When Will I Know Exactly What My New Home Will Cost?

In short, at concept stage you will know your budget with about 80% accuracy, after the design is complete you will know with about 90% accuracy, and at the time of construction will generally have near total accuracy except for the price of any unforeseen works or changes you may request. 

This rule of thumb depends on maintaining a good level of professional services through the project and doesn’t take into account the broader economic context of the project; such as inflation, the “boom/bust cycle” and other factors affecting in the market for construction work.

Here Are the 6 Key Steps:

1. Architect’s budget estimate
2. Quantity surveyor’s cost plan
3. Quantity surveyor’s estimate based on preparation of bill of quantities
4. Tender responses
5. Contract price
6. Final price after construction

As a construction project progresses through the architectural design process, the definition of the budget increases at key stages. At the earliest design stage, the budget begins as an architect’s estimate based on their experience working with similar projects. When design drawings are produced, they can be referred to a quantity surveyor for a cost plan to guide decisions in a more detailed way. Several builders may provide quotations for the work, which must be checked and may be subject to additional negotiation.

The price of the project is effectively finalised when a building contract is agreed, with the exception of additional works not anticipated or defined at the time of contract signing.

Budget Definition and Accuracy Increase as Design and Procurement Work Proceeds

Price certainty comes into focus with the benefit of design decisions which lead to clear drawings and design documents. A quantity surveyor then applies their knowledge of the current availability of materials and labour for different construction techniques and design solutions. The more the designers decide about the project, the greater the factual basis of the QS’ price assumptions.

If the scope of work is stated clearly and the required level of quality is well understood: the budget may be 80% accurate at concept (sketches) stage, 90% accurate after a quantity surveyor’s initial cost plan (accurate design drawings), 95% accurate when a bill of quantities has been prepared for the tender process (developed technical drawings), and 97% accurate when a contract (finished construction drawings) has been signed.

Anecdotal Information

Most clients start their journey with an amount of money in mind based on a combination of online research into building costs, and information gleaned from the experiences of friends and family. This starting point can have a firm basis in fact or can be wildly inaccurate.

One of the main benefits of our initial consultation service is the opportunity to frame your ideas in the context of current- market price information.  

Architect’s Initial Budget Estimate- Price Information for Conceptual Design

From our initial conversations with clients and through the design stage, the architect’s budget estimate is our gauge on the overall price and viability of the emerging project; it’s typically, a one-page document. We prepare these in a consistent way:

1. Budget for new space based on a rate per square meter
2. Budget for reconfigured space based on a rate per square meter
3. Budget for major third-party expenses such as bathrooms, kitchens, special finishes, flooring etc.  

These headings are useful for the design stage when high level decisions about your project are in flux: how large should the extension be? How much of the existing house will be reconfigured and to what standard? Will there be roof-lights or tall sliding glass doors? A short breakdown based on these categories relates the design decisions to the budget in an intuitive way. But of course, there are obvious inaccuracies with such a high level budget breakdown: there may be greater or lesser degrees of reconfiguration, extensions may be more expensive depending on site conditions, and there may be specific preferences for luxury finishes, expensive items like photovoltaic systems or ground source heating.

Architects are focused on satisfying the client’s needs in the context of the available budget, and we are generally optimists. When the design has reached a point where clear drawings exist, we may then confer with a quantity surveyor, a specialist professional trained to focus on the budget.    

Viability checks on architect’s initial budget estimate

You can easily plan a budget on this basis which is not commercially viable for a builder and therefore won’t practically happen; particularly when a large part of the budget is earmarked for companies other than the main contractor. Your project depends on having the undivided attention of a highly skilled construction leader; such a person may require pay of €60,000- €100,000 per year depending on their career stage. If your project will take 6 months of their time it needs to contain enough profit to entice the professional you need.  

• Is the overall proportion of profitable value adding work by the main contractor sufficient to justify the time they will need to spend onsite?
• How many weeks is the project likely to take? Most main contractors’ business models can be defined by a required turnover level per week. (Typically a minimum income of €5000 per week before expenses is required to cover the needs of business capable of executing a small architect designed building.) 
• What proportion of the budget is allocated to products, services and components which the main contractor does not directly provide?

