Don’t Battle Your Budget

from Protein Producers Winter 2016

PAC 2016 Year-End Snapshot

By: Jacob Mayer, P.E., Settje Agri-Services & Engineering, Inc.

In my last article, we worked through some of the critical details involved in building a new cattle working facility for your ranch or feedyard.

Disciplined planning will not only benefit you during construction, but it will also help you establish a firm budget and stick to it.

Perhaps you had a number in your head when we started that you wanted to use for a bottom line cost. Without a thoroughly defined scope, that is a hard figure to estimate. Now that we have a game plan, we have some decisions to make on how to proceed.

Here are a couple options to get your project built:

1. Build it yourself. Can your current labor force build fence and pour concrete? You may need to purchase the building structure and equipment, but much of the work stays in-house. This path is typically much slower; however, it allows you to control the schedule and can save money if you’ve got capable people on your team.

2. Hire a general contractor. A general contractor is a one stop shop. They handle everything for a predetermined price and as long as you stick to your plan, the price doesn’t change. This option is usually the most expensive because they assume all of the risk in regard to the price of materials and weather.

3. Hire a construction manager or act as your own. A construction manager will solicit bids from multiple contractors for the different aspects of the job (building erection, plumbing, electrical, etc.) for you to review and award contracts to. They will oversee the work to make sure everything is built according to the plans. They receive a fee for their services, but you pay the actual costs.

There isn’t a right or wrong way to go, but there is a best way for your particular situation. Depending on the route you choose, your budget will develop differently, but ultimately you will arrive at a cost. Keeping your banker, partners, and family in the know during this budget development process will avoid surprises and delays in the start of construction.

The key to staying on budget is minimizing changes. Projects of this size are too complex to execute perfectly without ever running into a snag.

I include a contingency with my customers to account for unforeseen overages and then we strive to keep them under 5% of the total budget.

A common question that tends to come up at this juncture is if my budget is more than I am comfortable spending, how or where can I save money. I strongly recommend that you never compromise on aspects that directly affect the cattle.

Go after the low hanging fruit first. Is there an office area or break room that can be simplified? Are there portions that can be combined to provide the same functionality with less? Did you automate something that can be done manually? There are typically lots of opportunities to adjust the plan to fit your financial constraints and still accomplish your goals.

In the next issue, I’ll conclude our series with some construction tips, tricks, and ideas. Until then, God Bless.

(Sample Feedlot Expansion Budget on next page from Settje Agri-Services & Engineering, Inc)

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