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Mastering Construction Budgets: A Comprehensive Guide

In the realm of construction, managing budgets is more art than science. In the dynamic landscape of building projects, adapting to unforeseen challenges is a given. From municipal regulations to site complexities and fluctuating costs, controlling risks in the budget should be a high priority. However, with strategic planning, meticulous attention to detail, and leveraging the expertise of your contractors, you can navigate these obstacles and ensure the success of your project while maximizing its value.

Create a Solid Plan

Construction projects, especially in sectors like Self-Storage, rarely unfold exactly as intended. Therefore, it’s vital to have a budget plan that can adapt to the ever-changing environment. Your budget planning should start the day you decide the project is a “go” and continue until the project is fully completed and ready for lease-up. A conceptual budget serves as the cornerstone, providing a benchmark against which cost fluctuations, arising from material price changes or design modifications, can be measured. In addition, a robust budget plan acts as a roadmap, guiding you from the project’s conceptualization to the contractual stage, ensuring that potential budget risks are mitigated effectively.

Stay on Course

To maintain your budget’s integrity, establish budget revision milestones. Regular updates at key stages of the construction process, such as the receipt of design drawings and permits, help in incorporating changes that might impact project costs. While placeholders are acceptable during the conceptual phase, once the initial design iteration is available, solicit subcontractor pricing. Secure hard cost estimates for major scopes of work, like site preparation, concrete, and metal building construction, as early as possible. However, be mindful of contractor fatigue; adhere to the milestone schedule to maintain bid accuracy and contractor commitment.

Inclusions and Exclusions Matter

Pay close attention to the often-overlooked contract section titled “inclusions and exclusions.” This section can be a hidden minefield of unexpected costs. Budget for high-value items that contractors commonly exclude, such as utility tap fees, permit fees, surveys, inspections, and reports. By ensuring coverage for excluded scope items in your budget, you can minimize the risk of cost fluctuations.

Determining the appropriate contingency is crucial. Begin with a higher percentage, such as 10% to 15% of the total project value, during the conceptual phase. As the project progresses, and key milestones are achieved, reassess and adjust the contingency based on the overall project risk. It’s prudent to maintain a developer contingency of at least 10% outside the contract contingency, providing additional flexibility to adapt to unforeseen costs.

Expect the Unexpected

Construction projects always present challenges, and self-storage builds are no exception. While aspects like concrete and metal building construction are relatively predictable, external factors such as site conditions and regulatory requirements can significantly impact costs. During due diligence and budget planning, ask critical questions about the construction site, soil conditions, environmental concerns, utility requirements, and design specifications. Creative solutions, often in collaboration with your design team and contractor, can be found to address these challenges. For instance, innovative grading and building design can optimize costs and even create additional usable space.

Substantial Completion and Beyond

To mitigate budget risks effectively and ensure a seamless project delivery, start with a solid plan and assemble a skilled team. Having a clear vision, sticking to your project scope, and collaborating with experienced design and construction professionals recommended by the industry are fundamental. Remember, a well-thought-out budget plan, with contingencies and creative problem-solving, sets the stage for a successful construction project. By embracing these principles, you can confidently navigate the complexities of construction budgeting, turning challenges into opportunities and ensuring the success of your project.