Financial Control and Budgets

Financial Control

• Financial control covers establishing budgets

Establishing Budgets

• A budget is an annual operating plan for the upcoming year
• Budgets are set for either a calendar year (January - December) or a fiscal year (12 months)
• Many businesses establish budgets aligned with the calendar or fiscal year
• Consulting firms such as Architectural and Engineering firms may create budgets based on individual projects
• Assets are economic resources that can be owned or controlled to produce value, like money, with money itself considered an asset or accounts receivable
• Tangible Assets include land, buildings, and inventory
• Intangible Assets include copyrights and stocks
• Liabilities are financial obligations, such as owed money
• When clients inquire about architect fees, they ask how much is charged
• Architect fees can be structured as a percentage of the construction cost, typical for larger projects
• Negotiated or Stipulated Sum fees are typical for smaller projects
• Hourly Rate fees are also used for smaller projects
• It is important to plan rather than start with numbers ($$)
• Considerations should include the firm's activities, who will execute them, the completion date, and the duration needed
• Hourly rates and charge-out rates, or bill-out rates, are important for establishing budgets
• Bill out at 2.5 times your hourly rate of pay
• 1.0x covers salary
• 1.0x covers direct costs like reproduction, indirect costs like equipment and rent, and payroll costs
• 0.5x covers profit
• Freelancing is self employment
• Freelancers work on a contract or project basis rather than being employed by a company
• Companies hire freelancers for specific tasks, but freelancers handle their own taxes, health insurance, pension, and other contributions
• Freelancing affects the fee structure with considerations for computer hardware, computer software, floor space, furniture, and general office supplies

Invoicing & Timesheets

• Consulting operates mainly on an hourly rate basis
• Fixed fees are determined by the amount of time required for tasks
• Base fees are different from extra fees
• Extra fees are typically based on hourly rates.
• Clients require task details to validate invoices
• Tasks and time should be recorded on time sheets
• Invoices should capture data
• Invoices are typically issued monthly
• Billing can occur on a work-in-progress or per-phase basis

Controlling Costs

• Architectural firms ensure projects remain on budget through:
• Careful planning and accurate estimating (overall and by project phase and discipline)
• Employing the right staff for the job
• Ensuring fair pay consistent with industry standards
• Setting up and achieving project deliverables
• Frequent cost reviews
• Monitoring for scope creep
• Adjustments as needed
• Avoiding repeat mistakes

Project Phases

• Predesign
• Concept or Schematic Design (SD)
• Design Development (DD)
• Contract Documents (CD, CDOCS)
• Tendering
• Contract Administration (CA)
• Post Construction

Predesign Phase

• Collecting all the required information and documentation and forms the basis of any design
• Includes facilities programming, existing site and facilities analysis, feasibility studies, site analysis, surveying, geotechnical investigations, traffic and parking studies, inventory of existing furniture, fixtures, and equipment (FFE), energy analysis, master planning, environmental studies, marketing studies, financial analysis, project financing, architectural competition advising, proposal call preparation, test fit planning, and program costing

Schematic Design Phase

• It is the initial phase in design review that develops an approach and overall direction for the design approach and the projected solution
• It might need multiple design iterations
• Includes various elements such as a review of predesign documentation, conceptual 3D models, drawings, sketches, renderings, revised programming space sheets, interior design concepts, site planning, code analysis, input from all building engineering disciplines, broad building design approach to requirements, measured plans, sections & elevations, initial material selections, concept design report, cost estimate +/- 10-15%, LEED Reports
• The client gives architect programme and requests cost limit
• The architect prepares estimate to check clients cost limit
• The client and architect agree on programme and cost
• Schematic drawings are prepared
• Final cost plan with costs allocated to elements
• After this, in design development

Design Development Phase

• Developing a detailed review of all aspects of the project to give direction for the preparation of Contract Documents
• Incorporates all disciplines of engineering, as well detailed floor layouts to prove workability
• Includes detailed sections, measured plans, sections and elevations, internal and external renderings, detailed material selections, updated programming space sheets, refined interior design concepts, site planning, detailed code analysis, estimated cost +/- 10%, Design Development Report, LEED Reports and requires sign of by the client
• Designs exceed the target or are within target cost
• Design costs are checked and tabulated
• Developments include detail designs prepared for each element, , creating alternative designs within target cost, and produce final cost plan
• Requires confirmation that project can proceed to contract document drawings

Contract Documents Phase

• It is based on sign off from the Design Development phase
• They involve all disciplines with the goal of creating the basis of the contract between Owner and Contractor
• Larger projects may have three stages with detailed deliverables at each stage, 33%, 66%, 99% (pre-tender)
• Almost 50% of effort on a project
• Involves integrating all engineering disciplines and finalize coordination, resulting in the final detailed and dimensioned floor layouts
• Includes detailed building sections, wall sections and details
• Measured plans, sections and elevations
• Covering all updated space areas including final interior design, drawings and details.
• Detailed material selections (interior and exterior) where there are large scale details of all disciplines.
• Involves creating site development drawings, landscape and civil plans along with detailed code analysis
• The Cost estimate is +/- 3-5%
• Requires final specifications and must be signed off by Client
• The documents include working drawings and specifications will be prepared and it will be followed by an interim cost check.
• From this a final estimate and cost analysis
• Followed by tenders

Tendering Phase

• Involves advertising for bidders, communications to all bidders
• Includes a review of any clarifications as well as the collection of tenders
• Requires the opening of the tender and includes an analysis of tenders in addition to the validation of bids
• Also includes the preparation of a tender report including recommendations to Owner (Client)
• Finishes by awarding the contract to a successful bidder

Contract Administration

• Manages an owners money
• It is a phase with potential litigation
• Can involve controversy and finger pointing
• Requires intense focus and accurate documentation of all communications with the contractor will be essential along with the careful review of the construction site and the anticipation of potential issues

Cost

• Cost planning is done by:
• setting a Cost Limit and then establishing Requirements
• It leads to a First Cost Plan and includes interim cost Checks as well as a pre-tender estimate
• It is followed by Schematic Drawings then Design Development

Post Construction Phase

• Consists of close out documents and warranty letters including commissioning, conducting final inspections, identifying any deficiencies including any necessary modifications to As-built drawings,
• Creating operation and maintenance documents in addition to test reports to determine project turnover and also complete final billing