For example: if you have a budget of €150,000 to undertake a six month construction process, it may be viable if the work is comprised of tasks which the main contractor can undertake directly, because they will earn a percentage of profit on the whole sum. But if €100,000 of that budget is to be spent on windows, electrical appliances, kitchen fittings and luxury floor finishes, the remaining €50,000 will simply not offer enough profit to pay the person you need for the required period of time.   

Getting the Most from Quantity Surveyor’s Services

A QS price is a complex piece of work, and while they can price design variants and cost options, it must ultimately be based on a fixed design, expressed by the architect in proper drawings. So the leap in accuracy delivered by the QS comes after significant investment in professional services to create a design and clear drawings. 

This is an important point. Reduced scope packages of architectural services, and “fast track” approaches to commencing construction work never achieve sufficiently detailed documentation to prepare an accurate pricing document. Such construction projects are characterised by uncertainty and stress over the budget, extreme difficulty agreeing prices for design changes, inability to plan time and work or to complete basic contract administration tasks.

If you want cost certainty with accuracy greater that 80% you must invest in a package of services from your architect and quantity surveyor sufficient to practically produce the drawings and documents the QS needs to do their work.

It is possible to proceed to construction with far more limited information, but the construction cost and timeframes will effectively be unknown, so it’s only a realistic option for people with unlimited time and budgets.   

Measurement and Valuation

The two main actions used by the QS are measurement of the material and work required, based on a detailed study of the drawings, and valuation of that work based on their knowledge of prices and the market. 

The measurement is a detailed study of the design drawings and specifications where work is listed using a spreadsheet or measurement software, and the determination of prices for each item depends on the costs, preferences and structure of the main contractor who will undertake the work.  

In an ideal scenario, both the client and the builder will each employ a QS, and they will confer and liaise on matters relating to price through the tendering and construction processes. This adversarial relationship, with high level skills on both sides gives reliable and consistent cost information for planning the project and administering the building contract objectively. 

Long and Short forms of Price Breakdown

The “list” documents delivered by the QS for domestic works projects are usually either 8-10 pages long or 70-120 pages long. They have different names depending on their role in the design process or building contract.     

The main differences between short and long forms of pricing document are the cost of producing it, and its ability to objectively and reliably quantify changes that are necessary during the building contract.

The QS will generally offer an 8–10-page price breakdown as a cost planning exercise at design stage, with a lot more detail and specificity than an architect’s budget estimate. Such a price breakdown is usually used to inform a finished design. This cost planning exercise provides sufficient price certainty to proceed with a planning application or highly detailed construction drawings.  

A similar 8-10 page shorter form document is often used as “a schedule of rates”; a part of the building contract used on very small simple projects where the builder has provided the price breakdown as part of their service.

The best form of price breakdown is a Bill of Quantities. This is a long document, often in excess of 100 pages. The client’s QS prepares an “unpriced” bill of quantities by measuring the architect’s drawings when the design is almost fully documented for construction. This informs a detailed price estimate by the client’s QS, and allows builders’ QS’ to prepare tenders ( quotations or bids for the building work) in a detailed and accurate way.

Tendering and Contract Formation

Traditionally, once drawings and an unpriced BoQ are prepared, a panel of different contractors are approached to provide a quotation in a form of sealed bid process. The contractors’ QS’ do this by adding the required prices for the building contractor they represent to the BoQ.    

These “tenders” are the real- world reactions to the design teams decisions and the economic and commercial context of the project.

In practice, it is now highly unusual to appoint a builder solely based on a tender process. There is usually a process of site visits, meetings, negotiations, further design and provision of additional information on all sides before the client and builder are ready to commit to a contract.   

The priced bill of quantities is often refined and amended in the run up to signing a building contract, and then forms the basis of all payments to the main contractor during the construction process. 

Get 3 Prices

From a client’s perspective, the tried and tested rule is to obtain several bids, tenders, or quotations for construction work. In this case, even if the prices are higher than expected, you can be assured that they are each arrived at independently.  

At times of change in the market for construction work, large differences in tender prices are often seen as different builders respond to changes in demand in their own way, in keeping with their own needs, skills, cost structures and circumstances.

From a client’s point of view value is achieved by finding the best possible fit with a builder, considering: the skill set needed to complete the project, their ability to complete the majority of the required work without subcontracting to other companies, their approach to communication, and the bond of trust they feel with them.

