Over Budget

12 years ago

My wife and I hired an architect about a year and a half ago. We set our budget and went to work on the design. It was a fun process, but sometimes frustrating. Periodically, we would touch base with the design team and reiterate our budget numbers. We were always met with an enthusiastic, yes I still think we can build this house for that budget. Anyway, we finally decided on the design and put the house out to bid. As you might imagine we were over budget on our home, but not by 20 or 30K, EVERY contractor bid the house at 230K+ over our original budget.

Is it common for the architect team to be so off on their build/design estimates? I always thought this was one of the reasons why we hired them in the first place; to help us design an interesting house within our budget.

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PRO

Lampert Dias Architects, Inc.

12 years ago

last modified: 12 years ago

It does happen, but it's not a good thing..........Most architects try so hard to please their clients that sometimes budgets get left behind in the enthusiasm of giving the client everything that they have asked for.

When this has happened to us, we call in one of our best contractors to work with the client and us to see how they can bid the job to give the client everything that they want, cutting items here and there to get close to the budget. Sometimes this means an unfinished second floor or it might mean shopping for sales for the appliances and finishes.
It becomes a "negotiated bid" because they are committing to the contractor and the contractor is working really hard to get the numbers to work.

Work as a team: architect, contractor, owner, and see if you can come up with a workable solution that gets you close to your budget.
If the structure is too complicated, simplify it.
If the finish materials are too expensive, shop for less expensive materials.
Live with inexpensive bathroom fixtures and tiles.
Use an asphalt shingle roof instead of a standing seam metal roof....
Windows can make a huge difference. Use Milgards instead of Pella or Anderson.
Or use Pella and Anderson in the front and Milgards in the back of the house........
Be creative and flexible...................

To prevent this from happening, we like to ask a contractor to give us a preliminary bid at the preliminary design phase. We are working on a project right now where the client has a very fixed budget, but they really wanted to add a second floor master bedroom suite to a single story house. We did a two story (dream design) and a single story (more realistic) addition design. With the two story preliminary bids we exceeded the budget by about 1/3.
With the single story design we were under budget, but now we will have money to remodel the rest of the house too.......
At that point in time the client had the choice of finding the extra money for his dream house, or staying within the budget. He chose the budget route, but often a client will find the extra money to get what they want if it is at all possible......

We are drawing up the single story design. They will have a wonderful craftsman cottage with a new kitchen, fireplace, open beam ceilings plus two new downstairs bedrooms and baths. If they had gone for the two story design they might have had to wait a few years to remodel the kitchen and the rest of the older part of the house.

Construction costs are tough to keep track of and they always seem to go up. Architects are not cost estimators, but they try very hard to keep up with costs of construction. It's not a science. It is still an art....

Best of luck with your house....

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Comments (31)

touchadream
12 years ago
I think that is outrageous. Both your time and money have been wasted by that architect. Just my opinion. What was the budget? What % increase was this?
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Ed
12 years ago
Hi tmarkus, Congrats on your new home and sorry to hear that. Same question as touchadream, what was the original budget, to gauge what percentage increase is 230K (which currency?).
tmarkus
Original Author
12 years ago
500K
PRO
Lampert Dias Architects, Inc.
12 years ago
last modified: 12 years ago
Here is a question for you........Knowing what you know now. What would you do differently if you were to start over with the design? Also, what is it that took you over the top with the budget?

Would you add less space?
Would you choose other materials?
Do you think the structure is more expensive because of the design that you chose?

Is the expense because of a steeply sloped site that costs more for the foundation then expected?

How would you approach the project differently knowing what you know now?

It probably isn't too late to get where you need to be with some modifications to the project.

Also, think about what you wanted and what you will be giving up to stay within budget........
In 5 years will you wish that you had spent the extra money, or will you be happy that you stayed within budget..........?
Ed
12 years ago
Hi tmarkus, so less than 50% over budget. A poll could be very interesting.
PRO
Charles Ross Homes
12 years ago
I'm sorry for your experience.

Most architect-designed homes are one-off projects, so it's not likely that an architect will have good cost data for a truly comparable home built on a comparable site with a comparable level of quality under similar constraints. Plus, since most architects aren't home builders, they won't know what current construction costs are nor will they be notified by suppliers of pending cost increases.

The gap between your budget and the actual cost to construct your home could have been minimized if a builder had been engaged early in the design process to contribute construction insights and preliminary costing. The American Institute of Architects endorses this approach--they call it "integrated project delivery." I'm hopeful it catches on.

