05 Nov 2010

Which Came First — Bid or Budget?

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There is no definitive answer to the age-old argument about which came first the chicken or the egg, but there is an answer to the construction dilemma bid or budget. I’ve noticed a disturbing trend in the construction industry where an owner describes a project and a builder provides a number. That seems simple enough, but once the project starts the owner’s desire and builder’s cost diverge and the project fails leaving a jilted owner and a broken builder. This unfortunate situation is avoidable as long as you know what to ask and what you get when you ask.

Let’s start by learning the difference between the terms budget, design and bid. These terms are important but distinct phases of the same project and knowing which does what helps you communicate your intentions and manage your expectations. Always remember, budget drives design and design determines the bid.

 

Budget – The budget is a number the owner (you) establishes to quantify how much money you’re willing to spend or can finance for your project. Often clients say, “I don’t know how much I want to spend.” but everyone has a comfortable threshold. Do you want to spend $100,000, $200,000 or $400,000 for your new home? The architect and builder can analyze your budget and scope to determine if it is realistic, but you have to provide this number because it drives the design. To evaluate your budget, your architect needs to know:

  • what you hope to achieve within your budget
  • if your budget includes design fees and construction cost
  • if you will provide material or labor
  • options you’ll consider if your budget and scope don’t match

Once you have a budget and compatible scope, your architect can design your project.

Design – The design is an illustration, description and instructions that define what you want to build and how you want it built. An architect provides a set of documents which include everything necessary to meet code, obtain a permit and build your project. The documents describe size, style, arrangement and set quality and appearance standards so your builder or bidders are pricing what you want. Definitive documents result in more accurate bids. To design your project, your architect needs to know:

  • your budget
  • about your family
  • what you need (new home, remodel)
  • where you’ll build or remodel
  • what you want to do and why
  • your likes and dislikes
  • changes in features, fit or finish

Once your architect finishes design, he can help you prepare bid packages or select a builder.

Bid – The bid is an itemized inventory and estimate of every product, part and service required to build your project. Bids include hard cost and soft cost. The hard cost is all purchased material and the labor to install it. Soft cost is project fees and the builder’s fee with profit. A single bid may include 20 different subcontractors and hundreds of line items. If developed correctly you should be able to find everything in your documents in the bid inventory and the cost associated with it. A thorough builder will assemble a comprehensive bid in 1-2 weeks. To develop a bid, the builder needs to have:

  • your detailed design documents
  • your time frame
  • your phasing
  • access to the property
  • a license, insurance and references
  • an established trade base and supplier network
  • how you’ll finance (cash or loan)

The design documents and bid is the scope and cost basis for your contract with the builder.

The best advice I can offer is not to get ahead of yourself. Know whether you’re getting a budget or a bid so you know what to do next. The buck starts and stops with you (the owner). You decide how much to spend, your architect designs for your budget and the builder bids the design.

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About the Author


Your Architect is Eric Faulkner -- an architect licensed in Texas & Oklahoma with 28 years experience in design, construction observation and life.