Understanding a construction project budget is essential, especially for those without a background in construction and embarking on building a custom home. The budget serves as a financial guide, detailing the funds required from start to finish.
The budget consists of two main parts: available funds and developmental costs. Available funds are the total amount set aside for the project, while developmental costs depend on plans and specifications from the design team, tailored to meet the owner's needs. Balancing these two parts is crucial for project success. Control over the funds is in the owner's hands, but the costs are determined by the design. The responsibility lies with the owner to keep costs within the budget and maintain balance throughout the project.
Developmental costs include soft and hard costs. Soft costs cover expenses like design and engineering fees, legal fees, permits, insurance, and other miscellaneous costs. Hard costs pertain to the physical construction of the project, including materials, labor, and equipment, which can amount to more than 80% of the total budget.
Proper planning and budgeting before starting the project are necessary to balance available funds and developmental costs. This requires close collaboration with the design team to create a detailed project plan and accurately estimate each part of the project. This approach ensures a realistic understanding of the project's costs, allowing for the setting of a practical budget.
For effective budget management, hiring an experienced owner's representative firm like Dubrow Group is advisable. Such firms bring extensive experience in budget management and use advanced software, including automation, data analytics, and AI, to identify and address potential issues promptly.
Using a Construction Manager at Risk (CMAR) project delivery method can also contribute to a successful outcome. In this approach, the Construction Manager is involved early on, working with the design team to detail the project plan and estimate hard costs. Maintaining open communication throughout the construction process is vital to keep the project on track and within budget. The owner's representative and Construction Manager collaborate with the design team to address any unexpected costs or project changes, adjusting the budget as needed.
In conclusion, understanding and balancing the two components of your project budget—available funds and developmental costs—is key to a successful construction project. Dubrow Group leverages its experience to help maintain this balance, ensuring open communication and budget adjustments as needed throughout the project.