What's the Project Budget?

The Problem

Recently I was reviewing a contract the architect provided for a new 1,000,000 GSF project. The prime contract between the owner and architect requires the architect to design to the owner's budget. The project was nearing the end of Schematic Design - less than 4 weeks away. By the date of the prime agreement, the architect started work on the project at least 10 months earlier.

The prime agreement included flow down provisions including the requirement of design to budget. By contract, the consequence is redesign at no cost to the owner. Since this project was a significant undertaking, I thought I should ask.

           Conspectus: "What is the construction budget you are working toward?"

           Architect: "I have not seen [owner] nor [contractor's] budgets, but we are hoping to have a meeting within                   the next week or two to review. I have heard [contractor] refer in passing to '$1.3B'. I assume [owner's]                         budget is much lower than that."

The cavalier answer is concerning. How low is "much lower?" Can the project be built for the budget?

The architect has a contractual obligation that cannot be met because the budget is unknown. Not only is the architect at risk, but the entire design team (including Conspectus), the owner, and the project are also all at risk. If the owner's program cannot be built within the available budget, there may not be a project.

The follow-up question becomes, what else may be a concern? If the prime agreement requires the architect, during Schematic Design, to "provide a preliminary review of the Owner's program, schedule, and Construction Budget", but the architect does not know what the budget is, it is obvious that this part of the contract was ignored. Now I wonder what else was ignored?

The prime contract requires the architect to deliver Schematic Design documents "based on the Owner's program, Project Schedule, and Construction Budget requirements." Without knowing the budget, complying with the contract is impossible. If the architect knowingly ignores contract requirements, might the architect be in breach? Hopefully, the courts will not need to decide this question.


The Complication

The architect will deliver Schematic Design documents. The contractor will price the design. Undoubtedly, the design will be at risk for being over budget, whatever that may be. Then the real impact will be felt. Delay! The project must pause to reconcile the design against the budget and the owner's program to ensure all are aligned.
If the owner's business case for the project requires completion by a specific date, the delay may impose a hardship on the owner. The delay and redesign certainly will erode the design team's profits. And the delay may result in a claim by the contractor due to the schedule interruption.

Withholding critical information leads to poor project outcomes.

train wreck
The Solution

Let's begin by 1) following the contract 2) asking questions and 3) providing reliable answers.

In the example above, the budget, together with the project size and program, is a quality indicator. Without this information, advising on system and material selections may be misleading. The "best" performing system may be desired, but that system may exceed the project budget. Selecting systems and materials must consider the project holistically and must fit within all project constraints including budget.

Project information must be shared to be effective. If critical information does not exist, it must be developed and accepted by the entire project team. Making the design process transparent will build trust among the project participants and promote collaboration. Collaborative information accepted by the team will be reliable, allowing the team to act decisively within the project constraints.

Well-informed teams will reliably meet owner expectations, including budget.

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