Imagine you are building your dream house.
The one you’ve been thinking about for as long as you can remember.
The whole family is on board.
You know how many bedrooms and bathrooms it needs to put an end to shared rooms and bunk beds.
You’ve included a butler’s pantry, and a walk-in robe, and a kitchen that would have Gordon Ramsay excited.
You have vision boards and colour schemes and finishes charts.
You can picture long family lunches and cosy movie nights.
It’s a done deal as far as you’re concerned.
How important is to you to come in on budget?
How reliable is your estimate of the construction cost?
Imagine now that you get halfway through the build and find out that you’re going to be 20% over on costs because there’s a problem with supply.
Your fittings are legitimately on a slow boat from China.
And there’s no contingency factored into the pricing.
It’s not unheard of, especially in the current climate.
And it’s entirely possible it will get worse before it gets better.
What if the stakes are even higher?
Now imagine that project wasn’t actually your house, but a multi-million dollar construction project.
With many stakeholders, all with a vested interest in the project being on time and on budget.
It wouldn’t be the first time that the cost of construction for a commercial project has gone over budget.
In fact, it doesn’t take much research to find a long history of significant projects that have been either over budget or over time, or more often than not, both.
Take for example the Sydney Opera House, arguably one of the more famous projects in Australia, if not the world.
According to a recent article by Macquarie University1, the Opera House was delivered in 1973, 10 years late and at a cost of $102million instead of the estimated $7million.
That’s $95 million over budget, in 1975 dollars.
Or $700,000,000 over budget, in 2021 dollars.
I guess in this case it was worth it.
But Opera Houses don’t get built every day.
Spare a thought for the Catholic Church.
They had to wait 100 years for the southern spires to be finally installed on St Mary’s Cathedral in Sydney’s CBD in 20002.
I can’t even imagine what that budget over-run was, but it would not have been cheap. I certainly don’t envy to person who came up with their construction cost estimates.
On the bright side, I guess they wouldn’t have been around for the final report.
In more recent times, you don’t have to live in Sydney to have heard about the financial difficulties of the light rail project completed in 2019. Following lengthy media speculation and multiple contradictory reports, the Auditor-General’s department announced its findings on the light rail.
The original budgeted cost of $1.6bn was a mere $1.5bn short of the final actual cost of $3.1bn3.
How to mitigate budget risk
Now I don’t mean to undersell the complexity of these projects. These are major infrastructure developments with a myriad of obstacles and hurdles to overcome.
But irrespective of whether we’re talking about a residential home, a billion dollar investment, or any project in between, one thing remains true.
The importance of reliable cost estimates for construction cannot be over-stated.
That’s where MCG Quantity Surveyors come in. We will establish a working budget for all project elements extending from structure to finishes, and form a valuable assessment tool in the design decision-making process.
We will make sure that sufficient realistic contingency is included to overcome unexpected cost blowouts.
This detailed reporting on the cost of building a house, commercial or industrial building will take into account the projects completed design and documentation, including the completed architectural specifications, structural constraints, schedules of finishes and services designs/specifications.
If that sounds of interest, we would love to chat to you about your project.
It might not be on the scale of the Sydney Opera House, but we know that for you, it’s just as important.
1&2 Yiannakis, Michael, 2021 “Budget Blowouts and Broken Promises”, Macquarie University, accessed 17 November 2021, <https:/lighthouse.mq.edu.au>
3Rabe,Tom & O’Sullivan, Matt, 2020, “NSW Government failed to update public on true cost of light rail”, accessed 18 November 2021, <smh.com.au>