Is tendering out designs the best way forward?

Illusivedreams · 21st Mar, 2019

Just to put things in perspective I just finished a granny flat in. Sydney.

60sqm interior
24sqm alfresco
2.7m ceiling heights
Mid spec finishes
55sqm driveway
Fencing
All in $160,000

shreko · 2nd Apr, 2019

Angad Singh said: ↑

Hi @frank22,

No problem at all, my friend. Happy to clarify. I'll go into a little bit more detail on the process.

The first point I'd like to make is this; the purpose of good design is to add value to the property and it is an incredibly important element to your project. I would be focused on trying to get the best house on the block for the following reasons:

There is a "flight to quality" phenomenon that occurs in depressed markets. So the good properties sell, and the bad/average properties sit on the market and need to offer heavy discounts. If you are in Perth (like me), then you should be VERY careful about this at the moment.

Good design can disproportionately add value (without adding cost) by ensuring a functional layout and a 'wow factor' that ultimately should create urgency and competition amongst buyers. Things like solar orientation and the 'feel' of spaces make a tremendous difference.

Having a desirable and scarce product is your best shield against risk.

Secondly, custom designs are not inherently more expensive than cookie cutter plans. As a builder, I can absolutely guarantee you that the price of bricks or labour doesn't change based on where you put them. The reason it might that appears that cookie cutter designs work out cheaper is because project builders charge higher than usual margins on variations, as their entire system is based on scale and volume.

It's taken me almost 10 years to establish my team and find the right people I work with, and I can tell you that there was a lot of fumbling to get to this point, but this is the approach I would take:

1) Concept Stage (floor plan and 1 elevation only)
My architect charges approx $500-2000+GST for a single story home. Honestly, this is the highest ROI activity in your entire project, so I wouldn't skip this, even for a single home. If you are based in Perth, I'm happy to refer you to the architect I use (just drop me a PM). Alternatively, maybe someone else on here can refer you to someone that is familiar with your location.

Make sure you do your research. What does the area need? A 3x2+theater, or a 4x2 with one living area? WIR's or a double vanity? This drives profit in your deal, and so you are the person that needs to be making the decision on this. Do not leave this to your architect, and definitely not a project builder.

Study your council areas and look for ways you can add value. Can you get concessions on the built-up area, or setbacks or something else that will make your house better? Trust me, this can add huge profits to your deal. Again, do not leave this to your architect, and definitely not a project builder. We recently turned a project builders '3x2' design into a '3x2+study+media room,' simply through the application of some concessions available to us and more efficient design. You can imagine what this does to your profit...

Ensure your architect/designer puts together a good floor plan that is in line with the above. Ask loads of questions. If you see something as not quite right, then change it. Get it right from the start. Usually, it takes me 2-5 revisions to get something I'm happy with.

Once the floor plan is done then you can start on the elevation. You want to ensure there is at least one 'hero piece' that makes your home stand out without breaking the bank.

Get a builder that you trust to estimate the plans using an appropriate spec for the area. Do not cheap out on finishes- you are only hurting your profit and increasing your risk. Almost no one ends up using the 'base spec' of a project builder- so ensure your builder understands what you are going for. Ask your builder for opportunities to add value/reduce cost. This estimate is not suitable for comparison because there are so many assumptions, and you do not want to incentivise your builder to underprice.

You may also want to to have a quick meeting with the council to run through the areas where you need concession. This is a good practice to avoid delays and questions later and start an open relationship.

I also get a real estate agent to value the properties and give feedback on design and spec.

2) Approval Stage ($1-2K+GST)

If all your numbers stack at this point then go ahead and prepare the necessary stuff to lodge. The architect usually charges $1-2k for this.

I like to attach the drawings and add any diagrams to communicate how this is in line with their future vision for the area

Dress up the streetscape and landscaping in the elevations and stuff to make the development look sexy (even if you are going to cut out some of the stuff later). Make sure there is a lot of greenery in your illustrations. Presentation matters A LOT. Council planners love good looking design, and they are much more likely to be on your team if they see you as adding value to the community.

Attach a covering letter explaining your intent and justification

3) Construction Drawings/Tender

After you have your approvals in place is when you should be going on to construction drawings and getting tenders. For simple projects, builders can get pretty accurate without full engineering details, but for more complex projects it's probably better you get those done before you ask builders for 'quotes.'

Never ask your builder for 'price' without providing them with an inclusions list. You are opening yourself up to 'underpricing' and large variation fees. Also, it defeats the purpose as you are not able to compare 'apples for apples.'

