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Last edited 20 Sep 2021
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.
'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.'
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 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.
- Consultant fees.
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 , 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."
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