Having worked with a variety of defective buildings for many years, Prendos Quantity Surveying Team Leader Senthil Arumugam has seen jobs at both ends of the scale.
“We’ve worked on everything from houses where the weathertight issue is solved simply by exterior recladding or, very rarely, localised repair, through to bigger commercial properties where an entire external and partial internal frame replacement is required. The problem, for us and the client, is that the extent of the issue is often not clear until the cladding is removed – which makes it very hard to estimate costs up front.”
When we look at remediation of various apartment projects, the potential for budget blow-out may lead one to think total re-building is a better option. But, based on cost benchmarking analysis, remediation is still more economical than a complete rebuild – even when it comes in over the expected budget.
So why does remediation work so often cost more than expected? And how can you allow for these extra expenses? Senthil says a good place to start is with a realistic Capital expenditure budget.
A major remediation budget can typically be broken into seven portions, plus a GST requirement.
- Construction (builder’s labour, materials, subcontractor costs plus overheads and profit)
- Design (architecture, service and specialist consultant fees)
- Project Administration (fees to manage the job and coordinate all parties)
- Building Consent (council costs to inspect and consent the remediation works)
- Insurance (insuring the contract works and existing structure)
- Legal & Expert Fees (lawyers or other advisers that may be required)
- Contingency (to manage the identified risks)
“Based on the cost benchmarking analysis shown below, a good rule of thumb is to put aside an additional 50% of your initial budget as a ‘rainy day’ Reserve Fund to cover unexpected costs. You may or may not need all of this, but better to be safe than sorry!”
To work out where your unexpected costs may lie, Senthil takes us through a few of the typical reasons for budget blow out in remediation works.
1. Inadequate Investigation:
The Building Surveyor generally carries out the investigation on walls and deck areas but not on the roof and subfloor spaces due to access issues.
2. The Extent of Timber Decay:
When a building is fully cladded, it’s difficult to assess how much damage there is until we’ve started the job. Determining the timber species and level of treatment retention helps. If internal lining, particleboard flooring and internal floor joist has to be replaced, it can require things like temporary propping or covering flooring, fittings and appliances. Buildings with concrete floors tend to lower remedial works.
3. Labour Hours:
Unlike a new build, remedial works can be complex and inefficient. They have an intrinsic ‘stop/start’ nature – due to Council hold ups and the new issues that can arise daily. Depending on the extent of the damage, extra material handling and logistics may also be required – all of which increases labour hours.
Council inspectors must carry out inspections and approve the work at each stage before builders can progress. They may stop work or put the project on hold when any stage is not fully compliant – not only disrupting, but increases costs involved.
5. Structural/Fire Works:
Most of these buildings were constructed when requirements were poorly understood and not enforced, so there are costs involved in getting them compliant. Replacing low cost or flammable materials, fixing inadequate structural bracings/connections and installing things like fire barriers, nogs and fire alarms all lead to extra work.
6. Inclement Weather:
Even when fully covered, if the weather packs in remediation jobs can easily be delayed. Strong winds may mean contractors can’t operate hoists and cranes, and there could be damage to the shrinkwrap. Generally, the contractor is entitled to a time extension claim if bad weather interferes with work progress, but not to compensation.
7. Variation Works:
Variations are inevitable in remedial projects. Things like electrical, plumbing, deck, flashing or bathroom remediation issues are not conceivable during the design stage. While the Quantity Surveyor will do their best to budget for unforeseen costs, the extent of these variations can’t be fully predicted.
8. Proprietary Products:
When building products required for a job are only manufactured/ installed by one vendor, any delays from that vendor can hold up the entire job.
9. Betterment Works:
While we typically try to reuse things like carpet, bathroom fittings and kitchen appliances, sometimes this isn’t possible. Whether they’ve been damaged or are simply no longer suitable, the cost of replacing fixtures and fittings can add up.
The asbestos (for pre-2000 buildings) and methamphetamine decontamination processes involve testing, cleaning, disposing the hazardous waste, re-testing, strip out or demolition – all of which can cause delays and additional costs.
At the end of the day, the final cost of remediation works can be a bit of an unknown. But as Senthil says, while it’s impossible to accurately budget for these additional costs up front, you can still be aware of them and put funds aside just in case.
“Your remediation contract will require a Quantity Surveyor to evaluate costs based on evidence, and a fair and reasonable ‘risk cost’ will be agreed on. Once works begin, It’s up to the builder to be proactive and solution driven around problems that arise, and it’s up to the Quantity Surveyor to make sure the owners are well informed every step of the way. Getting a regular cost report from the Quantity Surveyor will help owners understand budget movements and keep costs under control.”