How a design-build firm keeps you in charge of the cost
Managing the cost of a remodel can often feel like climbing a very dangerous mountain. Do it right, and there’s something spectacular waiting for you at the end. But even a small mistake could be incredibly costly. What you need is a guide to help you manage the risks and take the safest path to your goal. Fortunately, a design-build firm can help you remodel your home while keeping you in charge of the cost.
As one of Portland’s leading remodelers, Lamont Bros. uses the design-build model to guide homeowners through the remodeling process. Every home remodel must fit a specific set of needs and a specific budget. The design-build process makes it possible for you, the homeowner, to balance those two factors from start to finish.
This article will discuss how the design-build process ensures that you remain in charge of the cost of your remodel. We’ll cover the basic design-build principles that put the budget in your hands, as well as how this model differs from other types of remodeling contractors. When you finish reading, you’ll be able to identify and fulfill the important role you hold in the design-build process. Below, you can read about:
- How a design-build firm help you manage your costs before they become an issue
- What can go wrong during the design process that might cost you later
- Whether a line-item budget sheet is helpful when working with a design-build firm
- How to effectively analyze your remodel costs
Balancing the Scope/Cost Scales in Design
In every remodel, the scope and cost are directly correlated. When the scope increases, the cost does with it. Working with a design-build firm gives you complete control over the scope and cost of your project.
How? By combining your remodel design team and your build team under one roof.
Take the guesswork out of cost estimating
What sets a design-build firm apart from independent designers or contractors is its ability to connect cost directly to designs.
An interior designer often has no way of accurately predicting how much it will cost to build their designs. At the same time, an independent contractor will likely have a difficult time adjusting a set of pre-made designs in the middle of construction to meet a client’s budget.
Because a design-build firm has both designers and project managers in-house, they have all the information they need to accurately budget how much it will cost to build a set of designs. As a result, they also know how changes to the plans set can raise or lower the overall cost.
Manage the budget from the beginning
When you first start designing a remodel, the first two things any good designer will ask are:
Question 1: What problems do you need to solve in your current space?
Question 2: How much are you willing to spend to make it happen?
As you work with your designer to develop designs for your remodel, those two questions provide a set of guardrails. From here, your team will use the following budgeting process to guide your project.
Stage 1. Your build team analyzes the cost of past projects similar to the one you’re proposing
Stage 2. You’re provided with an initial budget range for your project based on the scope
Stage 3. As your designs develop, your team assembles a custom budget based on cost projections, past projects, and similar products you might select.
Stage 4. Once your remodel design plans are complete, your team uses the plans to develop a firm construction cost.
Stage 5. If necessary, your design team will help you adjust your project scope to fit what you want to spend.
Compromise when necessary
When faced with the choice between scope and cost, it’s important that you recognize where you are willing to compromise.
Perhaps your initial budget for a fully custom kitchen remodel was $120,000. However, to accomplish what you had planned, you’ll have to spend $160,000. Your option is to either raise your budget by $40,000 or reduce the scope and complexity of your remodel.
If the kitchen’s design is important to you, maybe that $40,000 is worth it. But if it isn’t, perhaps you’d rather downgrade your cabinet line or appliance package, instead. Or maybe, the best option is a bit of both – you increase your budget by $20,000 and reduce the scope to meet a total budget of $140,000.
The point here is that the choice is yours. You don’t absolutely need to pay over your budget — there are solutions to get you a remodel while reducing its overall cost by reducing its scope.
What can go wrong in the design process?
Your build team will do their best to provide you with an accurate cost projection for your remodel. However, there are some issues that may result in your final bid price coming in significantly higher than the initial budget.
- Material or Labor pricing may be over budget due to increases
It’s possible that the cost of items or services could increase significantly between the initial budget and final pricing. For example, in 2021, the cost of lumber tripled in just a few months, raising remodeling costs, too. With inflation on the rise, it’s not uncommon for prices to change even month to month.
- The materials and finishes you select cost more than expected
The initial budget of a remodel uses average costs for material and finish selections. If you select high-end light fixtures, flooring, cabinets, or tile, that can drastically increase the material costs of your remodel.
Many design-build firms will use a “Good, Better, & Best” ranking system to help you make selections. Be mindful of these decisions — if you’re choosing a lot of items in the better to best categories, expect your budget to come in on the high side.
- Constant scope changes make it impossible to establish a budget
You should want a remodel design that meets your needs as a homeowner. However, if you are constantly adjusting the scope of your remodel (i.e. adding a bathroom remodel to a kitchen remodel or changing from a 1 to 2-story addition), it becomes impossible to start solidifying your budget.
