Controlling Construction Costs

Thinking about an addition or remodel project for your home? If you’re like most of us, you need to know how much it’s going to cost. And that it won’t cost more than you’ve got budgeted.

In a perfect world you would have a detailed set of plans and specifications put together that exactly described the project. You would show these documents to a contractor who would then give you an exact price.

The reality is that the world is NOT perfect, and that perfect projects are extremely rare. We’ve done a number of retaining wall and fence projects in our back yard, and most of them ended up costing more than we anticipated. Partly because when planning the project we tended to be optimistic. We thought, “That tree isn’t in the way of the footing” or “We won’t have several tons of extra dirt.”

Cost extras fall into three main categories:

1. you change your mind about something, decide to add to the scope, or misunderstand what is covered by the contractors proposal

Some scope changes are inevitable and make a better project. If a contractor’s price is based on detailed drawings and specifications, both parties know what is going to be built. Misunderstandings most often occur when the construction contract is a conversation and a handshake.

2. you wait until too long to make decisions, leading to delays and construction changes

How long is too long? Ideally, you should have made all decisions regarding the products, materials, and construction methods before you get a price. After the contractor has given a price most changes are extra costs.

3. in the case of a remodel, unexpected conditions are discovered during construction

Contractors are not responsible for things that are discovered once they open the walls, dig up that pipe, or otherwise expose hidden areas. You can pretty much count on finding water damage, inadequate construction, or other hidden problems that you want to fix before everything gets covered up again. Keep a contingency fund for these types of changes. Ten to fifteen percent of the construction cost is a good size for this fund. Put this number into your budget (not the one you show your contractor) from the begining.

Remember, a contractor or subcontractor can't change a contracted price for no reason. Once they have given you a price there has to be a good reason for change orders. And give yourself a break . . . a little optimism is a good thing.