23/10/2018

Self-build: How to avoid common pitfalls

If you are considering a self-build project, it’s pretty much a given that you’ll be an avid Grand Designs fan. As you’ll know from the show, many things can (and usually do) go wrong on these dream builds, but generally speaking the end result is usually the same: increased cost....

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Self-build: How to avoid common pitfalls
Self-build: How to avoid common pitfalls

Self-build: How to avoid common pitfalls

If you are considering a self-build project, it’s pretty much a given that you’ll be an avid Grand Designs fan. As you’ll know from the show, many things can (and usually do) go wrong on these dream builds, but generally speaking the end result is usually the same: increased cost. While this can make for entertaining television, it’s not so much fun when the spiralling costs are your own.

 

So, what causes projects to go overbudget? There are three broad categories...

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Self-build: How to avoid common pitfalls

If you are considering a self-build project, it’s pretty much a given that you’ll be an avid Grand Designs fan. As you’ll know from the show, many things can (and usually do) go wrong on these dream builds, but generally speaking the end result is usually the same: increased cost. While this can make for entertaining television, it’s not so much fun when the spiralling costs are your own.

 

So, what causes projects to go overbudget? There are three broad categories which can be the causes of overspend, and over the next three months I’ll be releasing blog posts covering these three areas, and the steps you can take to avoid falling into those common traps.

 

This first post covers the first of the three categories, and by far the most common, which is:

 

Starting a construction project on site with an unclear or unrealistic idea of the project costs or timescales.

 

So what are the common Issues?

  1. Failure to consider Whole Project Costs vs Construction Costs
  2. Not taking (or not believing) the advice given by construction professionals on construction costs.
  3. Failure to consider inflation and contingency sums when considering project costs.
  4. Proceeding to planning application, technical design, and even starting on site on the basis of inaccurate or non-existent cost information

 

Seems like a no brainer, I know, but you would be surprised how many self-builders chose to either not take (or not believe) expert advice on construction costs.

 

The result?

Projects going over budget.

 

The solution?

Be sure of your finances before committing to any work.

 

So how do you go about it?

 

There is a two-step solution to these issues. The first is to utilise the experience and knowledge of your design team to give you an early stage outline of Whole-Project Costs before the design work commences.

 

Your architect will be able to advise you of the project costs you might need to consider over and above the actual cost of constructing the building, such as consultants fees, surveys and reports (and the VAT payable on them), fees charged by the Local Authority for planning and building regulations approvals and, in the case of remodelling or refurbishments projects, VAT payable on construction costs.

 

It’s worth noting that while architects will provide you with all the information they can on which consultants and reports may be required at this very early stage, until design progresses it’s often not possible to know for certain exactly what will be required. Your architect also won’t be able to tell you for definite how much other consultants will charge in fees, but they can often give a rough idea based on recent projects, or can obtain quotations on your behalf. I will speak about contingency funds shortly, but this is an area where you will need scope to be flexible in your budget figures.

 

Once these fees and other project costs are deducted from your overall budget, you will be left with an amount which you can use as your construction budget cost. Your architect will advise you of cost per square meter rates for construction, usually within a range based on your location, site conditions and brief, as well as complexity of build and quality of finish. These figures may at first seem higher than you expect but will be based on your architect’s experience of the construction costs of recently completed projects in your area. These figures can be a useful starting point to allow you to calculate the size and/or quality house you can realistically achieve for your budget.

 

The second step towards cost certainty is to employ a Quantity Surveyor to undertake one, or even multiple, Cost Plans for your project. We generally advise our clients that, alongside the architect, the quantity surveyor should be one of the first consultants appointed unless working with a builder from the start.

 

We recommend the appointment of the quantity surveyor to undertake an outline cost plan at the early design stage, certainly pre-planning. This has the benefit of ensuring that the scheme being designed is looking likely to be within budget before a planning application is submitted. While your architect will be able to advise whether you are ‘roughly’ on track, Architects are not cost consultants, and as such can only advise to the limitations of the information available to them.

 

An outline cost plan at this stage can be produced from basic architect’s plan, elevation and section drawings and a basic outline specification. The risk in not having this cost plan undertaken is that you may require further design work and even a return to planning if it transpires the house as designed is not within your budget, which will carry a far greater time and financial penalty.

 

Alongside the actual cost of the design, there are several items the quantity surveyor will consider within his cost plan.

 

The first is the approximate level of preliminaries, overheads and profit being charged by the local contractors in the area. If you know at this stage whether you are intending on undertaking elements of the work yourself, which would therefore not be subject to contractor’s overheads and profit, discuss this with your QS, as they will be able to adjust the cost plan accordingly.

 

The second element to discuss with the QS is when you think that the building work is likely to be undertaken. While most people will want to start work as soon as possible, you may for some reason not be able to start for two to three years, in which case the QS will need to build a greater allowance for inflation into the cost plan than normal.

 

The third element to discuss is the level of contingency to be included. The QS will usually include a contingency figure within the cost plan; if you have a separate ‘pot’ of money outside your construction budget then advise the QS accordingly. At this point, it is worth discussing contingency figures, and where they are usually pitched.

 

An early stage cost plan such as this one will usually allow a blanket overall 10% contingency sum. This 10% can be considered in two halves. 5% of the figure would be what we would term a ‘design reserve’. This is to allow for the fact that at this stage the detailed design has not yet been undertaken, and to allow for cost which may arise as the detailed design is finalised. For instance, at this stage the QS will allow a single lump sum for waterproofing. On undertaking the detailed design, it may transpire that a more expensive or complex solution is required due to site conditions. This figure allows for those design decision to be made without adding cost to the budget. By the time the project is priced, either in a second cost plan or priced by contractors, these decisions will hopefully mostly have been finalised and those costs incorporated in the main sections, and so this figure may drop to 1%, allowing for any last minute decisions along the way.

 

The second half of the contingency figure is what we would term ‘construction contingency’. This figure allows for issues arising on site which cannot be foreseen, for which additional works or materials are required. If you have a particularly challenging site or build, your QS or architect may advise you to increase your construction contingency allowance. Many of those Grand Designs projects had no contingency allowance at all, or what they did have wasn’t enough.

 

Hopefully this blog has given you an idea of the importance of being sure of your costs before starting work, and how to avoid it. Next month I’ll take you through Design and Regulatory issues, and how a lack of proper control of these items can result in projects going over budget.

 

Please feel free to get in touch if you have any questions.

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