How fees affect the project budget.

Every construction project consists of materials, labor, and associated management and fees. All of these costs and fees can be reasonably predicted, and the more that is known about the project details, the more accurately project costs can be predicted or budgeted.

Often, owners think of the material and labor costs when estimating the construction budget but forget about other important costs such as Design, Insurance, and Permit Fees.

An owner may opt out of using insurance and the permitting process in order to save on project costs. Unfortunately, excluding insurance and permit fees saves little money and can leave the owner exposed to enormous liabilities.  So how can the owner save on construction costs?

Owner Representatives or Owner Agents use special tools and systems and inject objectivly comprehensive knowledge to streamline how projects are designed and built, saving time and money. By heling the owner make the right decisions every time having an O.R. on the project is the most effective way to keep costs low.

An Owner Representative is worth much more than the cost and generally costs less than a General Contractor.

The following calculator helps you visualize how various fees affect the amount available to purchase material and labor. Input a project budget in the green field on the calculator and using the drop-down-boxes on the left, “include” or “exclude” the seven remaining list items to see how the fees affect project costs.

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Of course, the above calculator is over-simplified and as every project is unique, it is a somewhat imperfect guide. However, it does an excellent job of showing how various fees can affect the project budget and illustrating the point that:

Owner Representation saves more money than it costs.

Here is a little more about the logic used to build the calculator:

  • The percentages reflect common project averages.
  • Owners legal, unique conditions, special costs, and owner purchased items are not included because they are too project specific to average for this model.
  • Contingency is 15% of the project budget, but commonly fluctuates between 5% and 20% cost of construction.
  • Savings realized using an O.R. is reflected in an average reduction in design and contingency.

 

© 2012, RCartright. All rights reserved.

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