Pricing is a complex and moving feast, made harder by recent pandemic-pricing. In the custom homes sector it's a question of “How long is a piece of string, what’s it made of and who's managing the production”.
In the initial stages, a client's appetite for understanding the implications of their brief (gold taps?) will set the tone for the project. That's somewhat beyond our control as a designer but to mitigate risk of budget blowout I suggest clients add a 10% contingency to their budget, then work backwards by shaving 10% off their desired building. You can imagine; that goes down like a lead balloon!
Once you're ready to garner a Preliminary Budget Estimate (PBE) the selection of the 'type' of builder will have cost implications. Different builders have different approaches to how they’ll price a project and this 'style' tend to flow through to the way they operate as a managing contractor.
Broadly speaking, there are two main 'styles' of builders (somewhat true for commercial but definitely the case for residential):
Design & Construct / Trade-aligned builders (usually carpenters) who apply their trade directly on the project and then co-ordinate all other trades for the build. These builders spread their time between being on site with a small team and working in the office maybe 1 day a week to manage their projects, materials ordering etc.
Pros & Cons of this style: These builders are usually highly skilled at their trade, hard working problem solvers and have constant visibility on site which brings some live accountability. However they also tend to be short on time to do the managing. This can lead to poor management since they can be swamped by information, potentially loosing track of important info. Scheduling of work tends to be a bit adhoc and they’re less inclined to 'stick to the programme' or honour the details of the construction documentation, contract etc. They’re less inclined to resolve defects and this leads to the reputation for not 'finishing' a job.
All that being said, trade-aligned builders may be more affordable because they're more attuned to working in the Design-Bid-Build style (Design & Construct contracts). Ie, you design, they cost the job, then depending who’s leading the build process, the detail therein may vary wildly.
Designers often find that we’re sidelined once our documents are handed over. That’s because good design-intent often gives way to ‘value-management’ and decisions are made on the fly without further consultation or proper representation.Design, Project Manage & Construct. True Managing contractors tend to spend less time on site (between 2-5%?) but they take their role as "managers" very seriously. These builders are more like facilitators who have a background in a trade but prefer to co-ordinate other trades simultaneously instead of spending their time on site "on the tools". They're almost the opposite of ‘trade-aligned’ builders. These ‘higher tier’ builders also come at a higher cost. Generally you'll pay a premium for any higher level of service and you'll get what you pay for. You'll get better communication, better cost management and hopefully fewer cost variations as well as open communication and an open-book or at least an itemised approach to costing / estimating and charging variations.
Another term or type is “Volume Builders”. These are generally not interested in bespoke homes since they focus on mass production however some will take on your project. Be aware that ‘volume’ can translate to a lack of quality control so if you elect to use a volume builder for a custom design then discussion and written agreement about the details is important.
Quality of workmanship depends upon each and every trade, where the whole is the sum of it’s parts; so neither style of builder represents a singular guarantee of quality. The major variation seems to be that trade based builders who spend their time on site have more flexibility in their pricing because they have a higher stake in the work, including their trade (typically carpentry). This allows them flexibility in their costs and ability to cut corners, ultimately giving their profits a wider range. ie. they have plenty of scope to "sharpen their pencil".
Sometimes this represents a saving to the client or a builder who’s willing to be a creative problem solver. Other times it equates to additional profit for the builder but it’s hard to foresee which aspects of the project are at risk. I always say to clients there’s three aspects of any project to get right and you should never compromise on more than 1 of the 3:
Cost
Time
Completeness (The detail)
So whilst ‘trade-aligned’ builders present a higher level of risk, they may present a more affordable opportunity (albeit more rough-and ready). A Managing Contractor who focusses their time managing contracts will often include more time for co-ordination in the initial stages (engineering, selection schedules & general co-ordination) and this will help things progress smoothly so you'll get a consistent level of service within a more controlled time frame. Such builders may also be working to a higher level of risk/reward. They could be charging 15%, 20% or perhaps even 30% as a profit margin (common during COVID) but they're going to work hard for every cent since their business model is unlikely to benefit from taking short cuts.
So you can see there's basically a big difference in where the accountability lies but in my experience if a client can afford a builder who prioritises project management, they'll bring more ‘sanity’ to a project which is good for all and avoid blow-outs of cost and time.
Paid Preliminary Cost Estimates: It’s now common to find builders charging for their time to undertake detailed pricing so even trade-based builders are diverging into two camps. The older generation of builders are more likely to submit an approximate price to win a client and then invoice price increases as variations when they arise, even if there’s supposed to be a fixed price agreement. These practices are reasonably common but ideally best to avoid. If you’ve taken care to design and document what you want then ultimately you want a builder who cares about the contractual and and design detail and who’s willing to communicate any onsite solutions when they arise so that the design intent is carried through. Worst case scenario, builders may not build aspects of the design ‘as specified’ in order to save money. They might argue this is a saving passed to a client, but it’s just as likely to be profit margin that’s maintained and pocketed by the builder.
Eg. Energy Ratings are a key part of the specification commonly overlooked by builders who think that they’re just red-tape. Instead of recognising the long terms saving which arise from constructing the design correctly / as specified, some will choose to disregard things like the correct glazing type or thermal insulation type which will reduce a building’s thermal performance.
And crucially; what do client's expect in terms of fees and their ownership of the design (like paying fees for planning and building approvals and other consultants). Some clients want to pay one fee for design and expect that the builder will include the cost of all engineering and permits within their total build cost, in which case, the builder become 'king' and the designer is left with little influence over the end result once the plans are handed over.
If clients can afford to pay for the individual services of each engineer, permit etc, their ownership brings added benefits including tendering to an open market. Testing the market once all the information is at hand can expose huge differences in individual trade pricing - that gives opportunity for review and consolidation and if necessary, compromise prior to commencement of building works (instead of shocks whilst building).
Finally, regardless of a builder’s methods, shopping around for builders can also be bad. Try to avoid wasting people’s time. To gain a collaborative environment and garner critical feedback find a builder early on in the process that you can trust. Each project and client is different.
There’s no singular pathway to success so the best outcome in any project is determined by a respectful balance between all three parties. Realistically, the client, designer and builder are equally responsible for a project’s success so communication becomes the most valuable tool in the box.
For further info search for "Types of Construction Contracts in Australia" to clarify terminology like "Design-Construct" etc.