As you travel the long road of planning and occupying a new or renovated facility, you will find that budget woes come from a variety of sources. Obviously, you will improve your chances for success if you have the right budget when you move into the implementation phases.
In order to develop the right budget you should:
-Confirm that all project team members are speaking, and understand, a common cost language.
-Acknowledge that change is inevitable, and establish contingencies and escalation in cost planning.
-Establish and document a solid base of prioritized needs.
-Study as many feasible site and building alternatives as possible.
-Establish well-defined, manageable project schedules.
-Manage expectations by confirming that the budget has the understanding and acceptance of all project team members.
The first point seems simple, but it is surprising how often cost figures are represented as something they are not. Dollars representing partial project costs by the presenter often are translated as the total project cost by the receiver. Reaching common ground for communicating cost data is a critical first step in avoiding budget woes.
The person responsible for the project, whether it be a superintendent, financial officer or project manager, must confirm that all project team members are on the same track in regard to terms and figures. The project cost first presented to a board, to fundraisers or to the public often is the cost they remember, regardless of changes that develop. Therefore, you do not want to return later and explain why that number is no longer sufficient.
Another danger is the attempt by some to divide the cost by the size in square feet and compare that unit cost to others they have heard, without understanding the basic conditions affecting each number. Failure in cost management often is a failure in communications rather than a failure in application.
Defining costs Over the life of a facility, the costs include:
-Building (construction or "hard") costs. Building costs are the easiest numbers to understand and accommodate in the budget. The accuracy can vary depending on the source of estimates and how long ago they were prepared, but the scope is relatively consistent. The initial cost estimate is based on a list of program needs (converted to the gross size of the building) and a set of assumptions about the general, mechanical and electrical systems likely to be used. The most common definition problems for building costs involve site conditions and equipment.
Site costs vary so widely that they always should be tracked as a separate line item in the budget. A small project may have the burden of expensive utility expansion. A large project may only have to bear the cost of site development to a point five feet outside the building perimeter.
An important subcategory of the site costs is the source of heating and cooling for the building. If the building has its own plant, the costs are included with the mechanical and electrical systems. If the building is connected to a central plant, it may create more complicated budget issues. If the central plant has adequate capacity, connection costs may be the only items carried in the building budget. However, if additional central plant capacity is required, will the building budget bear all costs of the upgrade, only a proportional share based on an estimate of a comparable stand-alone system, or no cost because it will be funded as a separate project?
Equipment requires special consideration and definition when setting budgets so costs are not overlooked. The owner may assume the voice/data cabling or the rigging for an auditorium stage are part of the building cost, while others on the team assume they are part of the fixtures, furnishings and equipment line item in the non-building costs. There are no hard and fast rules; each project can be different.
-Non-building (non-construction or "soft") costs. The non-building costs are the most difficult to determine because the owner can choose to add or subtract line items based on internal accounting and funding sources. Owner staff costs and costs incurred at an earlier date, such as planning studies and original property acquisition, may or may not be included at the owner's discretion. Most contractors and architects will not include non-building costs when asked to provide an estimate.
-Life-cycle costs. These include alterations, repairs, replacement and maintenance costs.
The initial capital budget includes building and non-building costs, and those two items will have significant impact on the life-cycle costs.
In addition, both building and non-building costs must have escalation and contingencies added to reflect accurately the timing and state of development of the project. After estimating costs in today's dollars, it is important to escalate them to the midpoint of the anticipated construction schedule.
Design contingency is an estimating factor applied to building costs to reflect the normal evolution of design from concept to bidding. At the concept level, the contingency may be 15 percent or higher. At the time of bid, this contingency is reduced to zero. Construction and project contingencies also should be budgeted.
Construction contingency is intended to cover unknowns, such as hidden soil problems, undocumented existing building conditions or uncoordinated design elements. An optional project contingency may be set aside to allow for discretionary changes by the owner.
A useful checklist for the non-building costs in the project budget includes the following (As noted, some of these items may be considered building costs if so defined):
-Internal staff costs.
-Builders risk insurance.
-Construction contingency (unforeseen changes).
-Project contingency (discretionary changes).
-Professional consulting services.
-Architectural/engineering fees and reimbursables.
-Preconstruction cost/schedule management fees and reimbursables.
-Movable fixtures, furnishings and equipment.
-Special equipment, such as voice/data head-in, satellite and security system.
-Low-voltage cabling not included in electrical contracts.
-Special owner construction.
-Relocation and occupancy.