We rely heavily on these procedures to advance projects from concept stage, through design and construction, but forming a construction contract is not just a process- driven exercise and price is just one aspect of the deal which makes your project a reality. Ultimately the price you pay is decided by the complex market for various construction services and materials, and your point of contact with that market is your main building contractor.

At a human level you are building a team and there needs to be enough interpersonal interaction in the build-up to a construction job for relationships to be formed and for trust to evolve. Irrespective of professional advice, the client needs to be comfortable trusting the builder.

Similarly, the client needs to be mindful of the fact that the builder’s entire career may comprise as few as 20-30 projects, and as self- employed individuals the choice of projects is critical for their professional advancement, their personal satisfaction, and the financial security of their family. Each contractor needs to be sure the client is reliable and capable of paying and that the project makes commercial sense.

In this context, they use their judgement as to whether a reasonable profit has been agreed.

Contractor’s Common-Sense Checks and Adjustments

Sometimes contractors’ prices are subject to additional common- sense, or commercial thought processes:  

1. What is the market value of the completed building?
2. How does this compare to the price of the construction work?
3. How much is the client willing/ able/ prepared to pay?
4. How much are costs likely to change during the contract?
5. How much competition is there for work like this?
6. Is there an opportunity for a greater than normal profit or is a low bid required to secure the work?

Economic Valuation

You can look at a building job as a set of 14 individual processes: from site setup and digging foundations, to decorating, snagging and installing flooring for handover. In many ways, a QS’ work is to assign a value to those stages, based on the nature of the work. But from a business point of view you can think of the same piece of work in terms of how much value it adds to the property.

This is often a key consideration when construction services are in high demand, and builders seek to cherry- pick their projects for optimal profits.

Say a piece of construction work can be executed for €100,000, but adds €200,000 to the value of the building.  In an era when builders have reduced bargaining power such as 2011, they may have to accept a price just above €100,000, but when their services are at a premium as was the case in 2022, they can expect almost €200,000.

Reciprocally, there are a great many projects where the sum value of work is less than the value added by the project. Such projects are intrinsically unviable. This is currently a major problem for a great many homeowners with homes which can physically be extended with a careful bespoke design. The highly skilled construction work these homeowners need is at a particular premium at the moment, whereas the values of the homes are effectively capped by mortgage lending rules. 

Shifting Balance of Power

As conditions in the construction industry have changed over time the balance of power has shifted back and forth between those commissioning construction work and those physically doing it! Contractors have sometimes been forced to accept prices barely covering their costs, and sometimes have earned extraordinary profits.

Both scenarios have proven to be temporary.

At a time of high demand for construction work, it’s worth comparing your finished project to similar properties in the area, in terms of size, location and standard of finish.

Benchmarking to Similar Work

The majority of architect led construction processes have a high proportion of bespoke design; that’s where our work makes the biggest difference to our clients. Such work must be measured, priced and planned on a very granular case-by-case basis.

There are some types of projects which are largely repetitive, it’s possible to shop around in an accurate and intuitive way and a “going rate” emerges:

1. One off houses in the countryside
2. Suburban greenfield housing development
3. Attic conversions
4. Garage conversions
5. Large scale apartment building.

In considering a price for a project, such “going rates” are useful in understanding the business context small contractors operate in. If a project can be framed as more routine and less bespoke, it can downplay concerts regarding uncertainty and risk often associated with unique designs.

Conclusion

It is important to note that our clients are usually people who place a high value on price certainty and are prepared to invest in the professional services needed to achieve it.

During construction, price certainty is directly linked to the degree of definition of the technical design and construction drawings which has been achieved. Our projects are generally drawn (and redrawn) in exhaustive detail, then studied by engineers and key suppliers before working with a main contractor to plan how it will physically be put together.

That means that a build with high price certainty is usually a build with exhaustive project planning and attention to detail. A relatively stress- free and more enjoyable life experience.

When changes occur during construction, the cost difference is determined by the “variations” procedure in the building contract, which is a weighty subject for an separate article.

The broader economic context of high or low demand, inflation and availability of finance are far outside the control of your design team. However, by shopping around, you can be assured of the best possible price at the time if you seek several prices from contractors with the appropriate setup, skillset and cost structure for the project.