| Planning Your Building Project Budget: Tricky Costs|
|Before you start designing and building a new church, you must make sure to carefully count the costs. For starters, here are two tricky costs that you must be aware of.|
The services provided by architectural firms vary from project to project, as do the fees charged for those services. For instance, the scope of the architect's services may vary depending upon whether the church will put the plans out to several general contractors for competitive, lump-sum bids versus working with a pre-determined construction manager. The size and location of the project are variables. Whether the church will require the architect to inspect the project and review contractor billings will also affect the fee.
Many architects quote a percentage fee based upon the estimated construction cost of the project. This may lead the architect to over-design the facility in order to increase the construction cost... and his fee. Even if the architect is willing to fix his fee based upon the estimated project cost, how is that cost determined? For instance, High Architects, Inc. may charge 8% of the estimated project cost. "High" estimates the cost at $80 per square foot. Low Architects, Inc. charges 7% but estimates the project will cost $100 per square foot. In this case, the cost of working with "High" is lower than working with "Low". Therefore, the church may want to establish a fixed architectural fee based upon a maximum project budget. This also informs the architect up front that he is to design a facility that can be built within their budget. If the project budget must later be increased in order for the church to get everything it needs in the building design, then the architect's fee can be increased accordingly.
While it is difficult enough to identify and account for the "hard costs" of a building project... the bricks and sticks of the church; many churches fail to anticipate other less obvious expenses. "Soft costs" are all the incidental expenses that a church will spend in design, planning, financing, and gaining government approvals for their building project. They can also include the costs of making the church building functional after construction. The latter costs involve office furniture and equipment, telephone systems, classroom furnishings and supplies, interior decorating and more. This column will deal in more detail with the former category.
Many "soft costs" are related to financing the land purchase and construction. Settlement fees include title insurance and underwriting fees. The church may want to prepay the loan interest (also called "discount points"). The lender may require an appraisal and an environmental impact study. It is usually less expensive to obtain the construction financing and the permanent mortgage from the same source so that fees are not duplicated.
The church will probably hire a civil engineer to design the storm water drainage systems, utility connections, site elevations, and street entries, and prepare the paperwork for obtaining the required permits. This work may not be included with the services offered by the architect who designs the building.
It is prudent to prepare in advance for the "soft" costs of the new church project as well as to allow for a contingency fund for any unexpected additional construction expenses.