How to get a Fixed Priced Contract and avoid a budget blow out!
Did you know that the typical building contract budget increases by an average of over 17% after signing the contract? You may ask yourself why? This is mainly due to the use of Prime Costs and Provisional Sums being used to calculate building costs.
From our experience, the first question asked by our clients is – “Before I spend thousands of dollars on drawings, engineer designs, soil tests, energy efficiency reports, surveys, and building applications costs – how much is this renovation going to cost?”
Building costs would have to be the most asked question to a Builder in his lifetime and the hardest thing to explain to a prospective client. Building is unlike any other product you will purchase, with so many components to include and calculate and all of this before we take into account the logistics of managing the project.
Now I’m sure when it comes to building a home or a major home renovation we all want to compare building quotes. We get cost comparisons broken down so a more informed decision can be made. However, when comparing quotes, it needs to be stated that all items must be comparable in size, quantity, and quality to come to a decision.
Whilst at the early stages of gaining estimates of building costs another typical question prospective clients ask is “Can’t you just give me a square metre rate on the costs?”. Now most good Builders should be able to come up with an answer to this question, shouldn’t they? This method of course relies on the Builders past experience and this form of estimation is what we in the industry call ‘guesstimation’! It shouldn’t be any more than a rough guide to what the true cost will be. There are so many more variables to consider when carrying out a full cost analysis for a building quote.
The only way for a Builder to arrive at a fixed price for a building contract is to carry out a thorough mathematical calculation and estimated cost analysis on your detailed drawings, combined with your other documentation and specifications. If you want value for money this should be the only method used to arrive at a building cost estimation.
My advice to clients is simple – the only way to ensure predictable cost outcomes, right at the earliest stage of the process, is to work with experienced Builders who are trained in building cost management and who use mathematical calculations to arrive at accurate outcomes and avoid having Prime Costs and Provisional Sums entered into your Contract.
Contact Constructive Homes before you spend thousands of dollars on plans and documentation, we can walk you through our process of offering you a fixed price at the signing of your Contract and you can rest assured you are working with a professional builder from concept to completion.
Remember you don’t want a cost blow out of over 17% once your project starts.
Talk to Constructive Homes so that you can complete your custom renovation within your budget.
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Download FREE guide – ‘5 Things You Should Know Before Renovating’ with critical questions to ask before selecting your builder so you can finish your project on time AND on budget.