Problems with the conventional building project

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We always assumed we were going down the “traditional” building route, as follows:

  1. Hire an architect or “building designer” to create a set of plans.
  2. Make a guess on the cost of the project, based on “$x per square m, multiplied by the size of the extension”.
  3. Use the plan and guessed budget to get council approval.
  4. Create a tender, outlining the project and a bunch of the details.
  5. Get three or more builders to quote on the job.
  6. Pick the cheapest.
  7. Haggle, then sign a fixed-price contract.
  8. Get going!

As we proceeded through the process, we started to have increasing concerns.

The building designer was fine, although there were times when we felt he wasn’t fully listening to our needs. We also kept wanting to know when the details would be worked out, but were always told “later”.

We liked the final plans, even though it took us twelve months to nail them down.

It was here that we really started to get nervous:

  • How would we find an initial list of good builders to go to?
  • Would they give us a meaningful quote, or just a quick guess?
  • When did the uncertainties get resolved?
  • What would stop us from getting hit with “death by a thousand project variations”?
  • How could we assess the quality of the builder?
  • If we were expected to pick the cheapest quote by default, wouldn’t that mean we’d get the shonkiest by default?
  • What about the unusual elements, like the rammed earth wall?
  • How much was this actually going to cost?

In the end, we stopped. And headed down the owner builder route, which we don’t regret.

In my day job, I help companies run tenders and projects. This leaves me convinced that the “traditional” building route is fraught with problems, at least in the residential space.

Issues with traditional building processes

These are a few of the issues that I see:

  • Uncertainties aren’t dealt with. There are easy bits to every building project, and there are the unknowns. We knew that strange things such as the rammed earth wall could cause problems, but it’s the unexpected things that get you. For example, our building designer had drawn a magnificent arrangement of doors and windows out onto the deck. Luckily, we thought it could be useful to get some early quotes to help with our budgeting, and quickly discovered that what had been drawn was unbuildable. Had this been a traditional approach, we only would’ve found this 1/3 of the way into the build, blowing out our budget, and costing us six weeks of time to resolve. Ouch! And this was just one of the uncertainties that would’ve lain in wait for us, had we gone down the traditional route.
  • Costs aren’t managed. As a result of the issues outlined above, the builders’ initial quotes are little more than educated guesses. There also isn’t a reason for them to commit huge amounts of time during a tender to accurately assess things, leading almost inevitably to cost over-runs later in the project.
  • Building materials aren’t carefully selected. The tendering builders make a set of assumptions about building materials when quoting, and these often aren’t the highest spec. Once building starts, it can be quite difficult to change materials, impacting on both quality and environmental impact.
  • Cost trumps quality. It goes without saying that picking the cheapest builder hardly biases the project towards quality.
  • Changes are hard. With a fixed price quote, it’s inherently hard to change things. And every change encourages the builder to inflate the cost of the variation.
  • Speed discourages thinking. While modern building practices are very efficient, having a pile of trades on-site means decisions get made in a hurry, leaving little time for tuning and refining the design.

In short, the traditional approach seems to virtually guarantee budget blow-outs, unpleasant surprises, and cut corners. No wonder there are so many horror stories of projects finishing 150% over budget, and a year late. Crazy stuff.

Now I’m not saying that you can’t get a great house at a great price, going through the standard process. It just seems to me that the odds are stacked against it.

While we went down the owner builder route in response to these concerns, I’m convinced that a more sensible approach to traditional practices could also get a good outcome. Such as exploring the uncertainties earlier, getting the preferred builder to do initial “scoping” to refine the cost and materials, and tuning the fixed-price/cost-plus models.

What do you think? Should we be building houses differently?

3 thoughts on “Problems with the conventional building project

    PM Hut said:
    July 19, 2012 at 6:48 pm

    Hi James,

    This is an excellent post on construction project management and that’s why I would like to republish it on PM Hut where many construction project managers will benefit from it.

    Please either email me or contact me through the contact us form on the PM Hut website if you’re OK with this.

    Darren (Green Change) said:
    July 20, 2012 at 8:40 am

    Your comments make a lot of sense. We went through a similar thought process when we extended our house in Kiama about 10 years ago.

    We ended up doing something slightly different though – we hired a builder we trusted, using a “cost plus” contract. He just passed on all the costs (trades, materials, fees, etc) to us, adding on a percentage to cover his project management time. I think it was around 5-10%, but can’t remember exactly.

    The builder gave us a rough estimate up front, based on the plans we’d had drawn up by a draftsman, but of course that was just his best-guess estimate not a binding quote. It did give us a good idea of how big a loan we needed, though.

    This arrangement gave us a lot of freedom to make changes, choose specific materials and fittings, deal with issues, etc without all the haggling and contract variances. Also a fixed-price quote is normally padded to cover the unknowns (What if we hit rock while digging the footings? Can we leave the untouched portion of the roof in place, or will we have to replace the whole lot? Will the plumbing and wiring have to be replaced once we pull the walls off?) – we only paid for the actual problems that arose. We did set money aside for contingencies, but we got to keep it when the problems didn’t eventuate.

    We didn’t have the time available to project manage the job ourselves, so this was a good compromise between the fixed-price-quote and owner-builder models. You do need to be able to trust your builder completely, though!

      James responded:
      August 26, 2012 at 1:20 pm

      Yes, the approach you outline is a good one — but only if you trust your builder!

      In practice, there’s not a lot of difference between cost-plus and owner-builder, except that as owner-builder you’re on the site all the time. Our builder charged for his time, and I paid for the building materials at cost.

      So either way, the key to success: find a great builder 🙂

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