paolo-volpis-architects-get-a-proposal 2

Nice meeting you,

This is Paolo, Principal of Paolo Volpis Architects.

If you are here, is because you are entertaining the possibility to hire my firm for your upcoming project, so thank you for the consideration and the opportunity.

I would love it if you could find the time to read through this guide, I trust it will be a valuable tool to bring you into a comfort zone since this is probably the first time you are venturing into this field.

I kept it an easy read without technicalities like I used to introduce my class when I taught this as a College Professor many years ago.

I believe that preparation is paramount for success, so I want to make sure that I cover a few basics to get you familiar with the process and engage in a productive first consultation call with me.

So, before we dive into the details of your specific project, let’s cover some critical points that I trust you will find very useful in navigating a journey that is often oversimplified. I want to make sure that you have some knowledge with a few important basics (and some insights) about the Design & Construction industry that you may find crucially helpful sometime soon.

So, let’s start with…

The most common mistake of future owner builders is to take the first step by asking various General Contractors (GC's) how much it would cost to build their home.

Giving a response to that question with a dollar amount would be very irresponsible because there are so many variables, special conditions, and unknowns involved. A ballpark figure with a range would be the most honest approach, together with a disclaimer that there is absolutely no commitment. In other words, the response is “I do not know” but a number is often put out there to look somehow knowledgeable and to throw a bait. WARNING: if a GC will ever give you a response more accurate than above, do not trust them! Furthermore, sometimes it comes with a half promise that they can deliver at the lowest number to get your attention; who does not like a great deal after all? They know that you will remember them and put their lowest price as your #1 choice, accompanied by the perception that they are also the most honest by giving you what seems a fair price compared to the others. This is anything but true.

The most correct and professional response would be telling you that giving a cost without a design is impossible, and that a ballpark figure differential on a per-square-foot assumption could make a difference that can go in the 7 digits, that’s not a small chunk of change.

It is inevitable therefore that once you hear that “number” it gets stuck in your head, and you will start by dividing your budget by that magic number to find out about the size of the house that you can afford. This is where unrealistic expectations are set, and people start to dream much bigger than their pockets can afford.

The GC, however, may have an “alibi” for derailing you from reality, which is that they actually gave you only the “hard cost” of the Project. They also know that if you remain somehow incompetent in the field, if you get back to them, they will tell you that they can take care of all the rest for much cheaper, and that you do not need many consultants, especially the Architect.

If you follow that advice (thinking that it will save you money) you will do the GC a favor because they would not have someone to scrutinize their work, and would be able to play alone in their sandbox (your project) to maximize their profits.

The Hard Cost represents exactly what it means, which is the actual cost of all the materials and labor (plus GC fees) that will take to build, which is just a portion of the Total Construction Cost.

The other portion of the Total Cost of Construction is represented by the Soft Cost, which includes the fees for all Consultants (Architect, Structural Engineer, Mechanical Engineer…) plus all the permitting fees. The Soft Cost in a Project generally ranges within 20 to 30% of the entire Budget.

When Owners realize that, suddenly, their house got 20-30% smaller; the usual reaction is to try to save on the Soft Cost to add some square footage back in their mind, yet still using the bogus numbers provided by an unprofessional Contractor. This is a recipe for disaster!

A successful project needs a realistic set of expectations from the offset.

You can calculate a rough Project budget using the worksheet below.

DESIGN-BUILD

In this scenario, the Construction drawings are not 100% completed, but generally at least enough to get through Permitting. The remaining Design/Construction Drawings work will proceed during the Construction. This option may seem to provide some savings on the Soft Cost in the long run, which may be very true, but on the other end it does not provide an accurate Pricing for the Construction. The GC, in fact, can only be accurate in pricing what is on paper and specified, while for what is unknown, they will have their best guess, by placing allowances in the respective line items.

Now, this scenario can get very tricky, because we will deal both with honest GCs who will fill the blanks with realistic numbers, and some let’s say less honest who will use low-balled numbers to get the project awarded, the last ones being the individuals who are ok arguing with the Owners at every turn when the costs increase, to create an unpleasant work environment, schedule derailment and unforeseen budget increase. We all like to have the good news to then hope that it becomes reality, but in construction there is not such thing and numbers cannot be bent.

