Why does construction work on a house go over budget?

Whether you are a professional or a private property developer, cost control is essential when it comes to executing works. A poorly managed work can be a real headache and we unfortunately all know of cases that come in significantly over budget (like public works).

What expenses must be considered?

A very common error among private clients who come to the office is to have the information, but no global vision of the entire process. As a general rule, they have consulted a builder who has given them an approximate cost per square metre and clients often think that applying a simple rule of three will give them the final cost of the work. Nothing could be further from the reality. If a builder is consulted, the price that is usually obtained is the cost of materials and labour, without considering other matters. Other costs must be added to this amount, depending on the type of work, which can include: topographer, geotechnical study, architect, technical architect, engineer, permit fees, waste fees, construction tax… and VAT on top of all that. This is why, depending on the type of work, we can be talking about increases of up to 40% in the builder’s price. However, this is not a budget overrun, but rather a flaw in the actual information on total costs related to a work. The builder’s cost is not the total cost of the work. In many cases, works seem to shoot up in cost before starting, but the client simply is not familiar with the costs he must deal with.

How to control costs?

It is impossible to know what a work is going to cost if there is no clear definition of what the client wants to do. So, we very much stress this to our clients in the design and planning phase, since a project with a realistic bill of quantities will enable us to know in advance the effective cost of the work. As we remind our clients “it is cheaper to move a line on paper than move a wall on site.” So, we understand that the best way to control costs is to draw up a design plan by stages so that we can turn it into a linear process: we close one phase and move onto the next one. For example, we cannot know the budget of the work if we do not have the design closed. Opening closed phases can entail delays (we cannot follow an efficient production process) or cost overruns (unforeseen works).
“It is cheaper to move a line on paper than to move a wall on site.”
One of the main causes of budget overruns in works is redesigning during the execution of the works. Before starting the works, we need to have clear answers to the following points:

What are we doing to do?

Scope of the work and design. If we start by wanting to change a bathroom and end up sorting out the entire floor, the initial budget will only be enough to steady a table.

When will the works be completed?

Once we have defined the above matters, we can have a realistic vision of the period of the works. This enables resources to be optimised and the different contractors to be coordinated, thereby avoiding stoppages in the work because “we need whatever” or “so-and-so hasn’t turned up,” or something needs to be redone. These issues entail delays in the work and if they are exclusively due to the developer, there are likely to be repercussions for the price, so the initial budget… will only be enough to steady a table.

How are we going to do it?

Just as important as the design are the technical solutions and the materials. For each element there are different construction solutions and for each material there are different qualities: painting a wall white is not the same as lining it with gold leaf. If we change these elements during the work (or, worse, they are not defined beforehand), the initial budget will only be enough to steady a table.

How much is it going to cost?

Only if we have followed a linear process in the design, closing each phase before starting the next one, designing before defining materials, defining materials before requesting budgets, requesting the budget before starting the work, without changes or reopening the phases, will we be able to control the cost, knowing, with certainty, that the initial budget will be enough for much more than steadying a table.

What about unforeseen events?

It is very usual throughout the process for unforeseen events to arise, especially when it comes to renovation and restoration actions, but these can be limited with proper analysis and consequent planning. It is important to distinguish unforeseen from improvisation, since they are totally different things. It is important to distinguish unforeseen from improvisation For these reasons, each stage must be worked on until it is sufficiently developed to advance to the next one. In this respect, it is not advisable to start the work, no matter how much in a rush we are, without clearly defining what it is that we are going to do. Our experience and work methodology, both in architectural and interior design works, enable us to offer our clients an initial realistic estimate of costs, subsequently confirmed when the project has been developed.