Design Principles Pod
Architecture. A hot topic, a buzz word, a realm for the rich and famous, or the thing that your step uncle does? We will be unpacking the good, the bad and the downright reality of the architectural and construction industry. With insights from industry professionals and personal anecdotes from our three hosts Ben, Gerard and Sam, you will be given a look behind the closed pages of those fancy looking moleskins. Tune in and redline out.
Design Principles Pod
Money Talks: The Challenges of Cost in Architecture and Construction
How do you navigate the maze of fluctuating construction costs and avoid the pitfall of overcapitalization? Join us as we tackle these pressing questions and uncover practical solutions to manage building expenses effectively. We’ll break down the frustrations professionals face when clients are vague about budgets and how quantity surveyors can play a crucial role in stabilizing these uncertainties. You'll learn about the importance of concept designs in gauging project feasibility and the cultural factors in New Zealand that influence property investment decisions.
Ever wondered how old rubbish dumps and flood zones in Wellington affect your building costs even before you break ground? We delve into the regulatory and environmental hurdles that significantly drive up expenses, exploring how adopting international testing methods might offer some relief. We'll also discuss how these challenges impact property resale and insurance, providing a comprehensive look at how market behavior is influenced by these factors.
From a builder’s perspective, discover why sticking to familiar methods like NZS 3604 can be a double-edged sword. We delve into fixed-price contracts, the benefits of Early Contractor Engagement (ECI), and why thorough documentation is crucial during the design phase. Learn how open communication and meticulous planning can help control costs while delivering high-quality architectural designs. Don't miss this episode packed with insights on maintaining budget constraints and achieving outstanding construction outcomes.
Chapters:
0:12 - Navigating Cost and Overcapitalization
14:28 - Building Costs and Regulatory Challenges
27:55 - Builder's Perspective on Construction Contracts
43:17 - Early Contractor Engagement and Cost Control
56:15 - Architectural Design and Cost Control
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all right, we're back. So what are we talking about today?
Sam Brown:cost of building terrifying cost of building yeah, money talks. Yeah, man, like I don't know about you guys, but I cannot really cope with it anymore from a cost perspective, like the amount of times you sit down, initial time, like meeting with the client, and you go. What's their budget? And they go. Oh, I don't really know. How much do you think it's going to cost? And even though we're at the relative coalface in the profession, I've got no idea. And what it cost yesterday, it won't cost that tomorrow. You know what I mean.
Ben Sutherland:Yeah, the amount of times I get asked. I get the phone call. Oh, if you had to put it into a square meter rate, what would that be?
Sam Brown:anywhere between so hard.
Ben Sutherland:I'm like what are you? 10 000 no anywhere between 1 000 and 10 000. You know, like you got no design. How am I meant to price something that doesn't exist?
Sam Brown:yeah, it's so classic, I know. And then when clients go on my budgets. You know, x and you go well, I, we can't. You know, we can't deliver what your, what your brief says. For that amount of money, we need to compromise. Oh no, I don't want to compromise. You go, well, you don't have an option yeah, that conversation changes, though once.
Ben Sutherland:Once estimates do come in yeah, how do you guys deal with that square meter rate question?
Sam Brown:try and ignore it like or if there's. But what we've done in the past is, if we've, if there's a very similar project that we've done, we'll often say we've done this similar project. You know, we caveat it with. These are the differences and it cost X, but that's not to say that yours will be the same, you know. And again, it's that timescale thing. You know you complete a project 12 months ago versus trying to compete it now. The value is different. You know, sorry, value is not now. They're worth. The value is different. You know, sorry, the value is not the right word.
Sam Brown:The cost is different yeah, yeah, it's moving so quickly, oh dude it's just, it's just impossible to keep up and I don't know, I don't really know what the right answer is. I don't think there is an answer to it.
Ben Sutherland:Well, I've got a different strategy. My strategy, because I get asked it obviously having a construction company does not help because you're expected to know a little bit more in depth the cost of materials and labor, but I guess asked it relatively often and my strategy is to get concept design done at the very least. I'm just like, okay, cool, I'm happy to like maybe put some sort of thumb in the air estimate, but we need to get through concept design to understand at least a little bit about what you're after here.
Gerard Dombroski:Yeah, otherwise, uh, it's just, it's just completely pointless and it's not, it's no good there's a slight issue that comes up sometimes when you know somebody can't afford what they want. You know it's like are you willing to draw them a concept that you know is like wildly out of their reach? Like I've lost clients in the past refusing to draw something that they couldn't afford. Yeah, Interesting?
