Renovation Crash Course - Module 3 - Budget and Cost Control

TABLE OF CONTENTS

Module 3

4

INTRO

4

GLOSSARY

7

WHAT AFFECTS THE COST

10

GLOBAL ECONOMICS

10

SUPPLY AND DEMAND

11

SKILL AND BRAND

11

QUALIFICATION HOW TO CALCULATE THE COST

12 13

COST ESTIMATES PER SQ M

13

SEND YOUR PROJECT FOR TENDER

15

ESTIMATE THE WORKS YOURSELF FOR A RENOVATION PROJECT BIG TICKET ITEMS

17 20

SAMPLE OF HOW TO REDUCE COST

22

FROM MY OWN RENOVATION

22

Next Topic…

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First published October 2020.

All rights reserved. All documentation is copyright to Formation Concept Design Ltd. and cannot be reproduced or shared without license. © Formation Concept Design Ltd. trading as Staunton Henderson Architecture and Interior Design 2020

Terms of Use: Supplier discounts offered as part of this course are for the use of the purchaser only and are not transferable.

The course is general information based on interior design and general design tips with an emphasis on project management in relation to construction and architecture. This course does not replace the service of hiring professionals. It does not constitute professional advice for a particular project in any way. It is not accredited to a professional body. Structural, construction, architectural or financial advice is not tendered in this product for any individual project. The course offers general knowledge with the express aim of giving confidence and enjoyment to the end user.

Information here is based on single residential works and not commercial, large scale or conservation work.

The information provided in this course is for general purposes only. It does not and is not intended to replace the services of a qualified professional. Your use of the information and reliance on any of it is at your own risk and we cannot accept any liability for loss or damage you might suffer as a result of it.

This online course is called Renovation Crash Course and has an advertised end goal “you can feel confident progressing with your home renovation.” The information here is non-exhaustive.

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COST CONTROL MODULE 3

INTRO

Your budget is the most important part of your project. It is something that needs to be continuously referred to.

There are a few ways that the budget can be stretched:

1. Getting more money (from the bank for example)

2. Reducing the Scope of Works (building less or to a less expensive standard)

3. Phasing the Works

4. The Route of Construction you choose.

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Refer to the table on page 9 Note: of Module 1, remembering that choosing a self build route does not lower the Cost of Construction. It is your own time, effort and management skills that may reduce the overall spend.

Construction is all about compromises!

Even a project with a limitless budget still deals with the constraints of the site locality, the site geography, the local planning law, and what products are available at the time, the construction team and craftspeople available.

Extract from Module 1, Topic 2, page 10

You could say a successful project is one where the series of decisions about prioritising and compromising were well made.

This is where your brief writing exercise from Module 1 Topic 2 comes in. The “must have” and “nice to have” hierarchy you have already established will help you to stay focussed on your end goal.

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Agility in your thinking early on in the process will serve you well. Meaning, if your budget doesn’t allow for all of your hopes, please don’t be disheartened.

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Remain level headed

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Take out your pen and paper and your original brief

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Figure out what means the most to you

Your “must-have” list can be a mix of practical and emotional decisions.

What you create must function properly, and it must make you happy.

And if you have to phase your project, the first part being small but mighty will boost you and keep you happy until you begin on the next phase.

I run through the example of my own renovation due next year later in this document. I see it as a wonderful challenge.

Note: It is important to note that phasing a project is more expensive in the long run because each time you have a contractor back for a new phase, you pay the preliminaries again.

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GLOSSARY Preliminaries or “prelims”: Form part of a construction contract. They are costs incurred by the contractor to carry out the work, but do not form part of the built work. They are the site overheads, and sometimes include builder’s profit margin. Sometimes, on larger or government contracts, the profit is shown separately. Site overheads include: insurances for your house and their staff, set-up costs like scaffolding, temporary office costs (portacabin / portal rental), licenses from a council for road access, mock-ups, reports, site offices costs, administration.

Tender:To issue a project to tender means to create a set of information, like drawings and written documents, send them to multiple contractors, (min 3, usually max 5) and ask them to “return the tender”. This means send back a quote based on your information. This way each of the quotes should be comparable. It is necessary to check that they have priced for everything you asked for.

Quantity Surveyor or “QS”: A construction professional who has a qualification in quantity surveying. They know how much buildings cost, from a timber frame, right down to a box of nails. They use rates issued annually by RICS, and also recent local projects. Their recent local projects gives them “live” information. They can work for the contractor, or the client.

The contractor will have his own QS to help him bill the client. On larger jobs the client will have their own QS too. I recommend my clients to take one on during construction too, certainly at Cost Estimate stage.

Cost Estimate: Educated assumptions on the future cost of a build.

