How to Avoid Cost Overruns
- Hi, everyone, Louise here from Perway Construction Services.
- Andy from Perway guys, hello.
- So today, we just wanted to chat to you about some customer queries that we get and that's how will I avoid cost overruns? So, we just wanted to give you a few tips to help you avoid this problem because obviously your renovation, it's one of your biggest investments that you're gonna make. And you know, you want to know exactly what you're getting and exactly what it's going to cost before you start your work. So do you want to start off Andy, what should people think about it to avoid cost overruns when at the start?
- Yeah, this is the most, probably the most important question of any of the videos that we do because you don't build a house without planning first. So plan will begin with knowing exactly what you want. It sounds simple but so many people don't do this, so, yeah.
- So we address that, a few of our videos that, for example it's just taking the time to sit down with family or key decision makers and really knowing the outcome of your job, first of all what you really want to get from that renovation. So for example, if you've got a growing family, ensuring that you are thinking about the future. And so, you know, you're getting really exactly what you want for the outcome and really incorporating those things and those considerations in before you start.
- Yeah, and another thing Louise, is speak to the builder and a designer first because a lot of people go to designer or architect first guys, and what we like is working with the designer, because the builder will know what an estimate price is. Architects and designers, they do a great job, but don't know the prices of stuff. That's why we like to do that first working with the designer because we can actually let you know what's possible and what's not.
- And that's been, a quick story. We did have customers prior, that came to us with design. And, you know, the design ended up being, you know half a million dollars worth of work and if they had worked with the designer and the builder from the beginning and the builder would have understood the cost. The designer would have been able to get the ideas from the people that wanted to do the renovation and really come up with a budget friendly, or suited to their budget, you know, ideas from the get-go so rather than, they've now wasted the money of having to now redo a design to suit what they're able to actually afford.
- And that happens sometimes
- Yeah, so and you know, onsite when you go to meet with clients and you're meeting with them, the designer as well, and you know, the designer is there to get the ideas and you can give - the builder can give their ballpark figure at that stage. They can't give the exact price because obviously they have to take in many factors of the... _ There's too many factors like control budgets and prices to anyone. But the last thing we want to do is disappoint people because if you told someone it was a hundred grand reno and then you price it at 150, it looks bad to them. And I just, that's why we like getting the working drawings back from the designer and then pricing it down. Because every time, let's look at the grand designs program, it's never on time and it's always over budget. Do you know if you look at the block you've done only 10 weeks?
- Yes so the likes of The Block and what do you call that girl, Cheree
- Cheree, oh yeah, yeah, yeah. cheree Barbara I think, they're renovating for profit.
- I like her but come on... She does all the work herself and she paints doors. She does all of these things. I don't think she can get a bathroom done for four grand. Guys if you wanna do it yourself, you can't do this But if you have to bring all the trades in and stuff and a builder to project manage, things cost
- Yeah, it's those reality TV shows are unrealistic. And it's unfortunate because people do think that they can get a lot more for what they actually can get and what's realistic. So, and it's just to be, you know understanding of those expectations as well and understanding that, you know, what things do cost. And that's another thing you can hop online just to even do checks on anticipated renovation costs also to make you aware of potentially what things cost before you start.
- And then the other thing is, are you adding anything else there,
- Nope.
- Specifications make sure you know what you want, like your kitchen, what you're gonna do. Stone tops. Make sure you have all that thought of beforehand because what people don't price it up is this. And then when your builder sends you a last few invoices you're like, oh, I never had that on your first price. And that can increase the price for sure.
- Yeah, so it's making sure that you have your final specifications. Your fittings and fixtures in line with what you can afford. So it could be low-end it could be budget range, it could be medium range or it could be the luxurious range and ensuring that all of those things are captured prior to finalizing your detailed quote. So what builders might do is put a provisional sum item or a it's called a prime cost item into your quotation. So what that means is it's an allowance for the supply. So prime cost item would be the allowance for that supply item. So pretend perhaps a particular sink, a provisional sum item is an allowance for the supply and labour of a certain aspect of your job. And, you know, it is really critical that those things are finalized before your quotation is accepted. Because what happens is that, you know that allowance could be for a thousand dollars for example, within your contract so you think, great this is gonna cost approximately a thousand dollars. And then it ends up that what you've chosen is actually $5,000. So there's an automatic $4000 blow out and additional costs to your, to your job, so it's really making sure that your builder has considered everything, finalized you know, your specifications and exactly really what you want before your final quotation is accepted.
- And you know all Louise, there's always changes. Guys I've been in the renovation game now for how long and there's always changes. And it just happens because people might see things happening during the reno and they're like no, I want to change it
- And that's okay. It's okay if you want to change it. And we're just making you aware of these things.
- You communicate with your builder, because if he changes there's going to be a change in your price there. So if he forgets about it now he's going to put it at the end of the price. So we try to educate and show you that things happen. And last but not least, I would put a 10% contingency So if your renovation's a hundred grand, I'll be putting an extra 10% on your budget. just in case for contingency, because
- So there's lots of unforeseen things that happen. So, you know, as much as you can have, you're clear about everything, what it's gonna cost before you start your job, there can be unforeseen things that may happen if, particularly if you're in an older house. so you've got the likes of asbestos or what else?
- Foundation sinking, might have be underpinned. It just happened on a project, so.
- Yeah, so it's just making sure that you've got an allowance there as well, to make sure that you can afford everything and that you're sticking to your budget before your job starts, so
- That was a long question, but the detail.
- Yeah, so that's given value to everybody
- Yes
- And let's hope it helps, any questions on that, just give us a shout and we'll be happy to help, see ya.