Sam Brown:Yeah, because we do it the same way as you, ben, in that we sort of say to clients hey look, you don't really know what your budget is. You've given us this indication. Let's develop a concept based on the aspects of your brief which we think you can achieve, and then we'll get like a qs or somebody to look at it. You know from concept design in that way, and we usually do that and we just sign them up to a small projects agreement, up to stage b2, and then like if, once it's priced, then you can start to make some decisions because you've got something a little bit more concrete. I mean, we've never had the opportunity where clients come to us and been like I have no budget, be free.
Ben Sutherland:Yeah, you know, there's probably two things yeah. There's probably two things they're really looking at when they're asking for square meter rates. A is like some sort of can I afford it? And then B, I guess, is the uh, am I going to over capitalize?
Sam Brown:yeah, and that over capitalization thing's interesting and that we've got it here in our in our sort of discussion points that we want to cover today. And johnny raised an interesting point the other day. He he was like I think new zealanders have a issue with over capitalization because so much of our wealth is tied up in property. Like I'd say in general and this may be wrong, I'd be happy to be corrected, but I know it's the case for myself is that, like I don't have like investments as such, most of our our like you know family wealth you know my wife and I is all tied up in property, and I'd say that's the case for a lot of people in New Zealand, and so there's so much value in that that overcapitalization is a real issue. But what you lose sight of is that real human nature and that actual like why does the value matter when you could just want to enjoy it?
Ben Sutherland:if you know what I mean yeah, I mean, it's a it's a tricky one to answer really. I guess like that's just kind of how new zealand's set up. In a way. All the governments even want to push people into owning their own house. There's a lot of sort of first homeowner initiatives and that sort of thing. So, yeah, we definitely, we definitely set up I don't know if it's about security or if it's, you know, less risk, but even like the kiwi saver system, you can actually withdraw your super annuation if you're going to purchase an asset, right? So it's like it really is how and new zealand is set up in a way yeah, being able to over capitalize.
Gerard Dombroski:This a bit of a position of privilege really. Like if you, if you can afford to do that and have the desire, why not? But like if the sale of your house one day is going to pay for your care home or whatever. You can kind of understand the reason people are afraid to do these things. I think there's a misunderstanding of what is overcapitalising. Like painting your house red instead of grey is probably not overcapitalising.
Ben Sutherland:Well, that's exactly right, though I guess overcapitalising is probably an easier one to overcome if you know some sort of basic, the basic equation, to understand what overcapitalizing is. Even just going through that design process, a lot of the things that we do at the very early stages, you know run your numbers on a feasibility study so you do actually know, working backwards from what you're purchasing the property for what you've got the property for what the property you've already got is valued at, and then where you see the future. Is it something that you're looking to sell within a couple of years or straight away, or is it something that you're looking to hold for the long term? And then working backwards.
Sam Brown:So that's understanding that long-term thing is the interesting one, though, right, because, being a lot of the stuff that you do, you look, you know you're working more with developers, so they're looking, they're purchasing, they're developing and they're moving on, so it's quite a short time frame of ownership yeah or before you realise like a return on your investment, whereas for a residential client that return on investment could be 10, 15, 20, longer years.
Sam Brown:So the overcapitalisation argument is a bit of an odd one, because you don't know what the value of something is in 20 years. So if you're looking at the over capitalization issue, I obviously understand it in relation to lending, but yeah at the same time, like is it not worth investing in your home, particularly from a renovation point of view, for better comfort, better performance, better whatever, and not kind of worrying about those bottom numbers, if you can?
Ben Sutherland:Yeah, that's the crux of it, though Obviously, the lending is based on the market value of the property. So unless you've got cash in the bank to be able to increase the value of the property, then you're kind of, you're kind of, uh, stuck, I guess you.
Sam Brown:you have to, um, stick within the parameters yeah within your feasibility so when you're doing those initial sort of feasibility studies, being because you'll probably do this to far more rigorously and involved than than I do I. I don't know about you, gerard, but like what are you, what are you looking at? Like what, what's the sort of things that you're you're researching and and information that you're inputting to come out with whether a project is going to be feasible?