If the chosen bid is realistic, the Design-Build method can be a great process when there is a good synergy between the Architect and the GC, in fact, when the cost allowances are correct, the Architect can design all the finishes while the house is under construction and the Owners can visualize in a built environment while controlling cost and schedule.

The Design Build can be implemented with the Architect and Constructor being the same company, or better, when the Architect and the GC are two different entities.

The reason why the second option is better is very simple: there are no conflicts of interest.

As an example, in the likely circumstance where the GC does not deliver something exactly as designed by the Architect or the quality of the work is sub-industry standards, the Architect has the authority to reject the work and the GC shall remedy at their own cost, but if the Architect and GC work together, most likely it will fly under the radar to deliver a sub-par product to the Owner who is still paying full price. It is also easy to understand that in the first scenario the Owner will have the Architect as his Agent, as it should be, to protect their interest, while in the second scenario, the Owners will be outnumbered, making the situation very uncomfortable and unpleasant.

“This one is one of my pet peeves because reading a construction contract is like having a crystal ball in your hands; you can see the future. I consulted with some Owner’s reps working on huge projects and dealt with a few hidden traps in the agreement that were overlooked. One time I advised removing a clause and the Attorney advised otherwise; it turned out that the project went above budget by 6M (on a 24M Contract) and finished one year late with no recourse”.

A bad agreement with a General Contractor can be as painful as a marriage without a prenuptial in the case of irreconcilable differences. Once a GC starts working on your site and shows up with his truck and coffee mug, it better be for good, otherwise, if things do not work out, a transition can be very difficult unless there is a lot at stake. It is as difficult as changing a surgeon in the middle of a procedure; you won’t easily find someone to finish it and take full liability, and if you can find that person, it will probably be the one who is desperate for work, and you’ll be rolling the dice.

This is why you must understand the Agreement options that you have available and discuss with your Architect which one better suits your project and needs.

Lump sum contracts.
Time and materials contracts.
Unit price contracts.
Guaranteed maximum price (GMP) contracts.
Cost-plus contracts.

C.O. (Change Order)

“This is one of the most hated terms for all Owners. A “CO” feels like finding a ticket on your windshield, and if that happens often enough, you’d burn your car out of anger”.

Change orders are notifications from the GC that will let you know that there is a “Change either on Time, Sum, or Both on your Project”. In other words, The GC is telling you that you will have to spend more than initially foreseen and that it will take longer than anticipated. You will have to sign that notification agreeing to the financial and schedule modification to proceed with the Project and not get to a halt.

“Now, imagine receiving this kind of “notification” every other week…you will not have restful nights anymore, guaranteed.

Possibly, develop PTSD”.

If you decide to dispute the CO, it can escalate to an argument and the atmosphere during construction will turn to be heavy, while every meeting with the GC becomes an antagonizing experience. You then find yourself arguing over something that is not your main area of expertise yet involves you emotionally.

The good news here is that if you have a Licensed Architect working on your project, the Architect can review the CO for you and object on your behalf with reasonable, professionally backed up, and realistic arguments that could reduce the amount or in extreme situations even remove the CO all together.

Pay App

A Pay App (or Pay Application) is nothing more than an invoice that the GC produces, usually monthly, for the Owner. The Architect reviews the Pay App and verifies on-site if the work described on the Pay App is performed and in the accurate percentage of completion. For example, if the Pay App requests a $80K payment for 80% completion of concrete work, but upon site observation only 60% is completed, the Architect will reduce the Pay App to $60K and approve the payment up to that amount.

The Owner, on the other hand, would not have the expertise for this assessment, and secondly, being the one who finances the project, objecting to the amount can be perceived as a conflict of interest and spark a contentious environment if the Architect was not involved. The Architect will take the heat for you.

Change Order Directive

I’ve met quite often General Contractors who do not even know what this is. It is a VERY powerful tool that only Licensed Architects have.