Make sure you provide your builder with appropriate detail (often this means a soil report and engineering detail) if you want a fixed price. This can cause significant variation. Don't be fooled by the term 'fixed price contract' - a builder can legally still charge you a variation if the assumptions of their price change. The problem with project builders is they charge you a very large margin on variations (30%+), smaller builders like us charge a much lower margin on variations (0-10%, depending on the reasons for variation).

Be sure to work closely with the builder that has helped you so far. Property development is a long term game and your relationships and reputation matter. Having said that, it's totally reasonable to cross-check the price to make sure it is reasonable. Some of our less experienced clients do this. Our more experienced clients generally tend to know what stuff should cost and whats a good but fair price.

You will find most builders (at least in Perth) will almost always end up very close in their pricing if you have been clear enough with your information (within say +/-2%). Do not discount the importance of professional service, transparency and workmanship. As a client, you have no idea how diligent the supervisor will be, but when all is said and done you will be the one holding the monkey. Trust me, if your tiles break because the builder didn't pay the tiler enough to get enough glue, it will be your problem. If the paint peels off because the supervisor didn't do the appropriate quality checks on the plaster, it will be your problem. One trip to the "shonky builders" facebook group will give most people sleepless nights, and just about every project builder has been named on there. Factor in your 'qualitative' analysis on your builder, along with their price so as to protect your mental energy

Anyway, hope that helps clarify the process on how I think you should approach every single deal regardless of how small or large, the target retail price point, and whether your budget is 200K or 2Mill... Obviously, the team may change (as different builders/architects have different expertise) and the budgets may change based on the project, but the process and principles remain the same

Cheers,
Angad
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Anyone wants building advice.. this guy knows it

frank22 · 2nd Apr, 2019

Sackie said: ↑

I like to use a cost estimator in my design stage and then before tender he will document what materials to use in build as he knows most cost effective ways to build/materials. Then when builders tender they know exactly what I want and price usually comes back very close to what my estimator estimated. Any below ( all things being equal) means a good deal and if too above could mean too inflated a build cost.
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Hi Sackie
You mentioned cost estimate in the design stage
Should i approach a estimator prior to talking to a designer ? Lets say i want a 146M2 single storey +DG ,should i speak to the estimator first? Or can the designer alone keep it within budget
Thanks

Sackie · 2nd Apr, 2019

frank22 said: ↑

Hi Sackie
You mentioned cost estimate in the design stage
Should i approach a estimator prior to talking to a designer ? Lets say i want a 146M2 single storey +DG ,should i speak to the estimator first? Or can the designer alone keep it within budget
Thanks
Click to expand...

Hi Frank,

Many ways to go about this . Designers are not all made equal and while some some may be good with cost estimating others may not . My preference is to use an estimator. But if your building a single storey 1 dwelling then an estimator may be overkill. If you can get a designer who is familiar and on the ball with costing you should be ok.

Joynz · 2nd Apr, 2019

frank22 said: ↑

The cedar 148 is approx 17 sqs at $301k +15k plans and town planner approx 4k
At the end of the day i understand it all comes down to site analysis/survey
I am working on a budget of $350k and want a 18 sq preferably 3 bv town house,a single storey would do ,with upgrades such as 2.7 ceiling ,splash back kitchen, eaves ,cooling
Might even be up for another single garage, if the existing carport has to go ,so i am cautios regarding hidden costs and going for a single storey
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Have you got quotes from other volume builders?

That design is pretty expensive for a small single storey.

shreko · 4th Apr, 2019

Probably give it to an estimator once you have the first concept floorplan with elevations

shreko · 4th Apr, 2019

You just need to find someone who a) will work with you and understand what your goal is and b) won't cost an absolute bomb. Stay away from a big QS firm, try find someone who just does some freelance estimating.

mickyyyy · 7th Apr, 2019

Westminster said: ↑

I have found a lot of builders tend to be cheaper on their own designers than when they tender. I think one of the main reasons behind this is that the designer designs to the way the builder constructs and they are more intimate with the plans than when they receive plans via tender that they haven't had input into and there are more unknowns with so they put in some risk amounts.

Having said that I've done it every way - builders designers, building brokers, independant drafty and architect.

For me it really depends on the site, the budget, the council and the risks. For a triplex in a middle ring area I'd probably lean to broker or development builder designer who has previously built and got DAs for that council.
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My builder friend has his own architect that he works with as he assists in design to keep costs down and build time down. He is doing one job now that I saw and things he pointed out could of saved owner 50k plus 2 months time saved but he was not involved in planning process.

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Is tendering out designs the best way forward?

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