Ben Sutherland:definitely market research. So we do, you know, just visiting a lot of open homes to understand what kind of what you're after and, um, where that is currently sitting in the market, talk to a lot of real estate agents and then we kind of we we do like a feasibility study and a concept design and we even take that to and have a sit down with real estate agents. Which is pro, has its pros and cons. I think it's a necessary step to get some sort of appraisal from them to understand where it's sitting within the market. That's how you can tie in the whole feasibility. But the cons are you end up kind of at the real estate agent's mercy a little bit, where you end up not designing how they want you to design.
Ben Sutherland:But there's certain things that real estate agents just see every day and they're like this sells, this sells, this sells. But how often do they actually see an architecturally designed house? You know? Very rarely for sale. So it's so hard because some of the feedback you get is just from what is out there, not what is good design this so this harkens back to the end of our conversation with matt in the last pod right, you know, and like not to not to be too rude, but like most people just follow, like, follow the trend.
Sam Brown:You know lovely gold taps, you know muted tan color palette and you know those sort of things and you're right. Like they sell because most people out there are pretty vanilla and they're like oh, I've seen that on instagram or on my pinterest board, so that's what I like and I'm confronted with anything different. They're a bit like oh yeah, much.
Ben Sutherland:Well, also, just going back and answering that question a bit more in depth, we also do extremely rigorous due diligence.
Ben Sutherland:So we we make sure that whatever we've got sort of under contract does have a due diligence period. And this is slightly different for you know someone that's already got property, but you should go through the process all the same and that involves just even like the slope of the section where the services are, you know, the orientation, schools, all the zoning, school zones, all of that sort of thing and ultimately those, ultimately those aspects of the build do add or decrease the cost. The ultimate, the overall cost of construction, like building on a flat section, is always going to be significantly easy and less expensive than building on even like a five-degree slope by quite a bit degree slope, uh, by quite a bit. And then you know the not only that, but there's also this and this is really like some kind of city format, but you know transportation is a huge one, making sure that there's, you know you can get the correct slopes and that sort of thing when you're entering and exiting a property, turning circles.
Ben Sutherland:So there's so many factors that come into play when, when trying to understand what a construction cost more accurately will look like, even like, is there a building on there, already an existing building? What are you going to do with it? Uh, so yeah, we basically do a lot of due diligence and we look at a lot and just through that process you get a bit of an understanding of how you know the cost of construction a little bit more in depth.
Gerard Dombroski:Would you go as far as like a geotech report? Or do a lot of properties nowadays come with one or yeah, it is a mixed bag, if it's.
Ben Sutherland:If it's a bigger site, then yes, but a lot of them come with, you know, at least a builder's report so you know what the state of whatever's on there. It's a risk thing. Basically, if you're putting a lot of capital into it, then purchasing a geotech report and getting it surveyed is low risk doing. You know, doing that up front than doing making a mistake and doing it later.
Sam Brown:So the answer is yes, it's a true word if it's a bigger site yeah, it's a tricky one, though, right, like for your individual sort of like resi client that's doing a one-off house, they're less likely to want to just drop, you know, three to five grand up front for some information you know before even seeing an idea. So you're right, it's definitely a.
Ben Sutherland:It's definitely like a scale thing it is, but also way less risk when you're doing like a standalone build. You know it's really.
Sam Brown:Yeah, you say that, but man.
Gerard Dombroski:A lot of people get burnt in the ground, especially in the city. You find an old rubbish dump under your house or something.
Sam Brown:Yeah, wellington's the worst, right Like. We've got a site at the moment and even the geotech initially assumed you know pretty good ground when the testing and the ground is horseshit, you know we've got to. We're not laying back temporary cuts because we can't. They're like 30 degrees and they underpin the house by a huge amount. So they're like you know we're going to be like 200K in the ground before you even start building and that's terrifying for the clients, you know you even start building and that's terrifying for the clients, you know.
Gerard Dombroski:Yeah, do you think there's a correlation between the sort of valleys in wellington and being full?
Ben Sutherland:of shit, probably.
Sam Brown:They probably all rubbish dumps happen to be in an old valley and they just find like massive pile of bricks and roofing iron and shit yeah, I also think that, like you know, there's been a huge amount of unregulated work where, especially like phil, like cut and fill, where sites have just pushed shit over a bank and you know someone else's problem later down the track, and because there's not a lot of land left in the cities, particularly in wellington you're you're sort of you're encountering all those old rubbish dumps all the time now yeah, well, a huge one recently is the obviously the flood zone.