A few months ago our company spent a tremendous amount of time and energy preparing a competitive bid for a home designed by a local architect that will never be built. Our bid--which was the lowest of three bidders--was more than twice the clients' intended budget. It's time to move beyond the traditional design-bid-build process to alternative processes such as IPD and design/build which add more value for clients.
apple_pie_order
12 years ago
The bids came in almost 50% over the original budget. That indicates the architect was not aware of the costs of what he/she was designing. Even with things like substituting cheaper windows, the bids are not going to be cut by a third, realistically, by the contractors. Unfortunately, this is a common experience with custom home design in the circle of my acquaintance. An alternative approach for you would be to contact a design/build firm who work in your price range. Be prepared for a much different and probably much smaller design.
PRO
Jeff Hibbard Design Services
12 years ago
I agree w/ Charles Ross. Bring the builder in early on in the design process, and keep him informed throughout the revision stages. This is the critical time when things can get out of hand. By keeping the builder involved start to finish, hopefully you can avoid this
frustating and costly process. Good luck on your project
tmarkus
Original Author
12 years ago
Thanks to everyone that commented thus far.

We have learned a lot during this process. I think bringing in a contractor early to better sort out the actual costs should be a must do for those on a budget. The integrated project delivery, CRH refers to, is good advice. I think this move would have helped keep both construction costs down, and ultimately design costs as we have spent considerable amounts on redesign, cutting back square footage, changing roof lines, etc.

Part of our increased costs are based on the siting of the house. It is a complicated site in that there is a seasonal wetland, and a significant slope to contend with. We originally started with an 1800sf main floor plan with modified butterfly roof and a loft, but this quickly turned into a 3600sf home with a daylight basement due to the slope. We did have a back up design should costs get out of hand, and have since reverted to this design, but even after cutting the roof line down, dropping the loft, and cutting the basement in half, in addition to cutting the main floor down to around 1650sf., we were still over by about 230K. Since then we have changed the window package, the decking and railing options and siding finishes, etc. We put it back out to bid, but the numbers are still out. Best case scenario, we are back on budget, but the reality is we will be closer to 150k over instead of 250K over. Tough decisions ahead.

What would we do differently?

Well, we originally picked our architect for the price point, the firms aesthetic, and that they were in our community (buy local). That said, next time we would pick a firm that specializes in residential, as ours definitely has a bent toward commercial/civic projects (perhaps forced by recent housing market constraints?).

Also, we would be more mindful of the integrated project delivery concept.

Another important point to consider for everyone is managing expectations. I think this part can be a real deal breaker, but I recognize it is difficult to balance. It was clear to us at the outset that our design tastes did not fit with our design budget. We had hoped that by hiring a professional, we could reconcile or at least balance our desires with budgetary reality. In retrospect, I think our enthusiasm for the design was allowed to drive the project too much which got us where we are now... redesign, rebid, keep fingers crossed and hope.

Revised bids come in today, so we shall see.

Thanks again!
Ed
12 years ago
Hi tmarkus, I'm very tempted to start a poll, actually two polls -- to see about over-budget and under-budget, and over-time or ahead of time. :)
tmarkus
Original Author
12 years ago
Yeah, I agree, it would be interesting to see what the response is for this subject. I don't know how to set up a pole on this site though.
User
12 years ago
The problem starts when everyone is told to expect 20% over budget. The next thing you know, everyone builds that into their bidding and design process. The one who promises the client the moon gets first crack at the project, so people lower their bid expecting it to go over the 20%. I design and build with a 0% increase guarantee for everything but excavation and below ground problems that may arise. I keep track of what a project will cost from the first set of sketches. At that point I am never more than 20% off, and that number gets closer to zero as the design process continues to it's conclusion. ALL materials are decided before the final house plan is drawn including the exact cabinet layouts and appliances. The only cost increases come from a client getting on Houzz and deciding they need to upgrade everything :). There should not be that much guess work in such a major purchase. Of course, the architect told you they could do anything, because they get paid whether you can afford to build or not. I know that all architects are not that way, but I have ran into quite a few builders and architects alike that think that way.
Anne
12 years ago
I totally agree with Charles Ross Homes' statement, "The gap between your budget and the actual cost to construct your home could have been minimized if a builder had been engaged early in the design process to contribute construction insights and preliminary costing."

We have built four custom homes...we've gone over budget on all of them...but not by a crippling amount!

I'm sorry you've encountered this problem, it's disheartening, and frustrating.
PRO
Lampert Dias Architects, Inc.
12 years ago
Let us know where the new bids come in.........and what your ultimate solution is.........

I totally agree that projects should be done as IPD - Integrated Project Delivery as recommended by the American Institute of Architects.....

The problem we have convincing clients to go this route is that they are often reluctant to commit to a contractor up front. They want to bid the job and get the best price.

