May 2017 Communique

Estimates and Budgets.

Members will probably be aware of the recent NZRAB concerns about budgets versus design.

The NZACS files have numerous claims based on such issues:

Clients:

• clients being misled by inadequate/optimistic preliminary estimates
• client’s expectations not matching the budget
• client’s failing to allow for contingencies in budgets
• client changes not being tied to corresponding budget changes
• clients not wanting to incur the necessary costs of QS input;
• client changes to the priority of cost in relation to other design requirements
• changes in the client’s financial position affecting scope or viability of the project
• clients who do not accept the reality that a project involves risk

Designers and consultants:

• design work done without an agreed budget (disputed fees for rework)
• designer attempting to meet client expectations despite inadequate budgets
• designer’s failure to monitor costs during design development (i.e. “overdesigning”)
• designer’s fees insufficient to do adequate documentation
• unexpected fees for secondary consultants
• mismatch between contracted design fees and the actual way the job proceeds
• responsibilities for cost control not being adequately defined
• items included/excluded from the budget not being adequately defined.
• poor estimating by QS
• unbudgeted costs from time over-runs in the design phase

Site issues:

• unexpected costs of bringing existing buildings to required compliance levels
• unexpected specialist engineering issues (esp. geotech)
• unforeseen subgrade services: unknown/unlocated/inadequate/damaged
• additional costs arising in the absence of the designer’s input during construction.
• variations arising as the design is tweaked during construction

Economic issues:

• market conditions escalating the build costs beyond those at the inception of the project
• market conditions adversely affecting the financial viability of the project

Long-term liabilities:

• performance/material failures attributable to cost-cutting during the design process

Only a few of the above causes may be directly under the control of the designer. But the design task includes consideration of cost along with function, materials, style, regulations and the myriad of other things. If the designer cannot control the costs or the budget, at least there is a duty to know that someone else is doing it.It’s not hard to understand why a client would balk at meeting all (or any) of the architect’s fees if the project runs over budget. Especially if the project is abandoned because the design was beyond the capacity of the client. If instead the client goes to another designer for a cheaper project, the latter design will be “informed” by the first one, but the first designer is unlikely to get thanks for providing that benefit!When unexpected issues increase project costs, clients often seek to recover the whole of the additional costs from those deemed responsible. Take, for example, an excavation unexpectedly encountering subgrade services: if those services had been known and designed for, the cost would be part of the overall project cost. Arguably, there is no additional cost because of the “surprise”. But it takes a lot of effort to get a client to accept that!