Ben Sutherland:So all of these properties that used to be low-ish risk and no one really cared that much, especially in auckland no one's going near them now. You, you have, you got anything near a flood zone. You, you know, you just never get that resale and is that like you're at risk?
Sam Brown:is that just that's an insurance thing, right? Like it's not dissimilar to wellington, whether it's like tsunami zone, flood zones and obviously earthquake risk like insurance companies aren't touching christchurch the same. Yeah, insurance companies aren't touching some of these places yeah, definitely, and just resale value.
Ben Sutherland:No one wants to be at risk of flood. You know the crazy downpours that have been experiencing.
Sam Brown:It's just not worth it yeah, it's interesting because this all ties back to what our like root discussion is, which is the cost of building, because to overcome a lot of these issues is costly. You know, to overcome these flooding issues, you've got to raise your house a certain level. There's extra cost in that. To overcome earthquake issues, you've got to strengthen the hell out of the house. There's cost in that. You know, to overcome all of these things, you know there's so much associated costs, and matt in the last pod talked about how nice it would be to return to the, the days when you could build, you know, 1500 a square meter or something. Do you think that this? That's just gone because regulation is just?
Ben Sutherland:it's just killed it now yeah, that's, I would say, right now just because of the high interest rates. So obviously the high interest rates have slowed the economy down, which is intended to do, but so because of that, we're obviously seeing a decrease in labor rates and material prices to a certain extent, but the fact is like material prices are just never going to come back down the plants are away, but yeah, and as soon as those interest rates decrease again and work picks up again, the labor rates are going to pick back up again.
Ben Sutherland:So there's just no where where the where the material prices will be reduced, like, unless there's more competition, why would they? And in fact, what we're seeing because of a lot of our regulatory system, like, uh, so the, the council requiring extensive evidence for construction. We're seeing, like the smart companies I say smart because it's good for the company but not good for the purchaser a lot of supplier ring ring fencing, which always frustrates the hell out of me. So that's basically when you purchase a product. So let's say, for example, you're purchasing a cladding, but that cladding is a part of a system and that system, that system, has to be purchased from the same supplier of the cladding.
Ben Sutherland:So then all of a sudden you've got, you know, your cladding. Then all of your flashings and your fixings that have to come from the same supplier, they put a premium on it because their product likely, because it's a good product, but also competition is just not there. And so all of a sudden, like your costs for material just through the roof because you've reduced competition by just saying that if you want this product, you have to buy these accessories, as opposed to being able to swap for similar flashing systems or similar fixings. I do. I want to say, though, I do understand that it is also an element of risk reduction. It's those proprietary systems have been tested and likely code marked or brands appraised, so I understand that.
Sam Brown:But also the ring fencing is very expensive it'd be interesting interesting to see if that regulatory change around the testing of building products and systems that's slated to come in, I think, december this year has any impact on that. So brands and code mark isn't necessarily going to be gospel anymore. They're also going to accept other comparable overseas testing methods. I wonder if that will introduce a better competition and just more supply to the market. Or are we such a small fish at the bottom of the world that it's not really going to have any impact? I don't know. What do you reckon?
Ben Sutherland:Well, we're definitely a small fish and we're an island, which never helps. However, more competition will always be beneficial. Reckon. Well, we're definitely a small fish and we're an island which never helps. However, more competition will always be beneficial, yeah it's just we did anybody have an?
Gerard Dombroski:example of that with the plasterboard over covid time frame because we started to bring in some international competition. Yeah, did anybody notice a drop in any of those prices?
Ben Sutherland:Yes, there was, maybe not a drop, but the premium was reduced, I guess. So they're more likely that the product was just down to where it should have been in the first place. But that's slightly different, like those supply chain disruptions another issue because you know, in Ireland nation you have those supply chain disruptions, but they can be extremely expensive. We're not experiencing any of that at the moment. I think it's kind of come right. But if something like covid ever happens again or something similar, we will definitely see that again and those once the material prices will skyrocket due to supply and demand.
Gerard Dombroski:Are some of those plasterboard suppliers still around? Yeah, I think elephant board's still available, isn't it? Elephant board's kind of always been available, but what were the other ones?
Ben Sutherland:Well, I believe that was just the government bringing in container loads in bulk. I'm not sure if they're still doing that or not. I don't think.
Gerard Dombroski:So, yeah, so yeah, that's, that's what I'd find interesting if those products manage to find a foothold and like survive, just some sort of market, yeah. But if they're not surviving, then like are we just too small or just high?
