When an architect provides complete documentation for the construction of a project, most areas of possible misunderstanding and confusion are removed.
Proper cost control is fundamental to the success of your project. This can only be achieved if attention is given to all matters relating to cost, from conception to completion, and extending into the maintenance and operation throughout the life of the building.
From the outset, your architect will discuss and determine a project budget with you. During these discussions you should be very specific as to whether this budget includes professional fees, for example for your architect and/or other specialist consultants, or is related only to the actual cost of the works.
During the design stages and the preparation of the construction documentation your architect will report regularly on project costs. Different cost options will be explored with you and the most economical ways to achieve your objectives will be considered. This will involve a consideration of the initialcost of construction and may include the life cycle costs of the project such as costs associated with energy consumption, maintenance and management during the building’s life cycle.
Different cost options wi ll be explored with you and the most economical ways to achieve your objectives will be considered
During the construction phase your architect will manage project costs according to the requirements of your contract with the builder. Some of the provisions for this in most building contracts are:
Under most standard building contracts the builder is paid progressively throughout the project and is required to submit progress claimsto the architect on a regular basis. The architect assesses each claim, on the basis of work done, the labour and materials used, and any other construction costs, and then issues a progress certificate which states the amount calculated by the architect to be due to the builder at the time of issue.
Under this system, your architect is able to protect you from being charged for work not completed, or not in accordance with the requirements of the construction documents.
VARIATIONS TO THE CONTRACT SUM
When an architect provides complete documentation for the construction of a project, most areas of possible misunderstanding and confusion are removed and variations to the work are kept to a minimum; however, unforeseeable variations may be necessary due to the discovery of unexpected site conditions, authority requirements or simply if you change your mind during construction. Again, with their training and experience, your architect is equipped to advise on options which may minimise or even avoid any increases to building costs.
When variations are unavoidable, your architect will act on your behalf to negotiate an equitable contract adjustment.
PROVISIONAL AND PRIME COST SUMS
The total contract sum often includes sums of money which have been included in the contract documents to cover work which may not have been documented fully at the time of calling tenders. These allowances are known as ‘provisional sums’ and are used more particularly to cover the cost of work to be undertaken by specialist contractors selected by you and referred to as ‘nominated subcontractors’.
The total contract sum also may include similar sums for use in the purchase of materials and building components to be selected by you and which have not otherwise been provided for in the documents. Such allowances are known as ‘prime cost sums’ and are more specifically used to permit selection of such things as bathroom fittings, etc, during the construction period.
When the actual expenditure on works and materials differs from the provisional and/or prime cost sums, the balance is adjusted against the original contract sum. This adjustment is monitored and approved by your architect.
THE RETENTION FUND
Most contracts require the builder to provide a sum of money to be retained by the owner as a surety that the builder will remedy any defects which might arise during the contractual period. This is known as a security or retention fund and is usually in the amount of five per cent of the contract sum. It can be held as cash in a joint bank account in the names of the owner and the builder or in the form of a bank guarantee held by the owner. If in cash, deductions are made by the architect from each progress payment certificate, usually at the rate of 10 per cent until the required amount is reached.
It is normal for half of the amount to be retained to be released on practical completion and the remainder with the issue of the final certificate.
If the builder defaults or fails to rectify the work as instructed, your architect has the power within the contract to use part or all of the money retained to have the work completed by others.
LIQUIDATED AND ASCERTAINED DAMAGES
Liquidated damages is a financial recompense by the builder to which you may be entitled for financial loss if the building is not completed on time. The amount agreed to is usually stated in the contract as a daily rate and covers such items as:
- loss of rent
- additional financecosts and holdingcharges
- alternative accommodation
It is advisable to seek both architectural and legal advice when considering the application of liquidated damages against the builder.