Inspiration & Goals
“Money Doesn’t Grow on Trees”
I was once on-hand for a meeting between a Cost-Plus Fee Contracted Client and the Team of Industry Professionals he had hired to build his beach-front, Custom Home on Gulf Shore Blvd. here in Naples. The Project was soon to begin, and he had agreed to a $12 million Budget to build it. Knowing that there would be changes along the way and that he would not be able to be closely involved in the Project moving forward, he specifically directed – or rather, asked – the Team to “keep it (the cost) reasonable”. Mostly left to their own devices, his Team proceeded as if they had a “blank check” and delivered his home to him at a total cost of $18 million.
Now THAT’s Budget Creep.
Though this is an extreme example, Budget Creep (in tandem with “Scope Creep”) is more the rule than it is the exception, especially with Cost-Plus Fee Contracts. The cost increases seem to sneak – or “creep” – up as the Project moves along, often as small increases over several Budget line items. By the time the Client (the party Contractually bound to pay them) realizes the problem, it’s too late to do anything about them. But “Creep” doesn’t happen in a vacuum. Though he approved major changes and was certainly “informed” along the way, I think that the Client above was betrayed by the process and, whether there was a direct intent or not, taken advantage of. How and why did it come to that?
I don’t take your money for granted.
A Cost-Plus Fee Contract is appropriate for custom construction, since the Project is always evolving. However, it shifts all of the risk of cost overruns from the Builder to the Client. In an inverted market, that’s a coup for the Builder. With a Cost-Plus Fee Contract – what is the Builder’s motivation to provide you with a thorough, comprehensive Budget up-front – especially when they are vying to be awarded it?
The Pre-Contract Estimates/Budgets that local Builders provide to their prospective Clients are unprofessional and lack detail at best, incomplete and too low at worst. With such inconsistency, how can you know:
- That the Estimate/Budget for your construction Project is comprehensive?
- That it is commensurate with the level of specifications that you are expecting?
- That it is commensurate with your timeframe?
The answer = you can’t..
Numbers are “spun”. Builders will insist that the Budget’s inaccuracy is due to the lack of complete information being available at the time. Yet, have they not built many, similar Projects before? Are they so unable to anticipate the need to Budget for Scope of Work that you will need or want done, but that might not yet be on a set of plans? What is the Budget that they have proposed even based on?
Nor do most Builders provide the level of clear, professional Cost Controls & Reporting during construction that Clients should expect. They are glad to be transparent and provide your cost information in detail, but what good is it if it’s incomplete, inaccurate and after-the-fact? Often lacking quality personnel themselves, they struggle to implement cost controls – even when THEY stand to be the beneficiary of the savings. That doesn’t bode well for the Client who is dependent on the Builder to try to save them money.
If you’re the Client, at no point can you know from, or control:
- exactly what your current total Job costs are.
- what you can expect your total, end-of-the-day Job costs to be.
- whether or not your Builder is doing all of the many things they could be doing to control YOUR costs.
- how well they are doing the things they are to control them.
Clients are all but forced to accept this subpar service in order to keep the construction work going, only to find themselves faced with the real costs of work AFTER it has already been completed.
All of these circumstances coalesce to make “Budget Creep” all but inevitable.
If you’re the Client, these things should be unacceptable.
NCHCC’s goal is to provide Clientele, with Locally-based, strong representation to help them keep their Construction Costs – and Builder – in check.
We work to CREATE VALUE
and save our Clients money by:
- Making sure the Estimate/Budget from your Builder is complete and accurate, ideally BEFORE they Contract for the Project.
- Monitoring and controlling the Project’s costs against the Budget DURING construction by getting involved with the “buy-out”, recommending “value-engineering” alternatives and confirming all invoices.
- Providing a Final cost Analysis AFTER the Project is complete to provide them with leverage before they release the final payment to the Builder.
I personally take care of EVERY client and guarantee rapid response to all inquiries – your Project will NEVER be held up by me. I will work WITH your Architect to help make their vision for your Project become a reality. Our tact is to foster and maintain a positive, not adversarial, relationship with the Builder. We are simply there to push them to do all of the things that they should already be doing for you, but don’t seem to of their own volition – all without unnecessarily holding up the Project or risking its quality. NCHCC will strive to work WITH all members of the team, however we work FOR you. In the inverted market, that difference is key:
I am not beholden to anyone except you – my Client
- I bring my Midwest work ethic, knack for anticipating problems, analytical skills and attention-to-detail to bear on every Project.
- Enjoy peace-of-mind - whether you are in or out-of-town during construction – by letting NCHCC monitor your Project for you.
Know what your Project’s costs are during the course of construction and what you can expect them to be at the end - before it’s too late to do anything about them.
You can, however, be empowered to “push back” against the prevailing circumstances…
- To make highly-informed decisions – both Pre-Contract and throughout the course of construction.
- To monitor and control the “Budget Creep” that is characteristic of almost every construction Project and hold your Builder accountable to you and the Contract.