Contingency: An amount added on and set aside by the client for “unforseens”. It varies between 10% to 20%. It should not be less than 10%.

Retention: A set percentage of the money paid to the contractor set aside in a joint account or simply held back for payment until the end of the job. Half is paid upon completion and half is paid at the end of the Defects Liability Period. Note: the exact details of release date will be outlined in the contract used.

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Cost of Construction: The cost of building minus the builder profit, designer, engineer, consultant, planning fees and furniture and fittings.

Contract Value: All of the above in the previous definition. It is the final cost to the client.

Provisional Sum: An amount in the Bill of Quantities that is a sample sum for an item not yet known. It is a place holder.

Prime Cost Sum: An amount in the Bill of Quantities that is a maximum amount to spend on a certain element.

Bill of Quantities: A document produced by a QS for you, or a contractor, or an architect on your behalf. It lists the elements of the projects.

Tender processes can ask to include a priced Bill or a blank bill. Large commercial contractors often do not show priced bills.

But for your a residential project you can ask for either.

A BoQ is a very important and informative document.

A sample page and a sample final page are on the next sheet.

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The final page shows the total, including VAT

Pay attention to the exclusions

And the fact that these prices can change over the course of the works

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WHAT AFFECTS THE COST

Global Economics

The Cost of Construction is often affected by global economics.

Some examples are outlined here:

•

Trumps trade war with China has resulted in tariffs on US timber into China. And this had a knock-on effect on timber prices globally because the Chinese are buying timber from sources that we usually use. Coillte Irish forests are under pressure too. We are currently in a timber shortage, and so it has become expensive.

•

In 2004 there was a steel shortage globally, which drove the cost up. On a project I was running, the QS suggest delaying the project to redesign the building structure to be a concrete frame, rather than a steel frame, which the client chose to do. Time was sacrificed for cost savings.

•

Brexit caused many UK building suppliers to stockhold, and this lead to increased costs of these items.

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The 2008 global recession caused mass emigration, as we all know. Previous recessions and their bounce backs had a shorter time between them. This last one had at least ten years before the banks started to lend freely again and the construction industry became buoyant again. But by this time the carpenters and block layers who had left for Australia, etc, had gotten married or had children in school. It was much more difficult for them to come home. So we still have the staff shortage, and this drives cost up.

Asking designers for reduced rates only allows them to spend less time on your project. You can compare different designers by asking for a broken down list of deliverables, and then compare.

Haggling with a builder would not result in a lower Cost of Construction, just lower profit margins for the builder or his sub-contractors. Tendering is the proper way to get a “best price”. We will jump into detail on that later.

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Supply and Demand

The previous recession lead to many construction workers emigrating. This shortage of workers also causes an increase in their rates.

If many people are building homes, and contractors are in high demand, they can charge more.

Many people want to carry out minor home renovations starting in September to be ready for Christmas, and so this is a time when contractors are in high demand. It is better to start way earlier in the year.

Skill and Brand

If a contractor or designer has been in business for many years, has multiple projects as showcases, and many happy past customers, their reputation would allow them to charge more.

You benefit from their experience.

Cost Estimates per sq m

Estimates from a local QS

Tender Returns

Agreed Contract Price

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I know I charged less in the first two years of business. I went above and beyond for the people who took a bet on me, so there are pros and cons to using experienced to new businesses.

Qualification

If a contractor or designer has extra credentials from a competitor, they can charge more.

If a contractor is an expert in a particular skill, for example conservation work, then they have that advantage for that particular project.

If a designer has more appropriate skills, like engineering qualification for roads / site works / large structures then they have the advantage there.

TOP TIP: Remember the note from page 11, Module 1, topic 2 about the three elements?

COST, TIME and QUALITY. Only two can exist at any one time, at the sacrifice of the other.

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HOW TO CALCULATE THE COST There are a couple of different methods.

Cost Estimates per sq m

One can estimate using the RICS annual figures, multiplying against the square area of the proposed design.

A handy way to access this information is via the RIAI, Royal Institute of Architects of Ireland.

This organisation produces a document that is more lay mans terms of the RICS info.

https://www.riai.ie/whats-on/news/riai_building_construction_cost_guidelines_2019

It is advised to download and look through this document.

They give cost per square metre so you can estimate the overall cost. Page 8 shows a cost per sq m for New Build constructions. Yes it looks very high! These costs encompass everything except interior fittings. So site works like driveways, percolation areas, retaining walls, and these are average costs.

The variance between the maximum and minimum estimates are down to standard of finishes. It is the difference between whether you are getting your kitchen from Poggenpohl or Ikea.

The cost of basic construction is fairly consistent, it is the finishes and detailing that drives the prices up. Detailing means how the building is put together, for example, if you have a zinc clad central core, or cedar wood panelling.

