Budget for building design and construction projects
A budget is a statement of the amount of money that is available to spend over a period of time, or on a specific thing, such as a building. It may include an outline plan for how that money will be spent, and a breakdown of the items it will be spent on.
The CIOB Code of practice for project management 4th edition, defines a budget as:
'Quantification of resources needed to achieve a task by a set time, within which the task owners are required to work... a budget consists of a financial and/or quantitative statement, prepared and approved prior to a defined period, for the purpose of attaining a given objective for that period.'
Budgets for construction projects help determine what is affordable and should be set as early as possible. It is important that they are based on evidence and are realistic.
The RIBA Plan of Work 2013 defines the project budget as; 'The client’s budget for the project, which may include the construction cost as well as the cost of certain items required post -completion and during the project’s operational use.'
A project budget can be established by:
- Assessment of projected income and expenses through the life of the project.
- Comparison with similar projects.
- Assessment of the funds available.
- Pre-design analysis of requirements.
- Analysis of preliminary design options.
The project budget is set by the client and is distinct from cost plans prepared by a cost consultant which are likely to focus on the construction cost.
The client's total project budget may include:
- The construction cost.
- Land or property acquisition.
- Approvals fees.
- Planning costs (Section 106 Agreement or Community Infrastructure Levy).
- Financing costs.
- Site investigations.
- Fixtures, fittings and equipment.
- The cost of decanting and relocating, including costs associated with moving staff.
- Contracts outside of the main works.
- Insurance.
- Consultant fees.
- Inflation.
- Contingency.
- VAT.
It is common on projects that the project budget and the project brief diverge over time and it is for this reason that careful cost control is important.
It is important that the client makes clear what costs should be monitored by the cost consultant and what will remain within the control of the client organisation.
NB: NRM 1 defines the authorised budget (sometimes referred to as the approved estimate or cost limit) as; 'the maximum expenditure that the employer is prepared to make in relation to the completed building.'
NB: In the case of Riva Properties Ltd & Ors v Foster + Partners Ltd [2017], the Technology and Construction Court (TCC) found that Foster + Partners had been negligent in failing to design a hotel that could be constructed within Riva Properties budget, and then suggesting that it could be value engineered down to the budget after planning permission had been granted. Foster + Partners were held liable for client's costs of £3.6 million in developing the scheme which was almost £100 million over the budget.
Stephen Homer, a partner at Ashfords LLP, the lawyers that acted for Riva Properties said; "This case serves as a warning to designers that they cannot design in a vacuum. Cost and budget is a key constraint and should always be identified and considered when designing any project, even when the provision of cost advice is expressly excluded from the designer’s obligations."
[edit] Related articles on Designing Buildings
- Accounting.
- Approximate quantities cost plan.
- Benchmarking.
- Best value.
- Bills of quantities.
- Business case.
- Business plan.
- Capital.
- Capital allowances.
- Capital costs.
- Capital value.
- Commercial management.
- Contract sum.
- Contract sum analysis.
- Cost.
- Cost certainty.
- Cost consultant.
- Cost control.
- Elemental cost plan.
- Estimate.
- Final account.
- Green budgeting.
- Initial cost appraisals.
- Net Present Value.
- Pre-tender estimate.
- Price certainty.
- Whole-life costs.
Featured articles and news
Apprenticeship announcement by the Prime Minister
Welcomed but with call for more actionable detail.
Heat pump announcements, what homeowners need to know
An 'ultimate guide to heat pumps' from a heating company.
Construction contract awards reach £7.1bn in February
Their highest level in seven months.
The journey to sustainability in heritage
Research is the key to better understanding.
Heritage approaches to adaptation, mitigation and loss.
Bridging the gap between policy, finance and installation.
Development on brownfield land
Definition, background, policy and the latest consultation.
With the Design Framework for Building Services.
Retrofit of Buildings, a CIOB Technical Publication
Pertinent technical issues, measures and the roles involved.
ECA joins HSE campaign to support mental health
Working Minds’ five simple steps based on risk assessment.
Mental health in the construction industry
Mental health issues in brief with related articles.
Transitional arrangements, Building Control and the BSR.
For pre-October buildings with substantial progress by April.
Why quality counts in domestic ventilation systems
From products, to systems to the installation.
Empowering the Future with CIOB Academy
Lifelong learning, upscaling, and reskilling for the built environment.
Comments
It would be apt to say that the ultimate success of a project manager and the construction company greatly depends on the fact whether their projects are completed on-time and on-budget. Essentially, construction project management is all about keeping track of the
costs at all stages of the project to ensure that you don’t flout the budget considerations.