The old Bid - Build concept is ingrained into the system and most people think that this is the best way to get the best price.

Unfortunately, this is not true. When we bid 3 equally qualified contractors against each other, the bids are within a few percentage points of each other.

I would prefer it if my clients would choose the contractor up front from a qualified list.
Then we could all work together to design the project as a team and hit the budget right on......

We are working on this, and more and more clients are taking this advise and are so happy with the results.....

Spread the word....it's best to have a team up front..........
S. Thomas Kutch
12 years ago
I'm sorry, but I have to disagree with Lampert Dias Architects on this one. While I agree that the IPD process is good, the integrity of the process depends on the "list" of qualified contractors the Architect recommends. This can and often times leaves "selective" preferential treatment questions hanging in the air or the good old boy network treatment. It can become a very closed group quite often.

When the professional architect commits to a project budget, he is professional bound and ethically responsible to lead in the design process to achieve that budget. It's not that hard. To say that the Architect can be excused for not knowing the cost of construction is BS. It's his job to know. That's part of being the Architect.

A simply process of checking the cost at each phase and reconciling each phase estimate back to the original budget would have prevented this situation.

Conceptual design, estimate, reconciliation to budget........modify as required.
Design Development, estimate, reconciliation to budget..... modify as required.
Construction drawings, estimate, reconciliation to budget.... modify as required.

The cold hard facts here are that the Architect failed in his professional responsibilities and part of the responsibility is telling the client your budget doesn't afford this design.......be it super structure, site, or top of the line finishes.............

Unfortunately, our profession has, like many others, has become so driven by economic factors and price (fees) cutting we have become more like car salesmen than the professional position we once held.
PRO
ReSquare Architecture + Construction
12 years ago
last modified: 12 years ago
@tmarkus I hate to hear this, but it does happen. I hope you get it sorted out and in the end are happy with the results.

I tend to agree with S. Thomas Kutch: an Architect that has experience in working in a budget knows to regularly reassess design progress against a budget. The flip side is that if their estimating skills aren't good it won't matter how may times they reassess.

I tend to agree with Lampert Dias about IPD as well. Most clients are reluctant to commit to a builder on qualifications rather than price. But while doing otherwise is logical (a low price does not guarantee a good job) it is counter-intuitive (a qualified contractor will work with you to keep prices in line if they know they are getting paid to do it) at the same time.

Your experience and those two factors are the main reason we got into builds.

As Architects alone, we can only know so much about costs; we focus on the design and try to keep a handle on the costs associated with them, but not necessarily with an ear to the ever moving rails of construction costs in the market. Hiring an estimator can be expensive, and clients usually don't want to allocate that to their soft cost budget. And when a client wants a DBB process, bringing in a contractor early to help anchor budget costs to reality also comes at a price: no contractor you want pricing things will do that for free, and most bidders won't bid if they know one of the bidders was in early.

In the end, we found that building what we design allows us to serve our clients better either way: as builders we are also Architects, as Architects we are also builders. But we are primarily Architects that build. Not all DB firms are set up that way, so to the rest considering that path, keep that in mind when selecting firms.

The one thing I think where tmarkus hits the nail on the head is "Another important point to consider for everyone is managing expectations." So true. Clients don't like to hear they can't have something and Architects don't like saying "no" to a client. Unfortunately though, that's part of the job.

Good luck with the re-designs and keep us posted on how it all pans out!
touchadream
12 years ago
Fred S has some great points. Homebuilding is so emotional, but the people in the industry, just like in the wedding industry, know how to make money, know how to sell to the emotions involved, and know that you will make costly changes throughout your purchase process. It is in their interest for you to do so and it is a long purchase process. They have you at product specification. You pick a floor and they estimate it, add for matching and waste, then you find a great deal on the wide plank oak you love. All is great until you need an extra 300 square feet to finish. The installer needs to move on to another job, the supplier doesn't make much on the small order, his prices have "gone up", fuel prices for delivery have "gone up", and your price per square foot for the entire floor has now come back up to a healthier margin for the flooring supplier, who bid it low to start with. There is nothing you can do to fix this once it happens because YOU HAVE TO HAVE THE FLOOR TO FINISH YOUR HOUSE. Now transfer this scenario to every other trade. None of this, as Fred points out so astutely, is costing the architect a dime. It also doesn't cost the builder, but the builder knows the game and can help you immensely in avoiding these kinds of problems.

Another professional I would also consult somewhere along the line is a realtor, who will be able to keep you realistic about what your home is going to be worth to other potential buyers--a different figure from what you might be willing to spend on it, but food for thought with a purchase of this size.