Basic construction would be blockwork and render. Anything above that will contribute to the cost, however would add significantly to the architectural merit of the building, and hence the resale value. It is a balancing act.

In addition to sqm area, the other calculation that drives up cost is the amount of wall required.

A large square box has the least amount of square area of wall. Three separate box shapes have a larger square area because the walls are simply longer in length to go around corners multiple times and hence costs more. Often this is unavoidable because the Planning Authority very frequently require the “massing to be broken down”. This means to make smaller shapes, rather than one large shape. A group of smaller shapes can be more pleasing than one large box shape and can sit nicely into the landscape. It also reflects vernacular styles.

Note: When architects speak about “massing” or “volumes”, they mean the shape of the buildings.

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Plan Diagram

Even if these two plans have the A single large shape

same area m2, the one below has more wall length, and hence will cost more to construct.

Plan Diagram Three shapes

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Send your Project for Tender

The most common way to get a cost for a renovation is by sending your project out to tender.

And the only way to receive accurate tender returns is to have the design fully drawn and specified.

That means a full set of drawings that include plans elevations, internal elevations, detail drawings of particular elements, like kitchen islands, a lighting plan, a heating plan, a landscape plan plus a written specification document.

Making this set of documents at the beginning usually saves you money later.

You can, of course, send your project to a builder for a quote with just a written document.

However, with a written document all of the small details may not be considered. And you must be prepared to have omitted something and have to make a change during construction.

The risk is higher.

TOP TIP: A common rule of construction: making changes during a build costs more. This is because a builder can charge you whatever he likes to make a change when he is already in contact and on your site.

Here is the scenario. During your renovation you decide to add an extra bathroom. You ask your builder to give you a price for this work. If his price is high, and you have a better price from another builder, it is contractually difficult and expensive to get the first builder off your site, and the new builder in to construct that new bathroom, and then the first builder back in. So your original builder could potentially charge you whatever they like.

For this very reason you should plan what you want carefully and in detail before starting on site.

A golden rule: making changes while on site with a builder will cost you more.

(I must point out that every builder I have worked with has been very trustworthy and very fair).

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There are set rules to tendering. They come from the Irish and UK competition law.

For a residential project you have the right to choose your builder, and do not legally need to tender, but it is advisable for larger projects.

Business to business and governmental contracts must strictly adhere to the Rules of Tender.

A shortened list of them are:

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Tender to at least 3 maximum 6 suppliers

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Issue all the tender documentation (eg. drawings and scope of works) at the same date with the exact same information to everyone

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Set a return date, any supplier who returns late is disqualified

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All parties are confidential from one another, never discuss a supplier quote with another supplier

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Set an initial period for queries to come in. Any answers get issued to all of the suppliers for fairness

Government contracts must go with the lowest tender and have a very strict opening procedure.

Home owners can interview the prospective suppliers / contractors and choose one.

More information is available at these links:

https://constructionnews.ie/cif-guidelines-on-best-practice-for-tendering/ https://www.gov.ie/en/organisation-information/30e5d2-how-we-purchase/

TOP TIP: If you ask a contractor to price works, it costs him money to respond. They have to pay their QS to prepare a quote for you. It could cost between €500 - €2000 to create a quote.

It will not serve you well to repeatedly ask a builder to price various options. It will cost him money and he will either walk away, or will have to add that cost back into the project preliminaries. This is where your preparation and self assessment, knowing what you want will save you money.

If you are very undecided between different options, include those options in the tender process.

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Estimate the Works Yourself for a Renovation Project

CONTRACTOR TYPE

DESCRIPTION Design and Approvals

Architect / Building Designer / Draftsman Interior Designer Structural Engineer fees Private or Council Certifier Environmental Specialist Surveyor Connections Water Connections ESB Tree Arborist Builder

Plan design and development Interior design services (not the product) Plans and site visits Planning fees EG: Basic fees (only if required by the planning office) Survey fees Water Electricity Tree reporting (only if required by the planning office) Materials and Labour - note some of these can be sub-contracted Architraves Asbestos testing, removal and disposal Concreting and or brickwork Construction clean Demolition Door installation Door handles, latches and locks Door stop install Excavation External clad and trim External Doors Floor protection Framing, footings and piers Garage door Hinges and Jambs Install bathroom accessories Insurance Internal Doors Portaloo Roof repair or replacement Skirting Skylights Staircase Underfloor heating (incl install) Waste removal Window clean Windows

Air Conditioning

Materials and Labour Disconnect the old system Air conditioning unit Install

Appliances

Purchased by owner and supplied to contractors Washing machine Dryer Fridge Cooktop Rangehood Oven Dishwasher Bar Fridge Microwave Fireplace

Cabinet Maker

Materials (cabinets and handles) and Labour Kitchen Laundry Mud Room Study Vanities Handles Benchtops EG: engineered stone, timber, laminate