- See you guys
- Andy from Perway guys, hello.
- So today, we just wanted to chat to you about some customer queries that we get and that's how will I avoid cost overruns? So, we just wanted to give you a few tips to help you avoid this problem because obviously your renovation, it's one of your biggest investments that you're gonna make. And you know, you want to know exactly what you're getting and exactly what it's going to cost before you start your work. So do you want to start off Andy, what should people think about it to avoid cost overruns when at the start?
- Yeah, this is the most, probably the most important question of any of the videos that we do because you don't build a house without planning first. So plan will begin with knowing exactly what you want. It sounds simple but so many people don't do this, so, yeah.
- So we address that, a few of our videos that, for example it's just taking the time to sit down with family or key decision makers and really knowing the outcome of your job, first of all what you really want to get from that renovation. So for example, if you've got a growing family, ensuring that you are thinking about the future. And so, you know, you're getting really exactly what you want for the outcome and really incorporating those things and those considerations in before you start.
- Yeah, and another thing Louise, is speak to the builder and a designer first because a lot of people go to designer or architect first guys, and what we like is working with the designer, because the builder will know what an estimate price is. Architects and designers, they do a great job, but don't know the prices of stuff. That's why we like to do that first working with the designer because we can actually let you know what's possible and what's not.
- And that's been, a quick story. We did have customers prior, that came to us with design. And, you know, the design ended up being, you know half a million dollars worth of work and if they had worked with the designer and the builder from the beginning and the builder would have understood the cost. The designer would have been able to get the ideas from the people that wanted to do the renovation and really come up with a budget friendly, or suited to their budget, you know, ideas from the get-go so rather than, they've now wasted the money of having to now redo a design to suit what they're able to actually afford.
- And that happens sometimes
- Yeah, so and you know, onsite when you go to meet with clients and you're meeting with them, the designer as well, and you know, the designer is there to get the ideas and you can give - the builder can give their ballpark figure at that stage. They can't give the exact price because obviously they have to take in many factors of the... _ There's too many factors like control budgets and prices to anyone. But the last thing we want to do is disappoint people because if you told someone it was a hundred grand reno and then you price it at 150, it looks bad to them. And I just, that's why we like getting the working drawings back from the designer and then pricing it down. Because every time, let's look at the grand designs program, it's never on time and it's always over budget. Do you know if you look at the block you've done only 10 weeks?
- Yes so the likes of The Block and what do you call that girl, Cheree
- Cheree, oh yeah, yeah, yeah. cheree Barbara I think, they're renovating for profit.
- I like her but come on... She does all the work herself and she paints doors. She does all of these things. I don't think she can get a bathroom done for four grand. Guys if you wanna do it yourself, you can't do this But if you have to bring all the trades in and stuff and a builder to project manage, things cost
- Yeah, it's those reality TV shows are unrealistic. And it's unfortunate because people do think that they can get a lot more for what they actually can get and what's realistic. So, and it's just to be, you know understanding of those expectations as well and understanding that, you know, what things do cost. And that's another thing you can hop online just to even do checks on anticipated renovation costs also to make you aware of potentially what things cost before you start.
- And then the other thing is, are you adding anything else there,
- Nope.
- Specifications make sure you know what you want, like your kitchen, what you're gonna do. Stone tops. Make sure you have all that thought of beforehand because what people don't price it up is this. And then when your builder sends you a last few invoices you're like, oh, I never had that on your first price. And that can increase the price for sure.
- Yeah, so it's making sure that you have your final specifications. Your fittings and fixtures in line with what you can afford. So it could be low-end it could be budget range, it could be medium range or it could be the luxurious range and ensuring that all of those things are captured prior to finalizing your detailed quote. So what builders might do is put a provisional sum item or a it's called a prime cost item into your quotation. So what that means is it's an allowance for the supply. So prime cost item would be the allowance for that supply item. So pretend perhaps a particular sink, a provisional sum item is an allowance for the supply and labour of a certain aspect of your job. And, you know, it is really critical that those things are finalized before your quotation is accepted. Because what happens is that, you know that allowance could be for a thousand dollars for example, within your contract so you think, great this is gonna cost approximately a thousand dollars. And then it ends up that what you've chosen is actually $5,000. So there's an automatic $4000 blow out and additional costs to your, to your job, so it's really making sure that your builder has considered everything, finalized you know, your specifications and exactly really what you want before your final quotation is accepted.
- And you know all Louise, there's always changes. Guys I've been in the renovation game now for how long and there's always changes. And it just happens because people might see things happening during the reno and they're like no, I want to change it
- And that's okay. It's okay if you want to change it. And we're just making you aware of these things.
- You communicate with your builder, because if he changes there's going to be a change in your price there. So if he forgets about it now he's going to put it at the end of the price. So we try to educate and show you that things happen. And last but not least, I would put a 10% contingency So if your renovation's a hundred grand, I'll be putting an extra 10% on your budget. just in case for contingency, because
- So there's lots of unforeseen things that happen. So, you know, as much as you can have, you're clear about everything, what it's gonna cost before you start your job, there can be unforeseen things that may happen if, particularly if you're in an older house. so you've got the likes of asbestos or what else?
- Foundation sinking, might have be underpinned. It just happened on a project, so.
- Yeah, so it's just making sure that you've got an allowance there as well, to make sure that you can afford everything and that you're sticking to your budget before your job starts, so
- That was a long question, but the detail.
- Yeah, so that's given value to everybody
- Yes
- And let's hope it helps, any questions on that, just give us a shout and we'll be happy to help, see ya.
- See you guys
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