Ben Sutherland:barriers to entry. It's so hard over here just to enter the market.
Sam Brown:Yeah, and I think even from our point of view, from like an architect and specifier point of view, we've used a certain system or a certain way of detailing or whatever for so long and although, like a product may be no different for us to move away from it and try and learn something new, you know we were kind of reluctant to do so and that's really pushed from like, maybe from like a budget point of view or like a necessity point of view, like, like, like the situation during covid to be the uh reason for costs main staying super high yeah, I kind of think we are a bit to blame, you know, as a profession, because people do just turn back to the same thing every time.
Sam Brown:You know.
Gerard Dombroski:During COVID. They gave like those possible ones. They just gave you all the bracing requirements that you need, like all the documentation, like the product reps.
Ben Sutherland:So they can do it Right in there like it.
Gerard Dombroski:I don't think that was too much of an issue.
Ben Sutherland:Yeah, because all the bracing units that you're, all those bracing units you're specifying, are like Jib bracing units and Jib is the product.
Gerard Dombroski:So you do need something similar. They've been tested.
Ben Sutherland:It was a super easy example of something that could just be substituted in yeah, one market trend to a large degree one market trend that you're starting to see now, and I don't know if this will come into fruition or not, but I think, like something like sustainability conscious materials could have a barrier, could have an entry point at some point. You're you're, you're seeing like a lot of like recycled, fully recycled products. So as soon as they start to become a little bit more feasible, I think potentially they could, they could start to have legs and and and assist with the costs in some way.
Sam Brown:Problem with them, though as well as I think you do, and this has been our experience in the type of work that we do it. You do pay a premium for quote, unquote green materials. You know, yeah, and that's still that. I think that will change again with that embodied carbon calculation stuff that's coming in, because it's just going to become a necessity and there's going to be a lot of products that will just struggle to achieve the requirements and so will slowly phase away and these green materials will start to take a bit more prominence. But I still think you pay a premium for anything outside of the norm, right, and that's just what you're kind of faced with.
Ben Sutherland:Yeah, well, once again it's the supply and demand. So they need to be manufacturing in bulk for some sort of price reduction at some point. So it comes down to what people are specifying. So just to your point if people need to start, if it's required to specify, then you'd like to think that the price is reduced in time.
Gerard Dombroski:I see a bit of a risk with that of like continuing this ultimately. Like the separation between rich and poor. Like if all of a sudden everyone has to buy a more expensive green product, then it's like the lower market that's just trying to get an enclosure to live in. It's slowly getting further and further out of reach.
Gerard Dombroski:Like yeah, it needs governmental support if that's what they really want to push right yeah, like you don't want to like ruin a good chunk of your population just just for some carbon credits. I think we want to save the world, but we want to save people as well another option could be kind of like when elon brought out the teslas.
Ben Sutherland:You know you start off with the premium model and then you slowly go down to the mid-tier model and then the low-tier model but there's no reason.
Ben Sutherland:Yeah, there's no reason why you can't tear that sort of thing. But you're absolutely right, gerard, if if it's not accessible, that at the end of the day jib is an accessible product, so you, you have to be and I'm not saying it's a jib competitor, but you have to be competitive if you want to make any dent in the construction industry in New Zealand. There's only 5 million people in this country, so the market is really not that big.
Gerard Dombroski:Unfortunately.
Sam Brown:I wonder how much of the cost conversation as well stems back to. You know, we sort of touched on our laziness as architects sometimes to specify anything that we're unfamiliar with, although I'd say that we in general are more open to changing our mindset than other parts of the industry, for instance, builders. You know the amount of times that you've specified something and a builder's gone oh, why did you specify that? That's different. I don't know how to do that. Blah, blah, blah, blah, when all it takes is just a little bit of like time to study, and so you're sort of I feel like everything and councils are the same right.
Sam Brown:Councils see something slightly out of the norm or something that they're not used to seeing through a compliance pathway you know building consent-wise and they throw their arms up. So the entire sort of industry at the moment is set up to funnel you into this like one channel, and any time you try and like break out of it, you're just sort of faced with either additional time or additional headaches or additional cost. I don't know there needs to be, I don't know how it works, but this sort of has to be this like overarching industry wide, just like opening up I, I, 100 agree it's.
