Who Takes The Financial Risk on Your Building Project?

Financial Risk

Financial Risk

Who Takes The Financial Risk on Your Building Project?

In the last 20 years the extent of construction drawing and specification done routinely by many architects has reduced for two main reasons:

  • Contractors and specialist subcontractors have taken on the detailed design and specification after planning stage by offering design-build services. This passes the financial risk to the contractor, but the client loses control over the design and specification because the contractor makes choices based on cost to stay within their quoted sum. The end result is usually a serviceable building, but with reduced design quality
  • Architects have responded to increased competition by cutting their fees to maintain turnover. That means they have less time to spend on the detailed design and specification leaving some of the work unscheduled. That leads to the classic situation where the contractor can claim lots of extras in site. The inexperienced client does not realise that they are being exposed to this much higher financial risk when they decide to spend less money on design fees

The service we offer is based on thoroughness of design and detailed construction documents. We believe that high quality construction drawings and specification are essential as they pass the cost risk from the client to the contractor. The result is a more predictable final project cost with fewer changes needed on site and less chance for the contractor to charge a premium cost for extras.

At tender stage we analyse the bids to identify where the financial risk has been accepted by the contractor and where it has been left with the client. Once that is clear, we can report to the client on the proportion of risk they are taking, usually as a percentage, and that helps them make a decision about how to proceed. If the proportion of risk is high, we can then agree how that is managed.

Once on site, we use a tried and tested system to record every change using a cloud based system accessible to the client and the contractor, so that the cost of changes are transparent and up to date. This really does work and usually there is no final account discussion needed, because the change list is the final account.