In the situation where you receive a CO and the sum requested is, for whatever reason, not acceptable, a series of back and forth between the Owner, Architect, and GC takes place. If an agreement cannot be reached, instead of wasting time in discussing it while the project slows down, the Architect issues a CO Directive to the GC, which is the order to proceed while the final cost and details of the change are determined.

Without a CO Directive, the GC could hold the Project hostage until is paid what was asked, whether is fair or not.

Retainage

This is a common practice in the construction industry where a portion of payment, typically 5-10%, is withheld until a predefined milestone is achieved on a building project, often till the end of the project, and disbursed with the final payment. Retainage has a few powerful twists within; it can be a way to ensure that both GC and Subs never abandon the project, and if they do for whatever reason, the funds retained can be used to complete their work. Funds can also be used for remedies in the quality of work in the possible situation where the GC disagrees; your licensed Architect, in this scenario, will be the one who makes and negotiates the decisions.

The difference of that amount is released to the GC.

Remember, your Architect is a Licensed Professional that abides by a rule of ethics and cannot be used as your “gun”. You shall expect your Architect to be fair and who will not attack the GC with unrealistic or inappropriate requests or claims.

Liens

I am quite sure that you have heard of Liens before, which is a security interest in a specific piece of property granted to someone other than that property’s owner. A valid lien acts as an encumbrance on a property, preventing its sale or transfer. If enforced, a lien can even force foreclosure or repossession of a property.

In Construction they have something similar referred as Mechanic’s Lien which is a statutory lien secured by real property for labor or materials used to improve the property. The owner and/or lender only release payment after verifying that the work and materials have been put in place, well after the contractors and suppliers have incurred the costs. Keep in mind, that construction work cannot be returned as common goods.

In Construction, we use Lien Waivers (or Lien Releases), which is a document signed in exchange for payment that waives the signer’s right to file a lien for the amount specified in the waiver. In short, if your payment goes through, the Contractor or Subcontractor cannot lien the property for the waived amount. This is a piece of mind for both the Owner and the Workers but requires some monthly paperwork.

Working out your budget is a critical step in the pre-planning work. By determining likely costs before design planning begins, you can get a better idea of what you can achieve in your project. A good Architect will be able to help you make design choices that are in line with your budget limitations, helping you avoid spending more than you can afford.

Using the worksheet below, you can calculate a rough estimate of how much your custom home will cost. Expenses are divided into two categories: construction costs and soft costs. These two will need to be added together to calculate your project total.

Smaller Up-Front Design Fees
Design not entirely figured out before Construction starts
Budget not entirely figured out (precise) before Construction starts
Budget is either higher due to unknowns and contingencies or lowballed to get the project awarded
Can start the Permitting process before being finished with Contact Documents
Construction lasts longer because decisions have to be made while building. Low commitment.
Liquidated damages are harder to negotiate
Receive many COs to increase Costs and extend the time
Large GC Fees due to extended PM services
Extensive Construction Administration time, scrutinization time, and paperwork

Highest Design fees upfront
Design entirely figured out beforehand
Precise budget that GC can commit to
Budget is as low as possible – Competitive Bidding (apples with apples)
Permitting starts after all the drawings are completed
The construction schedule is very aggressive and guaranteed
Liquidated damages are easier to obtain on contract
Minimal amount of COs
Reduced GC Fees due PM services offered for a shorter amount of time
Predictable construction Administration time, scrutinization, and reduced paperwork.

Initially, the programmatic requirements are studied to define a Parti, creating the blueprint for a strong concept, cohesive design, and massing.
The Program is then inserted within the Parti to develop adjacencies of spaces to reflect the hierarchy of views, circulation, function, and natural forces such as light and prevailing winds. A diagrammatic floor plan is created and modified with Owner’s feedback.
A floor plan is then drafted, where a layout of space, circulation, and adjacencies are clearly readable together with added detail such as furniture layout for scale.
A 3D model is created to shape the object, to study the exterior appeal and sense of arrival through materiality and finishes.
Renderings of the exterior spaces are then produced to visualize the building with different finishes and colors to address a preliminary budget for the shell and core.