Ben Sutherland:I've actually found that quite funny. I've noticed it recently and I'm allowed to say this because I technically am a builder myself. But, very like, builders kind of just want to adhere to 3604 but at the same time they want to do build cool stuff. So any cool stuff that you're building, majority of it, it's going to have some sort of alternative details, but they don't want to do those details. They want to do the 3604 details but they want the architectural outcome it's. It's such a funny dynamic why is that?
Sam Brown:because I feel like you've got, you know, there's some builders that that are really good and they're passionate about building and they're passionate about, like you know, the quality of their work and that making a difference, and they're passionate about building and they're passionate about the quality of their work and making a difference and contributing to the built environment. And then we have some that you deal with that come in every day, punch the time clock, punch out, do their house. I guess it's kind of the same in any industry You're always going to get the people that just like to run the mill. But why is it that they're less open to change? Is it because it takes longer? Is it because they don't care? Like what is from your perspective, from the builder's perspective, like what is that influencing factor?
Ben Sutherland:I think there's a combination of you've done it so many times, yeah, so you know what it should look like. Yeah, you, you think that there's an easier way to do it, and let's, I'm not going to lie, oftentimes there is. That's just. That's just a matter of, like, getting the builder on at an early stage and getting buy-in from them and getting them to assist with those details so they can't complain when the details come around and they have to build them. They can't complain anymore.
Sam Brown:But yeah, I think it's just.
Ben Sutherland:You know, you've seen it so many times. You see what the council were after. You know that you're the one that has to actually do that added complexity and make sure it all works. It's complexity no one wants to. It's always about achieving the best outcome in the easiest possible way.
Sam Brown:Is it fear and this is where the council comes into it as well is it fear of liability? Is it fear of doing something different and doing it wrong because you haven't done it a thousand times before and then being held culpable for it? Because I feel like this whole argument leaky home thing. Obviously it was a problem, but we've just got to grow up a little bit. So many of us us we have liability insurance and obviously we're not going to go out there and do negligent work, but it's kind of there to help us, like, push the barriers of the norm. If we all just did the same shit, everything would be so boring and generic.
Gerard Dombroski:You know what I mean yeah, I think you like it's a lot of us probably down to personality as well like a builder who wants a challenge is probably going to look for more challenging jobs, and somebody who's all we've ever known as spec homes will probably and they're happy smashing that out. They know what they're doing, they can do it fast and well. Then maybe they just like to stick to that. I personally like going after things that are a bit out there or maybe haven't been done before, so I kind of actively seek that out and I don't see any reason why it wouldn't be the same with builders.
Sam Brown:I think we all do as architects, though, right and I think that's kind of the frustrating thing that I find as well, and is that, even though we could design something that's incredibly simple and uses pretty standard methodology, as soon as it's like comes from an architect, I feel like it instantly gets architect tax. You know what I mean? A builder, because one you're unlikely to engage with. A builder who, like you said, does this sort of spec house, plug in, plug out type stuff. So they're probably going to be charging slightly more and also I think it just comes with it. Oh, an architect did. It was clearly going to be complex, you know but, sometimes it's not, but you're still.
Ben Sutherland:You're still up against it from a financial point of view, because people just make that assumption yeah, I think, just going back to your previous question, more of it is probably around finances as opposed to liability. Liability definitely plays a part, but put yourself in the builder's position, right, this architect's given you these extensive plans and you've got a limited time to read through them and put a number to it right, and you've got to try and, like, break it down as much as possible, get your head around all those details, understand what materials involved and understand what labor is involved. No one can estimate labor accurately. It's impossible. It's absolutely impossible. So then you find yourself okay, you're awarded the job and you're on site and you're getting to these complex details and maybe it just doesn't need to be as complex as it is. Did. This would be the same outcome, or it's just additional labor or additional time required just puts a little bit of added stress on the whole job. You've got to remember sometimes, when those details go well, you don't hear about them.
Ben Sutherland:This because it's not an issue yeah you only ever hear about the ones that are an issue because something has happened, whether it's a material or a labour or a complexity shortfall.
Sam Brown:But you're talking about fixed price contracts here, ben, and I've had this conversation with Ben Nansip from MPB Builders, who we share an office with a lot, and I said to him I'm like Ben, you're stressed all the time with fixed price contracts. One, it's stressful, pricing Two, it's stressful like Ben, you're stressed all the time with fixed price contracts. One, it's stressful, pricing Two, it's stressful, like you said, trying to stay within the parameters of your fixed price contract, particularly if things you know end up a little bit different. There's got to be like there's definitely something to be said for, like cost plus or open book contracts and just de-stressing the entire process and like we sort of had that. We we recently did a build down south and we had that system in place and you know there was still a budget. But having everything open, you was, you became so much more aware of where your wins and losses were and you're able to sort of like massage the project throughout it.
