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How to Maximize Investment on a Residential Remodel By Using Incentives

  • plans before you remodel

Incentivizes, Part 3; How to Incentivize Architects and General Contractors to Maximize Investment in a Residential Remodel

The previous two articles were about how Architects and General Contractors are incentivized and how to control construction costs in the Design and Estimating Phases of a typical “Design-Build” residential remodel . This last article in the series ties it all together…

Here are some simple rules you can implement to incentivize your architect and general contractor to maximize investment dollars and take as much of the risk as possible out of the process:

  1. Require that your architect or designer obtain professional costing feedback early and often in the design process. Put it in their contract. This should be done:
    • …during the initial “programming” phase, when it’s all still just ideas in conversation, nothing is written down, and no money has been spent yet making any drawings. Just knowing what ballpark you are in could have a significant effect on how the design conversation begins.
    • …during the “conceptual” phase, when the design professional comes to you with some ideas on paper. Once you have selected a project direction that you think might work for your needs (and you hope fits your budget), get some preliminary pricing in large, round numbers to see how close you are to where you want to be. This is the place in the process to make adjustments to the project, not after you’ve spent money on a design you have no intention of building as it does not meet your budgetary goals… Repeat as necessary! Keep working the conceptual design and the conceptual budget until they meet at a place that works for you.
    • …once that process is complete and you have good conceptual designs and a workable ballpark figure to go with it, the next place you want to get pricing input is after the design and specifications are complete and (maybe) before the engineering is done. Engineering costs money, and should represent your “no-turning-back-now” point. Crossing the Rubicon. Your costing professional will need to “pencil in” some allowances for what he or she “thinks” will be required by the engineer, but any competent professional should be able to do this. Now we are into exact, contract-able pricing; and if that still looks good, get the engineering and permits and get started!
  2. Choose a builder first based on things that matter just as much as the price: dependability, trustworthiness, experience, business acumen, and expertise in spreadsheets (a must for all the costing activity above). Then, require that your builder obtain multiple bids at the sub-contractor level during step “c” above. That is to say that they obtain 3 bids on the electrical work, 3 on the roofing, etc. (Maybe you have a painter that you really like?). Include verbiage in the construction contract that requires that the bidding process stops only when you are satisfied that you are receiving the best possible price for that portion of the project.
  3. Require that all those bids come in broken down into their component costs. For example, one price to paint the exterior affected areas only, another price to paint the rest of the exterior. Same for the interior. One price to plumb the bath, another the kitchen, etc. Your metric for success in this requirement is about $1,000 to $1,500 average per line item for the overall project. More than this and you won’t be getting the transparency you want and the facility you need to “get your hands dirty” with the budget planning.
  4. Require a “Constructability Review” as I discussed in last month’s article in great detail. If you are working with 2 different firms, require it in your contract with your design professional, and do it before signing contract with your builder and make it clear to both of them that Change Orders for things that were missed during the planning and budgeting phase will not be well-received…

All this assumes that you are not using a Design-Build firm for your project. If you are, all of the above still apply, but these concepts should be firmly in the realm of “that’s just how we do things around here.” A good Design-Build firm will have all these requirements and incentivizations built into the fabric of their cultural and business-structural DNA so that you will not be trying to make two separate stand-alone firms act like one entity. This task may be easy if you find the right people, difficult if not.

 

There’s so much more to say about this, and I’ve only scratched the surface. If you have any questions, please e-mail me at john@theperfectbuilder.com and I’ll answer it in upcoming columns of “The Design-Build Advisor”.

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One Comment
  1. Having read this I thought it was rather enlightening. I appreciate you finding the time
    and effort to put this content together. I once again find myself spending a significant amount of time
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