Project Cost and Budgeting Flashcards

An architect completes the Design Development phase, and the updated cost estimate indicates the project is 15% over the owner's budget for the Cost of the Work. According to AIA B101-2017, what is the architect's primary responsibility in this situation?

Answer: Propose reasonable adjustments to the project's scope, quality, or budget, and obtain the owner's approval.

According to AIA B101-2017 § 6.3 and § 6.6, if the architect's estimate for the Cost of the Work exceeds the owner's budget, the architect is required to propose reasonable adjustments to the project's scope and quality to bring it within budget. The owner must then cooperate and approve such adjustments. Halting work is not the first step, and redesign is only performed without additional compensation if the architect fails in this duty and bids come in over budget, with certain exceptions for market conditions.

Which of the following cost estimating methods is most appropriate for an architect to use during the schematic design phase to determine initial project feasibility?

Answer: Cost-per-Square-Foot (Area/Volume) Method

During schematic design, the project details are not developed enough for detailed estimates. The Cost-per-Square-Foot (or Area/Volume) method is an order-of-magnitude estimate based on historical data from similar project types. It is the most common and appropriate method for establishing a preliminary budget and testing project feasibility at this early stage.

A client is developing a total project budget for a new restaurant. Which of the following items is considered a 'soft cost'?

Answer: The cost of the land and financing.

Soft costs are project expenses not directly tied to the physical construction materials and labor. They include items like land acquisition costs, financing, legal fees, architectural and engineering fees, and permits. The other options—contractor's fee, kitchen equipment (part of FF&E or construction), and structural steel—are all considered hard costs, which are tangible construction expenses.

In project budgeting, what is the primary purpose of a design contingency?

Answer: To account for costs related to project elements that are not yet fully designed or detailed.

A design contingency is included in early cost estimates to account for the ongoing development of the design. As the design progresses from schematic to construction documents, details are filled in, and the design contingency is typically reduced because the 'unknowns' of the design are resolved. Unforeseen site conditions are covered by a construction contingency.

During a project meeting, a proposal is made to substitute a specified exterior cladding system with an alternative that has a slightly higher initial cost but offers significantly lower maintenance and energy costs over the building's lifespan, resulting in a net savings. This proposal is a classic example of:

Answer: Value Engineering

Value engineering (or value analysis) is a systematic process aimed at maximizing the value of a project by analyzing its functions and costs. It focuses on finding alternatives that meet or improve the project's functional requirements at the lowest life-cycle cost, which may sometimes involve a higher initial investment for long-term savings. This is distinct from simple cost-cutting, which often reduces quality or function to save money upfront.

An owner's total project budget must account for more than just the construction contract amount. Which of the following is typically included in the project budget but falls outside of the 'Cost of the Work'?

Answer: Furniture, Fixtures, and Equipment (FF&E).

The 'Cost of the Work' generally refers to the costs of construction and services provided by the general contractor. The total Project Budget is a broader category that includes the Cost of the Work plus other owner expenses like professional fees, land costs, financing, and Furniture, Fixtures, and Equipment (FF&E). The contractor's bond, allowances, and subcontractor costs are all components included within the Cost of the Work.