Tmarkus, in a way you are lucky to have learned some skepticism so early in the process. Spend every dime you can on "paper" now, and try to remember that all those little things add up. Have you seen the "sexy" Kohler commercials on TV? Actually, your faucets don't represent your life accomplishments--they are primarily important to the plumbing supply company's bottom line. It's ok to want and have nice things, but Ralph Waldo Emerson said it years ago: "Things are in the saddle and ride mankind." We do live in a consumer-oriented culture, and we do well to step back from it now and then, give it a look with our "innocent mind." Is this what I want? Or is this how I want to be seen? Will I still want this 5 years or 10 years from now? The very fact that we use the phrase "dream home" is revealing. Making a home can be a wonderful experience and I hope yours soon turns into that. It probably comes down to achieving a good balance among competing wants, needs and constraints.
tmarkus
Original Author
12 years ago
The second round of bids came in after multiple changes and significant down grades. B & C had an line item breakdown, but A did not which makes me wonder what they left out.

Contractor A:
Total: $615,023.00

Contractor B
Total: $658,798.56

Contractor C
Total: $670,570.89

We figured approximately 10% cost overrun for the project, which is a WAG, but gives me some idea as to a potential max, and provides a small buffer.

We hope to meet with all these firms in the coming week to get a better sense of how much cost overrun they figured into the bid. In the event they didn't figure this into the bid I expect them to provide us with an idea of what they commonly encounter for budgetary overruns.

Do any of you have advice as to what specific questions we should ask these contractors? I would like to eliminate as many surprises as possible before committing to build a house already 20% over budget prior to permits.
PRO
Design Details
12 years ago
Excellent discussion and all of this also applies to remodeling projects. Looking at a contractors completed projects and costs is the most reliable way to assure the budget will stay within reason but the first mistake was in not hiring a residential architect. Commercial/institutional architecture is a totally different practice.
rosecottagehome
12 years ago
I would ask if you will need to add tax on to that price. I did on our big reno in Canada and that added another 24K. I knew it was coming so allowed for it in the budget. Good luck with your project.
PRO
Lampert Dias Architects, Inc.
12 years ago
We have a method of reviewing and comparing apples to apples which is a comprehensive list of all line items in each bid. Whenever we have bids come in we do this review for our clients to determine if the bids are all equal and what might be missing.

Your architect should really help you with the comparison. If not, then you can make up your own spread sheet and do a comparison.

It sounds as if you are getting close to construction
tmarkus
Original Author
12 years ago
The quotes were all with tax included
PRO
Lampert Dias Architects, Inc.
12 years ago
If you do end up with the bidder who has no line
items you will want a very complete list as part of your contract with that contractor
PRO
Paintingiant Art
12 years ago
Hi, if the design is exactly under your budget, then after done, the house would look exactly like the designed, It is very hard. Now, cost much more than your budget, then you have to use substitutions or omit somethings, then finally, the result is not response of the designer
Ed
12 years ago
Hi tmarkus, since you seem to be already over budget even before you start, could you share you experience in this poll, here --

https://www.houzz.com/discussions/over-or-under-budget-dsvw-vd~730577
PRO
Aggie dba Aggie Designs
12 years ago
Great discussion. You could also share the plans with a "second set of eyes", someone, who is experienced in residential building, and could see if anything is designed more expensive than it should be. I would be happy to look at it for a small fee, I am a real budget princess.
PRO
User
12 years ago
MR Kutch we see it all the time.
PRO
Norwood Architects
12 years ago
Unfortunately, I see this all of the time with architects. They just don't seem to be in touch with the correct way of calculating construction costs or how expensive items can be that are designed into a home. I am an architect, but have an extensive background in construction and this has helped put in in front of other architects when being interviewed for a project. As I began my architect profession working for various firms, I was very surprised at the lack of knowledge (in some cases lake of care) of the cost of construction/ budget for a project particularly in residential construction. I'm sorry you have had to experience this with your home.
PRO
Jeff Hibbard Design Services
12 years ago
I would recommend checking the allowances provided by the contractor. Pick out all of your cabinets/ lighting/ plumbing/ flooring/ exterior materials, etc. to make sure what you want will be covered by the allowances provided. This will really help in reducing any cost overruns during construction.
apple_pie_order
12 years ago
What you want to know is who will be carrying your 10-20% contingency or reserve: you or the contractor. My guess is that they expect you will be carrying it. If you do not have that 10 or 20% extra, you need to go back to the drawing board.

If (a big if) it is the site preparation which is so much more expensive than anticipated, then you really need to re-evaluate whether you can build the kind of house you want there.

Over Budget

Lampert Dias Architects, Inc.

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