Sam Brown:And I think financially it's a better way of doing it. Difficulty is if you're lending to build. Banks don't want to hear about it.
Ben Sutherland:Yeah. I just want to point out, though, that the mentality that you need to go into an open book contract should be that of a fixed price contract. Otherwise, if you go in with an open book contract of like, okay cool, I can just take my time and get it right, that is probably half the reason why you get extensive cost overruns on the construction side of things.
Sam Brown:You're talking about the builder's point of view, right.
Ben Sutherland:From the builder's point of view. At the end of the day, that's the cost of the build. Like the architecture, fees more or less are fixed.
Sam Brown:But if we're administering, if we, we as architects, are administering that contract, it's on, it's our responsibility to you know, to stay on top of that. Let's call it uh overrun yes and no.
Ben Sutherland:It's also the builder's responsibility because it's their reputation at stake. If they have said they're going to do, they've provided you with an estimate. They want to adhere to the best of their abilities. So you still do get that labour, financial stress, although you'll get paid for it. No one wants a fist fight at the end of a job. You know what I mean.
Gerard Dombroski:I think the iron from the book, though charge-up kind of thing places huge trust on the builder's performance. Like, as soon as they are a bit slow or take a bit too long to do things, then that bill ticks up really quick yeah, but that's the point.
Ben Sutherland:That's why it's still stressful.
Gerard Dombroski:There's a risk on clients, whilst fixed price puts a lot of pressure on the builder to cost it in the first place. I don't know If you asked me five years ago I would have been on that bandwagon, but I think.
Sam Brown:On the fixed price or the open book. Five years ago I would have been on that bandwagon but I think On the fixed price or the open book.
Gerard Dombroski:Oh, that I would have been. I would have said that fixed price kind of makes builders put in a larger price because of unknowns at risk, correct, and depending on what contract they're using, they might account for retentions or something in their price. But then if you go fixed price, sorry, charge up. In the ideal world it's extremely fair and people get paid for what they do, but that doesn't bring the same level of work ethic I think that you get with fixed price. Because when you have fixed price, like you actively are chasing the clock, like as the builder, like because I do a lot of my sculpture sort of things, is fixed price.
Gerard Dombroski:Well, all of them, yeah. So then I'm like, all right, I'm going to do this for this match. This is going to be my hourly rate if I get it done this time, and then it, yeah, massively dwindles if you take too long, which often I do Totally, whereas like who, yeah, like do you understand? Like fixed price I think is better for a client, like it adds more certainty to their budget. I think you're right.
Gerard Dombroski:It just means that the builder has to price it properly, and maybe that means the tender period should be longer, like if you're tendering or whatever, like how long you give them to price something.
Sam Brown:I agree, but I also but I also am finding that with fixed price contracts the cost is like some of the costs that are put up are astronomical because builders are building in so much unknown and so much risk. And maybe you're right, gerard, maybe it is because the tender period is too short. I mean, we average what? Four to six weeks for a tender period, and a lot of the time you can't get anything out of a subcontractor for you know eight weeks.
Gerard Dombroski:So they just put in a provisional sum, but that's laced with you know, that's laced with high margin and you know uncertainty yeah, I think it depends on the economy as well, like while covid was booming and builders were everywhere, nobody wanted to tender a thing, because they're kind of well, they were busy name their price and yeah. So, yeah, there's a lot of facts at play, but you just want to be careful with full arm and book, because you've got to police it pretty hard. And full arm and book, I think it should be Like you want to see everything.
Ben Sutherland:Yeah, just going to adding to your point, sam, it's hard to price without adding extra allowance into something that you've never built before, extra allowance in to something that you've never built before. It's not like. It's not like you can just put an accurate labor price to something that you've never done before. Like it's just impossible. How can you do it? So that's why, like, if you're building complexity, you have to make allowances. Yes, those allowances probably should be a bit more refined. But have you noticed, because you've done a couple of, let's say, sip houses now, have you noticed, was the first one expensive and then the second one more in line with what your expectations?
