Value of Preliminary Estimates

Dear John and Anna*,

We provide a preliminary range of costs early in the process using cost data from recent projects. Many builders offer this same initial information. This preliminary project scope and estimate is based on program requirements or conceptual designs only, without completed plans and specifications. The purpose of this preliminary estimate is limited to evaluating the ballpark match between project scope and project budget and preliminary estimates are quite valuable for this reason. If your budget expectation is $1.4M for the total construction costs for your home and the costs for a comparable custom home are $2.2M, you have early bad news and actionable good information.

Some clients use preliminary estimates (mistakenly, we believe) as a primary factor in selecting a builder. Here’s why that does not work.

• Preliminary estimates are based on incomplete information and, regardless of the form in which they are presented, they are (at best) generated from data from recent similar projects.
• Preliminary estimates are not a commitment to build a defined scope of work (based on full construction documents) for a fixed sum of money.
• Preliminary estimates are not based on fixed quotes from vendors and trade partners.
• Builders with strong reputations and robust experience that are capable of building your project will likely have similar direct costs and similar cost structures, yielding comparable overall costs for the same project.

We strongly encourage our potential clients to learn about and interact with builders; understand their motivation, beliefs, and values; tour projects; check references; understand their team structure, systems, and resources; and learn about their communication style. These are all key factors in selecting the right builder partner.

With your builder partner selected and engaged and schematic design completed, detailed pricing and planning work can move forward. Part of this process is invaluable feedback from the builder, vendors, and trade partners about the most effective and efficient way to achieve the design intent and owner priorities. A scope and budget match rarely happens on the first pass, but the second or third pass typically yields that match.

 

Respectfully,

Randall Lanou
Founder

 

*Full disclosure: not only have we never worked for John Hamm or Anna Osceola, we've never actually met them. Indeed, I'm not sure we've ever been in the same city at the same time. They seem like fun people, though, and we would be happy to build a home for them. If any of you are close friends with them, we would be grateful for an introduction!