Electrician

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Fencing

Materials and Labour Disconnect power ready for demolition Connect power as per lighting plans and layout Internal lights External lights Power points Feature lights / pendants / chandeliers Globes for feature lights Ceiling fans Module 3 - Topic 1 Extraction fans Laundry appliance fit out Kitchen appliance fit out Materials and Labour

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Boundary fences Front fence Fixtures and Fittings

Main bathroom Bath Bath tap set Bath waste / plug Robe hook Shaving cabinet Shower arm Shower head Toilet Toilet roll holder Towel rack Vanity mixer Vanity waste / plug Wall mixer for shower

Ensuite Bath Bath tap set Bath waste / plug Extraction fan Robe hook Shower arm Shower head Wall mixer for shower Toilet Toilet roll holder Towel rack Vanity mixer Vanity waste / plug Laundry Floor waste Sink / tub Sink mixer/tapware Sink waste / plug Hooks/Drying rack Kitchen Sink Tap Flooring

Supply and Install Subfloor Prep Carpet (including underlay) Floorboards Floorboard install

Glazier

Materials and Labour Shower screens Mirrors Repair windows / new openings Glass balustrade

Landscaping

Materials and Labour Deck Paving Driveway Edging and planting Lay new turf Mulch New letterbox New plants Pergola Prepare existing space for new turf Retaining walls Privacy Screen Timber stairs and balustrade Trees (arborist/tree lopper)

Painter

Materials and Labour

Plasterer

Materials and Labour Gyprock Villaboard Cornice

Plumber

Materials and Labour Disconnect existing water as per the scope of work Rough in new items listed below as per the scope of work Fit out items listed below as per the scope of work

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Removalists Renderer

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Labour and storage costs Materials and Labour

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Rent

Accommodation costs

Siliconer

Labour and materials

Solar Panels

Materials and Labour

Panels, battery and install Stonemason Tiler

Labour Materials (grout, glue, sealer) and Labour Waterproof Skreed Tile labour - inc glue, grout and seal Tiles

TV Installer

Materials and Labour

Wardrobes

Materials and Labour

Waterproofer Window Coverings

Materials and Labour (can be done by tiler) Materials and Labour Blinds, shutters, curtains Total Contingency

TOTAL

And don't forget…. Styling!

Styling

All the pretty things you'll want to buy

This is a non-exhaustive list as every project is different and individual. It for example, does not include any sustainable heating or solar panels.

It is for a renovation, and not a new build.

It is a starting point. And a good place to begin discussions with your contractor.

It is a useful tool to cross-check against any Bill of Quantities you receive.

I would always recommend using a QS. It might cost you €300 - €500 euro for an estimate, but their expertise will serve you well.

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BIG TICKET ITEMS Below is a list of potential items to consider when trying to reduce cost.

Roof tiles (real slate costs more)

Floor Finish (anything with a large area being adjusted can reduce the cost drastically)

What type of plasterboard is being used? Sound proof board costs a lot more but could be really useful for some rooms

Window material (PVC or Aluminium?)

The heating system? Usually if you spend more now you save on running costs

Is the site sloped? It is much less expensive to build on the flat

What is the type of soil? Important to know when choosing sites. Bedrock is more expensive to build on because excavating rock is more costly.

Asbestos removal? Important to know if it is present when buying an older house to renovate. It needs to be professionally removed

Do you require planning permission? Some councils require a new septic tank in the conditions of a permission. When does the tank need to be constructed? Do the council have a time limit on that request? (Each council can have different rules for that). This can add €10k.

A recessed skirting board will cost more than a planted on skirting

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TOP TIP: Never pay a contractor a cash deposit with out a contract signed, and receiving a receipt.

Myself and all the best contractors I work with never deal in cash. It is a false economy to us, and to the customers. You may need receipts and proof of payments for your mortgage and for your own security.

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SAMPLE OF HOW TO REDUCE COST FROM MY OWN RENOVATION

Ocean View

Site purchase with less land but amazing view

South West facing living / kitchen /dining

Bedroom moved to North side

Marble Kitchen Counter

Inexpensive cabinets

Highly functioning Utility Room

Ensuite phased to 5 years time

Widen the hallway

Use our antique furniture rather than new

Home Office

Put South facing glazing in garage and insulate it

Herringbone timber floor throughout Double height ceiling in Living area Large outdoor BBQ area, with roof Beautiful Landscaping to front

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Phase until 5 years time: • Adding floor to Garage • Adding Extension • Creating the large home gym Phase until 10 years time: • Adding entire extra floor to the house • Building guest house at end of garden

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NEXT TOPIC… Next Wednesday we look at Contractual Relationships

You are now half way through…

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