Managing Budget new build

El Gato De Negocios · 06-02-2022 1:06pm #1

Hi.

We are in the process of building a house currently. We have completed stage 2 and windows will be going in shortly.

We have our budget in terms of what we can spend, got a BOQ done prebuild and at the end of each phase have received the costings sheet from the QS.

We have gone down the contractor route until we get to the builders finish point and we will decide then whether to finish it out ourselves via direct labour or let the builder handle it.

My question is, should we be querying with the builder how the budget is running? We have in the contract that where costs arise that are over and above what was agreed at the outset, the builder has to get sign off from us. To date, nothing untoward has been reported to us. Would people be comfortable in letting it run as is pending queries from the builder or should we be "micromanaging" the budget with him?

As an FYI, the two costings we have received at the end of the first two stages are in line with the initial budget.

Cheers.

WillContribute · 06-02-2022 1:27pm

Do you have a contract in place with an agreed stage payment structure? Or do you have a billable materials and labour arrangement?

Normally, in a stage payment structure when dealing with a contractor, what you call the "costings" at each stage are the stage payments, and are actual invoices, for the work completed for that stage. They are not costings but agreed planned payments for work to that stage. Anything extra should be invoiced separately. If there is nothing drawn to your attention and you have requested nothing outside the agreed specification or changes, then there should be no or little extras.

I would be wary of describing them as "costings", out of a "budget", if you have a contract, you want to keep to your contract price as much as reasonable.

If you have a billable structure, check yourself that what you are being invoiced for, matches the all work completed. If it matches, then you are finished after that payment.

Don't ever ask "Does this include everything?" That's asking for additional things to be discovered/added. Sure if something is an honest omission/error that's ok to pay, but sometimes it's a flag to add more extras.

Good luck.

El Gato De Negocios · 07-02-2022 2:09pm

https://www.boards.ie/discussion/comment/118590059#Comment_118590059

Thanks for the reply.

What we have in place is a fixed term contract and the total amount for the build to a "builders finish" was agreed at the outset. This figure was based on the BOQ we received from a QS and the contractor agreed he could build the house within that amount. My terminology is a bit off but as you say, we have received the stage payment cert for works completed up to the end of stages one and two. I've been cross referencing these against the original BOQ and raising any queries where I was unable to see where the amount itemised was actually done, for example, at the end of stage one, the QS had included €3k for the removal of materials (clay, stone etc) from the site however nothing was removed so flagged this and the "invoice" was adjusted accordingly.

I'm reluctant to ask the contractor how we are running in terms of original agreed contract price vs where we are to date for the reasons you outline above, ie, I dont want to open the door for him to try and add on additional costs. As I said above, the contract wording stipulates that where there is a deviation from the BOQ that the contractor has to either source adequate alternatives in line with the projected cost, or where this is not possible, he is obliged to get written sign off from us that we are in agreement with the additional cost.

In your experience, is it the more prudent approach to let him make representation to us about potential additional costs rather than asking him are we running over? Thanks again.

WillContribute · 08-02-2022 9:56pm

Let him make the representation for extras. These should be made and costed going along or at least notified with approx costs at reasonable notice. Maybe within two stages of them occurring. E.g. he might need material invoices to make them up.

You might at the half way point, note that payment is complete for work to that point, bar noted extras and ask for him to sign to that effect. That'll force him to check back over things.

At the end, some contractors might come up with a big list of extras, but I think you have covered that well with your requirement to notify.

Another tip is to privately keep track of all the changes, extras that you are aware of that have happened and guesstimate possible prices for them. This helps avoid a big surprise.

Then do the same for savings that you made for the contractor, be ready to trade one off the other at the end.

E.g. In my job, the builder had some extra costs, due to the work being more difficult that he envisaged. He billed me for these at the end but also I had spent extra to help with some of these and or fixed things that really helped him, so cancelled some against the other. Bit of horse trading there, was willing then to split a difference etc.

In the end, if progress is good, and you are happy with the work and price, you want him, progressing and off the site asap. Fecking around at the end, 2 or 3 months waiting could cost thousands.

The contractor I had was very good to about 3/4 of the way, then everything stopped, he got a bit peeved over possibly under pricing, when he worked it all out, I also was watching extras/costs carefully and also he started a new job elsewhere, so mentally had moved on. There was 2-3 months of messing which cost me thousands in rent/extra mortgage.

Keep it moving on good terms but be firm and fair.

Good luck.

Managing Budget new build

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