MEP (Mechanical Electrical& Plumbing) is always one of the major struggles in construction sites. The room left for all the infrastructure that your house needs is often overlooked in the design phases to create delays, extra costs, and waste of time to be resolved on the field, sometimes at the expense of design features that did matter.

We care about design, and we do not want to have to modify anything unless it is desired. For this reason, we model the MEP during the design phases to ensure that the proper space is allocated.

Now that you have read through this entire guideline (and no, don’t worry, I will not give you a pop quiz during our call), I am sure you understand the work involved in delivering a successful project, minimizing unknowns, hiccups, and roadblocks. You also understand the value of having a licensed Architect as your talented designer, consultant, enforcer, and yes, sometimes even your marriage counselor. No jokes here, I’ve done that.

Architect fees are quite a complicated beast, difficult to figure out yet easy to tame.

The general rule of thumb used in the industry is an average flat fee that ranges between 10 to 12% of construction cost, further subdivided into phases. This fee is usually increased when the scope is increased or if the project has some peculiarities, to make it more difficult or can be decreased when the project is very large, or less complex.

In general, fees are divided in a percentage that runs parallel to the design phases:

In our case, we work off a matrix that we developed over the years, where the fees are approached from different angles such as a percentage of construction cost, per square foot, Permit only based on budget, or again per square foot. This matrix gives us a rough estimate, and then we adjust it to the specific conditions.

Phases, percentages and the labor involved can vary and are based on the delivery method, level of quality (base, medium, or high-end), schedule, and desired design outcome.

In short, the estimation is based on many variables, we will have to figure it out beforehand and with the best approximation.

You will be explained the reasoning behind the fee structure, however, the clearer you are about what you want and how sure you are about it, the fewer unknowns for us, which generally produce the most competitive proposal.

Next, we have a few questions that you will need to ask yourself before we meet.

Your Budget Range is Set

You’ve worked up the numbers and you have a clear understanding of what you can afford. You’ve established a ballpark budget for your project with a firm maximum, and you already know how you’ll fund it. If you’re counting on financing, you’ve verified that you have the credit needed for approval.

You Know What’s in Store for the Future of Your Home

You have decided whether you’re planning on staying in the home or reselling soon. Therefore, you know whether you should be prioritizing your personal needs and preferences or designing for optimal market value.

Everyone is on the Same Page

Every person who has a say in the design and scope of your project can agree on the budget and the main goals. While there still may be differences of opinion when it comes to the small details, there’s solidarity on project priorities and vision.

You Have a Realistic Picture of Your Lifestyle Needs

You’ve thought long and hard about how you’re going to be using your home.

You know what every household member needs out of the design, and you feel like you’ve determined what functions the spaces should be able to perform. You’ve also figured out what ideas aren’t going to be very useful in real life. If you still have some uncertainties, you understand which topics you need to ask for advice on.

You’ve Identified what you Must-Have, Nice-To-Have, and Don’t-Quite-Need

After determining your lifestyle needs and style preferences, you know exactly what features need to be present in your design, which ones would be nice to have but can go if they don’t fit in your budget, and which ones you absolutely don’t want. You can clearly describe these to your Architect and explain why they’re necessary (or why they don’t work for you).

You Can Describe the General Style You Want

You don’t need to have every finish or paint color picked, but you do feel like you have a clear idea of how you want your home to look. You can verbalize this aesthetic accurately, and you may even have some visual examples of the vibe you’re trying to achieve.

You Have a Good Idea of Your Desired Size and Layout

You’ve determined your desired square footage range and the number of stories. You know how many rooms you need, and what type of space each room will be, if there are outdoor spaces to include in the design, and you have a fairly good idea of their scope and their size compared to your home and lot.

Are you open to listening to the advice from your Architect?

Do you think that you have it all figured out and that you just need someone to execute your ideas, or are you open to options that never crossed your mind?

We will have many ideas and suggestions that can add value to your project without necessarily adding more cost.

Do you want to be the designer of your home, or do you want a leader who will produce a cohesive product where nothing is left to guesswork but instead the product of a process led by rational thinking?