Saturday, 10 December 2016

Between Cost to Design and Design to Cost: Making the Right Choice For Your Project

Before embarking on a project, for example a housing project, considerations must be given to several factors ranging from the project cost (or finance) to the duration (or time) and then the quality of the final product. 

First you have an idea in mind, and then you contact a designer/contractor. As the designer/contractor begins to develop your imaginations into a realistic concept, cost becomes an issue. In making a decision on the cost model to adopt, it is very important to be properly guided so as not to attract frustrations along the line which may eventually lead to pre-mature abandoning of the project or even poor handling of the work. 

The two major cost models relative to the project design are; Cost to design (CTD) and Design to Cost (DTC). Cost to design simply means putting up a concrete design first and then estimating the total construction cost from the design usually without formally tying it to any budget while Design to cost entails stating your budget for the project first, then ensuring that the project is designed to be completed within that budget. For easy comprehension, view CTD as ‘cost my design’ and DTC as ‘design to my budget’.

The choice of what model best fit your project depends largely on your earning power and it’s a decision you must make. However it has been observed that most project owners across the country (perhaps out of sheer ignorance) opt for the cost-to-design model and this has been identified as a major cause of in-completion of several building projects especially embarked upon by private individuals.

The popular orientation that revealing your budget to the designer/contractor at the pre-contract stage may affect the integrity of the final estimates is not very correct. In fact, research in value engineering has shown that it is often better to adopt the DTC method so as to transfer more project risks to the contractor especially a nominated contractor in a negotiated contract. 

A nominated contractor is a contractor that you have engaged based on enduring trust or performance in past works often without inviting estimates from other contractors. Lately, a lot more landlords/project owners across the world are keying into the benefits of the design-to-cost model which apart from transfer of greater project risks to the contractor, also includes overall cost reductions, better planning, reduced contractor-client friction during the project life cycle, an opportunity to compare several design options relative to the cost goal as well as improved outcomes.

For instance using the recommended DTC model, a project owner can approach a designer/contractor with say 4 Million Naira to construct a simple bungalow and achieve his/her desires within it in the following simple steps;

-          First, you discuss the development idea/concept with the designer/contractor,

-          Thereafter you reveal your initial budget, say 3.5 Million Naira and retain the balance,

-          Then request that the designer/contractor provide two or three design options that can be achieved within your budget and based on your specifications (e.g. It should consist of 3 beds -all rooms en-suite, French-style windows, an ante-room, slanting height, a court yard etc). 
  However it is strongly recommended that you employ the service of a designer/contractor with good knowledge of both design, estimation and construction from the start as it is in common knowledge that most independent designers/architects aren’t good estimators or alternatively you co-engage a Quantity Surveyor to achieve your cost goal (You will have to pay for this service say around 5% of the total project cost).

-          Once the preliminary site investigation is completed and the building designs and cost estimates are ready, you then choose the most appealing design. Do not hesitate to pre-inform the estimator/contractor to simplify the cost estimates by breaking it into two main sections one showing the Material cost/schedule and the other, the labour cost/schedule (which will include the contractor’s profit so that it can be negotiated separately). You have to study the estimates carefully and compare for consistency with the design.

-          Because some features would have been deliberately excluded in the design in order to make it fit into the cost plan, you may have to add some much desired features (like special finishes, fittings and fixtures, etc) within your initial retention budget (in this case, the 500,000 NGN left). But don’t use all of it; keep a fraction for contingencies, and 
-           You are good to go.

However in the Cost-to-Design model, the project owner/landlord is highly disadvantaged in that the designer/contractor may come up with fabulous designs that may be far beyond your budget because there have been little or no consideration of the cost implication of the design at the initial stage.

This is the most common case in practice. When this happens, subsequently the project owner lured to this expensive design begins to run helter-skelter to source for additional funds to complete the project and this is not usually a funny experience

But on the flip side, the CTD model has the advantages of allowing both the designer and the landlord to enjoy some degree of design freedom and input flexibility respectively as well as gives the owner the opportunity to compare numerous estimates from invited bidders before embarking on the project. Think carefully and make the right choice of cost model to adopt for your next building project.

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