It’s okay to make little changes to your design to fine-tune it. However, when you’re constantly changing the big picture, that prevents your team from being able to advance your project through the costing process. Continue in this pattern long enough, and you’ll eat through your design retainer before your designs are complete. If this happens, you’ll have to pay another design retainer to continue the process.
Can I see a line-item breakdown of my remodel budget?
When a homeowner finds themself in the uncomfortable position of being over budget on their remodel designs, the natural response is to try and reduce the cost themself. For many, the easiest way to do this would at first seem to be a line-item breakdown of the budget to the smallest detail possible. Then they could go through and determine what they could cut.
Ultimately, this isn’t the best way to figure out how to reduce the costs of the remodel. It can be very frustrating for the owner and the contractor and wastes time that could be spent value engineering the project.
Category Breakouts Are Not Most Effective and are often a Distraction
There are many ways to categorize costs in a remodeling project and the most common isn’t always the most helpful. Most companies in their estimating processes break costs out by some type of cost-code or cost category.
Your contractor might take a bid from a plumber and place it as a lump sum in their budget. Then they might take a lump sum from an electrician and place it in their budget. They also typically might have a lumber package from the lumber supplier that’s itemized for each 2×4 that goes into the entire addition.
Your objective is to reduce cost. Working through a category breakout like this is more hindrance than help in your quest. You might want to consider reducing costs by eliminating work in particular rooms from the scope. Or, you might want to consider shrinking the addition by 100 SF with smaller room size. You might even want to eliminate a feature within a large cost category or consider simplifying the roof design. None of those options would be reflected in any way in a cost-code or category breakout.
Categories are Codependent
Category line-items depend on each other for proper installation. For example, let’s say you decide that your $4,000 workstation sink is too expensive.
You won’t save that entire $4,000 by simply removing it. Now you have to rearrange your cabinet design with smaller cabinet, may have a revision of plumbing costs, and will have to revise countertops and possibly backsplash. Those secondary changes could save you the $4,000 line item, but they could also add costs that eat up the entire amount you thought you’d save.
Categories are not optional
You might look at a category breakout for your remodel and decide you don’t want to pay $5,000 for demolition and protection work. Unfortunately, those aren’t optional. If you want a remodel, the remodeled space has to be demolished before it can be re-done, and it has to be done to jobsite preparation standards.
For instance, the drywall in your home has to be redone any time your build team opens a wall, be it for electrical, plumbing, or structural work. Per building code, repairing the drywall isn’t optional. A better way to save cost is to strategically consider how you can avoid demolishing some drywall to save in drywall repair costs.
How should you evaluate costs to reduce the cost of your project?
As you move through the design phase, there are some highly effective way to manage the budget and control costs:
Budget from big-picture to small-detail. Not small-detail to big-picture.
You should think in the beginning of the remodel about the large features and scale of your project and then move to the detailed requests. If you can’t create a budget range that makes sense for you–don’t move into the detailed portion of the design process.
Prioritize the features in your project.
Spend time to clearly define why you are doing the project and what features and solutions are most important. Then identify what is a nice to have and a luxury item. Once you have it broken down into those groups you can isolate items that could be sacrificed and your design or construction team will be able to assist you in finding ways to reduce the cost of your project.
Additional budgeting options
If you feel like budgeting and prioritizing this way isn’t right for you, it could be better for you to have complete access to all the costs of the remodel in whatever form the contractor does. If you are okay with a higher level of risk and potentially stress, you can do this by working with a cost-plus contractor. This type of contract allows you to manage each individual bid that your contractor gets with the understanding he is adding a percentage on top of that and billing you for the total.
Most people opt not to work with a cost-plus contractor because it involves more risk for the total price of the remodel. You might have more visibility over the bid that the contractor got from the electrician, but you’ll have less control over potential issues.
There is often no cap to the total price, and the contractor is incentivized to budget low in the beginning so that you’ll start the work. Construction expert Michael Stone also says that cost-plus contracts are nine times more likely to lead to legal disputes.
Want to learn more about the design-build process?
After reading this article, you should have a better understanding of how to stay in control of your remodel cost when working with a design-build firm. If you feel like the Design/Build process is right for you, learn more about it here.
Are you ready to start designing your remodel, but don’t know how to get the ball rolling? Click the link below to get connected with a member of our design team. We’ll schedule a free design consultation to talk with you about your project and how to manage its cost.