Whilst recent discussions have focussed on the Federal Budget, today we discuss a different type of Budget - one that’s just as important to property developers as the Budget is to the politicians.
 

Effective budgeting for construction is fundamental to the success of any property development.

Property developing can present many different challenges but one thing I’ve learnt is there is always a solution to a problem. The trick is to understand what possible problems may arise and prepare for them. This comes with experience but sometimes things don’t always go as planned and as a project manager it’s our responsibility to make sure a development is completed as efficiently as possible.
 

When pricing a development and conducting feasibility assessments, it’s important to understand that the building estimate is organic. This means the building estimate you start with will nearly always be different to the one you end with. It evolves throughout the process as more and more details emerge.  Once you have all the fine details and plans approved, the building estimate can be finalised and a fixed price builder’s contract issued. 
 

Our architectural design process follows these steps:

1. Once the site has been secured, a Concept and Yield Plan is designed – this shows the number of units we can get onto a site and the size of each.
2. The Detailed Contour Survey and Geotech Reports are received, and the plan evolves to the more detailed Development Application (DA) plans. These plans include enough information to satisfy council requirements and their assessment process.
3. After receiving DA Consent, Construction Certificate (CC) plans are completed, incorporating detailed engineering for stormwater drainage and slab design
4. The construction estimate begins prior to the availability of a Concept Plan and is based on comparable projects, adjusted for site-specific differences.

The builder is asked to run their first quote based on the Concept Plan.  This is still a ‘loose’ estimate as there is not enough detail yet for the builder to give a finite cost.  Should the estimate exceed budgetary constraints, adjustments such as resizing units may be made.

Following Concept Plan approval, full DA plans are produced, integrating survey and Geotech data for greater specificity. The builder prices the DA plans, enabling a review of costs over preliminary estimates. Although the final build cost remains undetermined at this stage, further clarity is achieved. Upon client approval, the DA is finalized and submitted to council.

During the DA process, council may request changes to the plans, so it is important to understand the process is still evolving at this stage. Once approved, a review of the Conditions of the DA Consent is completed giving further detail to refine build cost estimates.

Next we move to preparation of the CC plans.  Engineers are briefed and a stormwater drainage and engineered slab design or footings for the foundations is produced. More detail is added to the CC plans, finalising levels and double-checking schedules. 

Before submitting CC plans to the certifier for approval, the builder provides a third costing, offering a near-final build cost pending plan revisions. Once the CC plans are approved, the builder updates their final costs and this translates to the Builder’s Fixed Price Contract.

However, certain items—such as site works, removal of fill, and retaining walls—may remain provisional due to unforeseen conditions to be encountered during construction. These provisional items are billed at actual cost, savings can be made if the provisional amount is lower than the actual, or if higher, then the provisional item cost will increase.

So, you can see how the build budget must evolve through the development process and until your development is completed, you really won’t know the exact cost. It’s important to  allocate contingency funds for variations that may arise.

As a developer, you will embark on a challenging journey from start to finish and the development budget is a very important part of your work. Always take the time to have builder’s estimates updated at each stage of the planning process to mitigate unexpected financial blow outs.

If you don’t have the experience required, consider using an experienced project manager to guide you along the way.