Minimizing Budget Adjustments on Your Custom Home or Remodel
What Is A Budget Adjustment?
A budget adjustment (BA) is a formal alteration to the original scope of work outlined in the construction contract. It can be required due to changes in design or material selection, additions to the scope, or unforeseen structural issues and repairs. BAs will typically add both cost and time to a project, so minimizing them is key when trying to stay within your initial budget and timeline.
1. “Well Planned is Half Built” - Anonymous
The foundation of a successful project lies in the planning. The more detailed and specific your plans and selections are prior to construction, the less likely you are to encounter change orders.
Prioritize Building your Team: Having your preferred builder on board early in the design process will streamline the project and highlight any potential roadblocks during the construction phase. A builder's involvement will also help you make more informed decisions and can potentially rein in costly design ideas that may look beautiful but could quickly overstretch your desired budget.
Finalize Plans: A builder is only as good as the information provided, so ensure you and your architect or designer provide complete and accurate plans that specify every detail of your project. Without these, your builder cannot provide you with accurate pricing, leaving the door wide open for change orders when decisions are made further into the process.
Make Decisions Early: Select all materials, fixtures and appliances early in the process and confirm their availability. Think very carefully about your selections at this stage. This is the optimal time to do your homework to make informed, intentional choices. Once the project breaks ground, it is exponentially more difficult and costly to pivot and will not only add to the timeline but will increase design, administrative and project management fees.
2. Stick to the Plan
We understand that building or remodeling a home is a creative process and that flexibility is part of the adventure. Sometimes a new idea can become an unexpected standout in the project! However, too many deviations from the original plan can easily derail both cost and schedule.
Avoid scope creep: This refers to the tendency for a project’s scope to expand beyond the original agreement. Any small change outside of the contract will add both days and dollars. Make sure you are 100% sure that the changes you wish to make are non-negotiable for you and that the additional investment is worthwhile.
Be decisive - As much as we try to plan, decisions will need to be made throughout the process. The quicker these can be made, the less impact it will have on the overall project. If a change order is needed, make sure that it is handled promptly. Even small delays relating to project administration can negatively impact the schedule.
3. Align with Experience
Knowledge is power, especially when it comes to a high-dollar investment such as building a custom home or undertaking a major remodel. An experienced team will undoubtedly have the insight to anticipate and prepare for potential pitfalls early in the planning stages before you reach the point of no return.
Site-specific challenges: Every site has its own unique challenges. An experienced contractor or architect will identify unique conditions that could complicate the construction process, allowing for informed discussions and solutions ahead of the project start date.
We have seen this before: Having a team that has ‘been there, done that’ provides a sense of trust and confidence. The value of an unflappable, calm builder or architect cannot be overstated, and it is imperative that you can rely on their expertise to find the best resolution to inevitable issues that arise. Ask questions when hiring your team; How do you handle unforeseen challenges? What is your communication style when problems arise? Make sure you feel 100% confident that issues will be dealt with swiftly and professionally before you embark on the project.
Anticipation and Communication: A seasoned builder already knows the common, unforeseen hurdles that may be lurking behind walls that will not be fully uncovered prior to demolition. Dry rot, structural, electrical/wiring issues and plumbing problems to name a few. Having discussions around potential changes to the scope based on the unknown eliminates the surprise element, and although it may still lead to change orders, being informed ahead of time means we are prepared and can potentially adjust the budget and allow for increased contingency.
Check References: The best insight you can get about a team is from their previous clients. Verifying another client’s completed experience will give first-hand insight into how the project was managed, as well as the outcomes of the final schedule and budget.
Project Management (PM): So much time (and therefore money) can be wasted if a project is poorly managed: days can go by without work taking place, Trade Partners are not scheduled appropriately, materials are not ordered in a timely manner. An experienced builder should have a comprehensive PM process in place that gives minimal room for lapses in work or changes to scope.
4. Review your Contract
Your contract should clearly outline the scope of work, timelines, budget, and procedures for handling changes. A well-written contract can significantly reduce the likelihood of disputes and costly change orders.
Clarify change order procedures: Ensure that your contract specifies how changes will be handled if they arise. It should outline the process for requesting and approving changes, as well as the costs and time implications. Make sure you fully understand the process before signing.
Conclusion
Minimizing BAs in a custom home or remodel project takes thoughtful planning, clear communication, careful, early decision-making and trust in your team. While changes are inevitable, following these suggestions will help you stay on track with your budget and timeline by avoiding unnecessary disruptions and costly additions, allowing for a much smoother and more enjoyable process.