When bids are opened many owners and developers look at the bid amounts and breathe a sigh of relief that they are at or less than the budgeted amount. They look at their project as now being a financial success and look forward to production or income becoming reality at the end of the project. In some cases this is not true. These are the cases where budgets have omitted key costs that will be incurred during and after the construction period.
Project owners can be surprised by a little item such as change orders. They wonder how these can be extra costs to them. After all didn’t the architect define the project and the contractors bid a firm price to do the work? Change orders can also surprise the experienced owner. They may have expected their customary one to three percent in change orders but the project incurs ten percent, or more, in change orders during construction.
Construction oversight and monitoring costs can be missed when setting a budget. This can happen when negotiating fees with the design firm. Construction oversight is typically an “extra” cost beyond the design fees. The project may also be special in that it will require more than just processing the paper and verifying the pay application.
An owner may be in for a surprise if they have a commissioning requirement that has not been developed prior to awarding a construction contract. While commissioning is not by the contractor, it does require craft support to implement. Commissioning requires time that may not be included in the original planning for the completion date of the project. These are added costs to be considered.
In order to keep the process on track each owner and developer should provided budget funds, beyond what each line item may contain, to make sure the project can be completed as planned. By doing this the “surprise” of added costs will be minimized so the project can be a success!
