A contract with a builder or General Contractor (Gencon) should generally cover the cost of the labor and materials you’ll need to complete your house.
Except that isn’t really the case. To get a more accurate assessment of construction cost, you’ll really need to consider 3 more factors –
- Owner supplied materials
- Contractor exclusions
- Work by others
Owner supplied materials (OSM)
OSM covers items you, as the client, request to be excluded from the your contractor’s deliverables. Most often finishing materials like tiles, fittings, and fixtures – home builders tend to take on items you’re most prone to seeing and interacting with.
Maybe you think you can get a better deal from a friendly supplier. Or maybe you just want to make sure you’re getting exactly what you want and not just the cheapest acceptable alternative. Whatever the reason, you as the client take on the responsibility of purchasing specific items, in the right quantities and making sure they arrive on site on time.
(Note: You’ll still have to pay your Gencon for the labor and installation when they do get on site.)
The term Contractor Exclusions covers items identified by your Gencon to be specifically removed from their scope of work or contract. The list differs from one contractor to the next. Items may cover work that needs specialty suppliers to achieve, such as the case with elevators. Or they may need expert sub-contractors with specific expertise, as in the case of air-conditioning and centralized ducting. Or items may just include works they know owners will be more nitpicky with, basing from previous experience with prior jobs, and would just be easier taken off their plate from the start. High Spec Cabinetry is impossible to build right, no matter how much effort you put into it if you don’t have the experience and expertise to begin with.
(Pro tip: compare exclusions between contractor bids to make sure you’re getting an apples to apples comparison, and aren’t just landing on someone cheaper because they’re actually delivering less.)
Work by Others
Who are these others and why do they have to make things so complicated?
Whereas OSM covers materials bought by a client to be installed by the contractor, and Contractor Exclusions list the things that a Gencon can’t or won’t do, Work by Others is the bizzare love child of the two. Whether the its by owner preference to apportion work to an independent party, or it’s prompted by being excluded from the general contractor’s scope, Work by Others is a catch-all term covering supply and services handled by a separate sub-contractor, as initiated by, and liable to the owner.
A well done kitchen is a good example where you need the right materials in combination with enough expertise. Landscaping is another, where the right contractor gets you a garden, and a wrong one gets you a dead yard.
(Pro tip: Get an accurate assessment of construction cost considering contractor exclusions, work by others, and owner supplied materials before committing to the terms of a loan, or you might end up with a number smaller than you’d actually need to finish.)
The 4th factor
While not strictly a construction cost, professional fees are the 4th factor to consider in getting a more accurate financial tally for your home build. Based roughly on the scale of project you’d want to have built, your design professionals set a cost based on the amount of design work that needs to be done.
More than just an expense though, Having the right people on board could actually be considered the X factor. The right consultants actually bring in more value than they’re billing for. Apart from producing good design, they walk you through the process, warn you ahead of common pitfalls, show you potential savings in what you might be planning, and present opportunities beyond what you could have had in mind. In this light, bringing on the right designers is more of an investment than simply a cost.
It’s less a matter of having additional expenses than it is taking a more realistic look at the factors that compose a project’s cost. At the end of the day, it’s less about where the money goes, (You’re supposed to be working from a fixed fund anyway,) but rather more about who carries the responsibility.
Cutting up a projects scope may yield savings, but it also messes with the hierarchy of liabilities, and increases finger-pointing. In dividing a scope, make sure it’s clear to the parties working together who’s liable to what extent. Request specialized meetings to align parties involved, and encourage the communication of concerns and requirements prior to and during work involving multiple groups. You’re ultimately responsible for everyone you bring in independently, and accountable to your future self for imperfections brought upon by lack of coordination.
Have any thoughts, questions, or concerns of your own with regards to factors that might affect your construction budget?
Email email@example.com and we’ll see if we can’t help you out.