Somewhere in the last few decades, saving money has become the most important consideration in most of our purchasing decisions.
In the building & development game, this translates into cutting costs wherever possible to try and gain a competitive advantage. As we are now starting to see, the cheapest initial outlay isn’t always the best long term solution.
As Architects, we see this outworked from the inception of the project. Many developers try to minimize their initial outlay on Architects and other Design Consultants in order to save money. This is understandable, because these fees have to be paid upfront – unlike the real estate agent, who gets paid from the sales at the end, or the builder who gets paid by the bank (generally).
Unfortunately, the design professions have joined the race to the bottom in the hope of winning work. But the old adage is true – you pay peanuts, you get monkeys. Reducing fees on proper design & documentation leads to inferior or insufficient documentation. In turn, this can lead to expensive surprises during construction, or worse still, major expenses for the future owners.
Saving on design fees doesn’t make sense when they are calculated as a percentage of the total project cost, and even less as a percentage of gross realisation (total sale values).
By way of example:
- Let’s assume design fees on a $5million construction cost are 10% – that is $500,000 (to keep the numbers simple)
- A $100,000 saving on the design fees, would reduce the cost (and output) by 20%. The same saving off the construction cost is only 2% – which the design team could probably find a way to save (if they had the time & fees to do it).
- This same amount is less than 1% of the total gross realization of the project.
- This reduction in documentation could in turn lead to unnecessary variations during the construction. Even a 5% variation in construction cost would far exceed the amount saved by reducing the design fees (and therefore scope).
These charts show the relative size of the design fees in relation to the overall project cost. The impact of that small component on the much larger construction cost is negligible.
The NSW Building Commissioner is working on a plan to mandate minimum documentation required for buildings. That may come as a rude shock and extra cost to the industry for some builders/developers – but that is a topic for another day.
We have found that well designed buildings, properly documented and constructed, end up costing our clients less in variations and surprises than those where design fees were saved.
Saving on design fees doesn’t make sense – it is like saving pennies and wasting pounds.