Controlling Home Construction Costs

(C)Copyright 2009 Rand Soellner, All Rights Reserved Worldwide.  Base Bid Pricing Strategry and Owner Optional Upgrade System

Home Construction Costs and Custom Home Architects

I call it the “Come to Jesus Meeting.”  It’s when you, the Client, who is paying to have your Dream home designed by guys like me (home architects) have the Big Get Together with the architect and the builder to hear the home construction costs to build your house.  These meetings (in the past, for many) would usually go something like this:

1.  We all sit down together at our office or the builder’s. 

2.  There is dead silence, while the contractor shuffles some papers before him.  He glances at the floor plans, then stacks a thick sheaf of spreadsheets and clears his voice with an audible “harumphf,” raises his eyebrows, pulls at his shirt collar, then says, fairly softly: ” the price to build your house the way the Architect designed it is $XXXXXXXX dollars.”

3.  You, the Client sits there for a few seconds, not sure if you heard correctly.  You say: “How much?”

4.  The builder says: “The home construction costs are:” then repeats his number.

5.  The Client now raises his eyebrows, looks at the architect with a scowl, while a red tinge appears at his neck and runs up over his face, and perhaps the Client points a finger at the designer of his dream house, and says, in a slightly elevated rasp: “I told you, I didn’t want my house to cost more than $YYYYYYY dollars!”

6.  The Architect looks down at the floor, tugs at his collar, glares at the builder for a second, then says: ” Well, I um, er…You asked to have all those nice things in the design…”

7.  “You should have told me those things would have thrown me over my budget!”  the Client shouts.

8.  Things are getting nasty.  Blood is in the air.  Heads are going to roll.  Not a nice situation at all.

9.  Sound familiar?  If you’re a builder, it certainly will.  If you’re an architect, it probably will.  If you’re a first-time luxury residential Client shopping for your home construction costs, you’re finding out for yourself.

10.  What happened?  How could this have happened?  What could have been done to prevent this unfortunate and disappointing scenario? 

Controlling Home Construction Costs:

Base Bid Pricing Strategy by Home Architects

The fact is, no Architect can or should promise that any particular project will come in at any particular price for your house construction costs or any type of project costs.  To do so would be foolhardy.  Why?  Because Architects do not control what Contractors decide to price things at.  Contractors are at the mercy of their subcontractors and material suppliers and their own employees and are sometimes victims of their own mistakes and overhead and how they decide to manage things and how much profit they decide they want to have from this particular project.  No Architect could ever anticipate what those numbers will be.  Architects might be familiar with how much similar projects cost in that vicinity in a possible range of $/sf, but times change and prices for many things change overnight.  So, your Architect should declare in no uncertain terms, that he cannot guarantee that your project will be bid for any certain price.  That should eliminate the Client’s perception that the Architect is an all-knowing wizard.  He isn’t.  He’s a smart, capable person who knows how to design your project and will likely do a swell job of that.  Expecting him or her to be everything under all circumstances is to set yourself up, and them, for some sort of disappointment down the line.  Be reasonable.  And be responsible for your own decisions, choices and directives.

Well, this scenario #10 (above) doesn’t happen for us anymore.

What did we do?

We talked with several clients and contractors, in particular, one builder that priced several of our projects and we came up with what we call our Base Bid Pricing strategy and Owner Optional Upgrades.  When I used to design projects for large developers, Universal Studios, NASA, State and County Governments, School Boards, Veteran’s Administration and the Corps of Engineers (in my previous life, years ago) we always used to create a list of Add Alternate Bid Items.  This was a useful thing, as it allowed the Architect to assign various items that were not absolutely essential to the project to be an option.  The Base Bid was a more stripped project, with the basics, but not including all of the luxuries that would be nice to have.  Most Architects only had 3 or 4 Alternates.  I went overboard.  I typically had about 20.  This created more work for me, but gave my Clients greater flexibility and more choices.  I think, during about 25 years of practice, I had maybe only 3 projects not come in on budget for the Base Bid.  I had a great track record.  So what does this mean for your house plans?

Home Value Engineering & Upgrade Packaging Helps Luxury Residential Architects Control Home Construction Costs

We have adapted that commercial approach to luxury home construction costs price bidding and we have now built into our home plans documentation and specifications and bid forms a very detailed breakdown of what is in the Base Bid Price for our Home projects and what is an Owner Optional Upgrade.  We have created 4 optional packages to track these dozens of options (over a hundred): our packages are:

A.  Base Bid Price (mainly just the basics; with only the most economical items, to allow you to obtain the most reasonable house construction costs pricing for your custom home).

B.  The Valley Package (a few goodies added to the Base Bid Price)

C.  The Hill Package (more niceities added to the previous package)

D. The Mountain Package (quite a few options added to the previous package)

E.  The Mountaintop Package (all of the wonderful options).

Now then, we tell our Clients that they can expect the lowest price in the Base Bid Price, because we have stripped their project down to its basics there.  The Client probably will not want to have just that, however, our experience in design and construction allows us to know what should be in the Base Bid Price package and what should not.  As you can imagine, our Valley Package has many of the nice things many Clients want, but shows some restraint.  The Hill Package has some more added improvements.  The Mountain Package has quite a few upgrades and the Mountaintop Package has nearly everything.  As you can well expect, the home construction costs for each of these packages will increase as goodies are added.  We feel we have organized the packages into understandable bundles, much the same as vehicle maufacturers have packages their options, for instance in truck series such as the 1500, 2500, 3500 and 4500.   We used to not have these pacakges and it confused both the Client and the Builder.  There are just too many options and you can get lost, without this organizing packaging on our part.  We also keep an eye on what packages need others so that certain options aren’t added without others upon which they depend.  Sound like a lot of work on the part of the Architect?  It is!!!

