If you are planning a construction project, you may feel overwhelmed. It’s understandable – construction has many stages, each with challenges and opportunities. To capitalize on the latter and avoid the former, you must understand what each stage entails and learn what inputs to make to ensure your project’s success.

First, you must know what you can afford.

Establishing Your Budget

Your construction budget is the sum of money you have earmarked for your project. Unless you have it ready, you will need to acquire this money through a construction loan.

To find a suitable financing option, figure out how much you are prepared to spend out of pocket; with most construction loans requiring a 20% down payment, you can easily calculate your maximum loan amount.

Now you can work out how much floor area you can afford – divide the total amount of financing available by the average rates per square foot for your type of project. Be conservative and keep in mind that rates fluctuate with inflation as well as other economic factors.

Design Development

Having come up with a budget and a preliminary floor area, you can get to work on the building’s design. Your first step would be to hire an architect who will conceptualize your building’s design around your vision. At this stage, fruitful collaboration with your architect will ensure that your objectives are implemented into the drawings.

Once the architect produces a set of drawings, other disciplines will join the collaboration to develop Civil, Structural, Mechanical, Electrical and Plumbing (MEP) sets, as required. You will need all these drawings to start the next phase of your project - getting planning approvals and building permits.

Approvals and Permits

An approval is a planning department’s green light to proceed with the project. Unlike a building department, which authorizes various aspects of construction with a permit, planning officials evaluate your project’s conformance to zoning by-laws, setbacks, and land use. Commercial projects, as well as some residential projects, may be subject to approvals from local planning departments. Depending on the scope of the project, other committees may also want to review your plans.

With approvals secured, you may apply for your building permit. Requirements vary depending on the type of project and jurisdiction, but typically you will need permits for at least the following activities on top of the building permit:

· demolition

· grading

· MEP

· solar panel installation

Fees depend on the permits you need, as well as the value of your project. Check with your building department once design development is underway.

Your contractor will usually pull the permits on your behalf, but you can start getting the applications ready while you solicit bids and choose your builder.

Pre-Qualifying Contractors

Before you send out bid packages, you should pre-qualify your bidders and make sure that each of them is licensed, insured, and experienced in building your type of project.

Take the time to research local contractors and evaluate them based on positive reviews on websites like Angie’s List and the Better Business Bureau. Meet with each prospective bidder and make sure that each is licensed in the State, has workers’ compensation and general liability insurance. To cover yourself against work that does not meet local building codes, make sure that your candidates are bondable.

Soliciting Bids

When you’ve pre-qualified at least 3 contractors, send out your bid sets for pricing. Make sure that each bidder is pricing the same drawings and specifications if you want to compare apples to apples.

Once you receive the bids, evaluate each one line-by-line to confirm that everything you specified is included. This compliance check will give you a chance to zero in on anomalies, particularly if one bid is substantially lower or higher than the others. Also, take the time to check whether each bidder priced the same materials. If anything seems out of order, call the bidder and ask for clarification.

If a compliant bid fits your budget, meet the contractor to discuss the project. Find out what timelines the contractor is proposing for important milestones, as well as the completion date. Ask about allowances – this is the money allocated to cover known expenses that may be difficult to price before construction starts. Interior finishes make a common allowance item in estimates, as they are often chosen right before installation.

At this point, you should have a good idea of your project’s costs. Unfortunately, some expenses only emerge during construction. Unforeseen conditions can blindside you with considerable extra costs and schedule delays. To protect yourself, add a 15% contingency to “cushion” your budget. It may be a good idea to keep this figure to yourself – some contractors may see a contingency as extra spending cash.

Construction

Even with meticulous planning, things can go wrong once construction starts. Bad weather, unavailable materials, and poor productivity can cause delays. Some of these factors are inevitable, and if they occur, ask your contractor how they plan to get the project back on schedule.

Extra costs may come up as well. Unforeseen events can flare up with little warning and lead to change orders. Your construction administration team – typically your designers – will help you assess and control the situation, but you should be ready to dip into your contingency budget at any moment during construction.

Sometimes a material you or your architect specified on approved plans is not available or is shown to perform poorly. In this case, your contractor may issue a substitution request. Such requests should not result in extra costs to you, and should not appear in the form of change orders. Your construction administrators should see to it that the contractor follows the proper substitution request protocol.

Even if your project is spared from costly surprises and schedule delays, you may still end up facing budget dilemmas. For example, finishes you’ve specified may cost more than the available allowance, or they may be unavailable. You might have to reassess your priorities and cut back on some elements to afford or splurge on others.

Payments

There are several payment structures to choose from, and you should discuss these with the contractor before construction starts.

Typically, progress payments happen monthly and are based on the Schedule of Values (SOV). An SOV is a breakdown of the project’s total cost into individual line items, such as demolition, grading, and framing. Every month the contractor bills you for the percentage of work that’s completed in each line item. This tool allows you and your contractor to keep track of the project’s progress over time, and to see how it lines up against the baseline schedule.

Another method follows the project’s milestones, with payments following each significant phase of the project that gets completed.

Completion and Occupancy

You may sigh with relief when the finishing touches on your house are complete, but the work is far from over. Some items may be deficient, and your architect or engineer may order them to be remedied before you settle with the contractor.

A final inspection will be performed by the city before the contractor hands over the building. If everything is in order, you will get a Certificate of Occupancy, which allows you to move in.

At this point, your construction loan matures and is due for repayment. Depending on the type of loan, it may convert to a mortgage automatically, or you will have to shop around for a mortgage on your own.

How We Can Help

Construction is a difficult process. There are lots of variables, and without professional assistance, projects can easily derail.

At Design Everest, we will help you with your project from start to finish. Our team will connect you with a partner architect. Once your vision makes it onto architectural drawings, we tailor our civil and structural design and help you get through approvals and permits as quickly as possible.

During construction, our team can help you handle the stress of managing the process. We will review change orders, substitution requests, and submittals, and visually assess quality as work progresses.

Regardless of the type of project you are planning, we are here to help. Contact us now and we will provide you a FREE Consultation with a quote. We also provide virtual on-sites and virtual consultations.

Sources/References:
  • https://www.angieslist.com/
  • https://www.bankrate.com/loans/personal-loans/how-do-home-construction-loans-work/
  • https://www.bbb.org/
  • https://designeverest.com/support/construction-administration-support/
  • https://designeverest.com/groundup-commercial/
  • https://designeverest.com/services/new-custom-home/
  • https://www.levelset.com/blog/what-is-a-schedule-of-values-construction/

*Note: The content published above was made in collaboration with members of Design Everest.

Verified by Darrick Lor
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