costs, range from 5% to 25%, depending on project type and complexity. These fees typically include the entire engineering design team (mechanical, electrical, plumbing, structural, and technology), and an allowance for expenses.
Due to project complexity or short timeframe, you may also need to hire a construction manager for preconstruction services to guide the design team on constructability, phasing of construction, and early bid packages. In my experience, working on healthcare and higher education projects, I’ve also seen many healthcare facility owners hire independent equipment planning consultants to help define medical equipment costs and assist in procurement. Again, these are additional project costs.
3. New construction vs. renovation. Some owner’s costs only occur with new construction projects because it’s necessary to obtain data that will help inform planning and design. These can include updated site surveys, Phase 1 environmental surveys, geotechnical investigations, confirming local and public utility capacities, parking studies, and public engagement. Dispersion studies might be necessary to discover region wind pattern impacts to neighborhoods and existing fresh air intakes.
Owner’s costs that only occur with renovations typically include a hazardous materials survey to identify mold, lead, or other existing sources of risk, and an existing building systems survey to assess the age and condition of M/E/P equipment.
Virtually all projects incur costs for permits, plan reviews, zoning changes, etc. – however this is not necessarily true if the owner is also the Authority Having Jurisdiction (AHJ) on a public university.
Examining the site up-front can also impact the total project cost later. If other projects are necessary to clear the site or move occupants out of the intended renovation area, the cost could be significant, ranging from 10% up to 40% of the construction cost. So, proper site and infrastructure planning and building placement could save you thousands of dollars or more.
4. Technology. Central Information Technology servers, phone switches, and other electronic equipment, along with wiring for all IT and communication systems, are often provided outside of construction costs. Technology costs continue to escalate and major projects will incur costs for things like flat-screen monitors, projectors, and other electronic display equipment. Also, security cameras and central monitoring could be part of the owner’s costs.
5. Furniture, Fixtures, Equipment (FF&E). FF&E costs vary depending on the project type, amount of inventory reused, etc., but they can be significant. Major medical equipment in hospitals and academic medical centers affects an owner’s budget; for some projects, the equipment could be anywhere from 25% to 100%—or more—of the construction cost. In addition, the cumulative impact of patient beds, IV equipment, etc. could be substantial.
6. Costs during construction. The owner is typically responsible for several items including independent testing and assessment of construction materials. An envelope consultant may be engaged to test the adequacy of installed systems, such as walls and window assemblies, which could also (but usually doesn’t) include initial test and balance of MEP systems. The owner may also choose to implement an Owner Controlled Insurance Program (OCIP) to provide coverage at less cost.
7. Contingencies. To make sure the project does not exceed the total available funds, several contingencies are necessary. A design contingency provides an allowance for design development while the team confirms accuracy of design documents. The owner contingency provides a fund for unexpected costs during construction. We often discover these costs during demolition or site excavation, but they could also include changes in the project direction based on client input. The contingencies will decrease as the project is more defined.
8. Completion of construction. Owners typically incur several costs as the project nears completion including installing signage and artwork. Often a Distributed Antenna System (DAS) will be added after completion to ensure adequate mobile communication for normal and emergency purposes. We also see building system commissioning performed with both medial and higher education facilities. Moving costs often include pre-move planning, and while construction typically leaves the area “broom clean,” an owner’s housekeeping staff is typically responsible for final cleaning.
Developing an appropriate project estimate can be a complex process, but it is critical to managing a construction project successfully and on budget!
Though this list is not all-inclusive, proper planning will help you create more accurate budgets and might even save your client some money!
About the AuthorMore Content by Dan Caren