However, is it worth the trouble to give our Clients options to allow Them to be the ones to determine their home construction costs, by virtue of their own choices?  Yes.  Does this requires Clients to be responsible for their wishes and choices?  Absolutely.   No longer should an Luxury Home Architect feel intimidated into including some high-end features that will likely be budget-busters to satisfy an immediate politically expedient situation with a Client (only to pay dearly for it at the Come to Jesus Meeting).  Do we or do we not include what the Client asks us to in their projects?  Of course.  The way in which we do it is what is important.  Our agreement with the Client indicates that we, as design professionals, will be making decisions as to what is included in the Base Bid Price and what items are Owner Optional Upgrades.  In this manner, we can help the Client receive the lowest possible pricing on the basic project and yet still have prices on the ala carte items in which they are interested, should the Client wish to add them to their project.  We have seen, in this context, that some things that Clients have said that they simply must have, go by the wayside, when they finally understand how much their builder will charge them for the pleasure.  And this is as it should be.  The Client should be the one deciding how much their home construction costs will be, due to the choices the Client makes.

We are here to help our Clients realize their dreams and make their house plans a reality.  This comes with an obligation to help guard the Client from his own worst enemy: him(or her)self.  What do we mean by this?  When it comes to peoples’ custom residences, is seems like all bets are off and there are no rules or restraint.  Anything and everything they have ever wanted in their lives will be in or on this house.  They are going to pay $ZZZZZZZZZ for it, and by golly, surely that’s enough to include whatever they might want.  Unfortunately, it usually isn’t.  I have never seen a contractor do much of anything for free and Clients seem to forget this when formulating their wishlists.  We, as the design professionals, are our Clients’ only braking system and guard against their own high-end desires.  By producing detailed Base Bid Pricing documents with clearly labeled Owner Optional Upgrades, we can help our Clients to priorotize their indulgences and group them into manageable packages that they can understand.  Once they see the pricing for each package, the Client can make the choice as to whether or not the upgrades in that package are worth the added cost to them in their dream home designs.

Conceptually, this Base Bid/Upgrade Strategy sounds simple.  It does, however, require a lot of coordination on the part of the Custom Home Architect, making sure that each package description is consistent with the specification options, door and finish schedule options and drawing options.  We, at Rand Soellner home architects build this into all of our projects and have invested our own R&D into making this happen.  We see no other rational method to avoid the dreaded Come To Jesus Meeting.  And we don’t have those.  They don’t happen with this approach.

Luxury Home Architects Successfully Controlling Contractor Home Construction Costs Bid Pricing Through Base Bid Pricing Strategy

Is it working?  Good question.  The answer is YES.  This is not just a good idea; it is not just an opinion or just a good idea.  It is actually working.  We have recently had real house projects (based on our house plans) priced from North Carolina to Tennessee to Washington State (near Tacoma).  On the job in Tennessee, the Base Bid Price came in exactly where we and the Client thought that it would, to the dollar, even though we made it clear that we were not guaranteeing the contractor pricing.  This has allowed them to added several much desired Owner Optional Upgrades, as we had hoped.  For the project in Washington, the project (a preliminary soft bidding with 4 interested contractors) came in precisely in the middle of the zone we anticipated. 

Does this mean that Clients will always be happy?  No, of course not.  We have also found that everyone in the World (including architects) believes that they will be able to obtain house construction costs pricing on their job for far less that the prevailing costs in their area.  We are not sure of the reason for this psychological anomaly, other than it is wishful thinking in which nearly everyone participates, regardless of what they are told as words of caution.  People seem to keep talking to different builders and home architects until they hear what they want to hear, then reality finally arrives and they have to find some way to deal with it.  We believe that people may actually have to ease into the realities of the costs associated with mountain home construction, which is typically higher than construction on flat land in more populated suburban areas.  They simply refuse to believe reality, until they receive the price proposal from their contractor(s).  We are trying to make this process more comfortable by building into the project the most economic methods we believe will accomplish the basic project objectives and general appearance. 

The reality is, with our Base Bid Pricing method, they should receive pricing lower than fully-optioned luxury home designs in their area, but not as cheaply as outright tract housing (even though many of the systems we use in the Base Bid are from that lower-end technology and are still remarkably durable).  So, is it working?  YES!  We are receiving pricing up to 23% lower than normally managed bid pricing without our Base Bid Pricing method.  On a one million dollar project, that can amount to hundreds of thousands of dollars in savings, just due to how we have organized our documents!  So, when you ask if your home architects are worth what you are paying, ask yourself if he is worth the $230,000 he just saved you on your next house!  That is, if he is knowlegable with our Base Bid/Upgrade pricing strategy. 

You may want to give Rand Soellner home architects a call; we invented it.  We’d be happy to design and manage your next custom home design:  rand@homearchitects.com  www.HomeArchitects.com We are glad to work on your luxury castle home design, suburban Atlanta house design, or Las Vegas mansion designs, Denver mountain house plans, Detroit floor plans and Aspen residential design to help you get your custom home dream design.  828-269-9046.  Rand is one of a few Cashiers Architects and Highlands Architects available to serve your residential design needs.

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