Sam Brown:no, I haven't had the opportunity to use the same build or a second time around yet, although, in saying that, like the build that we're doing in Queenstown with Compound, I know that from a labour point of view because I've built two sub-houses side by side. It's the same contract, so I guess it's two houses but one contract. So we haven't necessarily been able to see the monetary value, but the labour and the speed of construction for the second one versus the first one was, like markedly different and I bet if you get them to do a third one again, you'll see those.
Ben Sutherland:Those not savings, but it should be priced accordingly you'd hope.
Sam Brown:so yeah, exactly, and I think that comes back down to the whole economies of scale thing right. The more often and this is where we're coming at it with that citrus concept you know, ideally the more often you do something, the cheaper it gets. The first ones will be expensive, but you know, as the experience grows across the board, you know those prices start to drop. Problem being is that you know, like you said, you build in complexity. But my argument to that and I have this argument with builders quite often is they're like oh, you've designed this super complex thing. And I'm like no, it's not complex, it's exactly the same as this detail or whatever. It's exactly the same as, like the last project that you did. You're just looking at it in a different context, but it is the same.
Ben Sutherland:So then, is that not up to the architect to provide the correct, I guess, display their details or their drawings in a way that they understand it? I don't know.
Sam Brown:Is it?
Ben Sutherland:a detailing thing, I guess, is my question.
Sam Brown:It could be a detailing thing and I guess you know, particularly if you're not working with the same builder time and time again. They're regularly getting different detailing sets and like laid out differently, different appearance every time. So it feels like you're trying to reinvent the wheel with every project, but it's not necessarily the case. I think as well. Oh, now I've lost my train of thought.
Ben Sutherland:Do you guys go through your drawing set? This is just a a curious curiosity question. Do you guys go through your drawing set once it's kind of finished and be like if I was a builder? You know, would I understand this? Does it have all of the information I require on it? Is everything being annotated correctly? Has everything got the correct dimensions on it? Is everything being annotated correctly? Has everything got the correct dimensions on it? Is it easy to understand page to page, like you're not going from the first page to the middle page? Is the layout formatted correctly? Because all of those things help significantly.
Sam Brown:Do you reckon that that helps reduce cost and building?
Ben Sutherland:I think it helps reduce cost because it makes the build run a little bit smoother okay, interesting I mean pricing, if you knew, and pricing yeah, I guess.
Sam Brown:No, we don't, but we do ask for feedback from builders and tenderers on, like, our drawing set after a project, like was it easy to understand? But I guess, sorry, I lost my train of thought, I picked it back up again, sorry, I'm back with myself. Um, what we're talking about and I think a lot of the issues that we're sort of discussing certainly stem around tender projects particularly, or projects where a contract is engaged late in the piece, be that post-building consent or be that midway through detail design or something. I think there's certainly a lot of value, although you lose that opportunity for competition. But there's so much value in an early contractor involvement engagement because you have the builder along with you, so you're developing the design with them in tow.
Sam Brown:So you're kind of working through all of those intricacies, those details, you're looking for those cost savings through the process and that's what we try and engage with as much as possible. But what's difficult from a client's perspective is, like I just mentioned, is that competition thing. You're sort of tying yourself into somebody, initially on the recommendation of either us or a friend or what have you. I don't know what are your guys' thoughts on that, that eci process, because we think it's a great method, but I just we just don't get the opportunity to sort of utilize it as much as we'd like I think it's good in theory.
Gerard Dombroski:I've just had the comment in the past about like oh, we're going to recuperate our costs from that time period, from the builder yeah so from that early involvement process, then they're factoring that time into the price as well and why shouldn't they?
Ben Sutherland:it's not like you're getting paid for it.
Gerard Dombroski:But like are you not guaranteed that they're going to be that competitive? And then they're giving you a lot of feedback, which ultimately quite often is super helpful, but like you're not guaranteed that yeah you know most, bang for your buck.
Sam Brown:Ultimately, it's that trust thing again, though, right and it's. It comes back to you know, ideally utilizing contractors or even even consultants it's the same argument utilizing people you've worked with before and building that relationship thing, and, and therefore ideally that will reduce cost because you're not trying to re-engage with somebody new every time. But I think, in terms of recuperating costs, I think they're totally within their right to. But I also feel like, if the contract goes ahead, there should be some sort of level of it's built in.
Ben Sutherland:Yeah, agreed, I mean, I've only really done that throughout my whole career. There was makers and makers fabrication, you know. So we, we did numerous tenders, but ultimately makers fabrication was always the more competitive and and MakersFab generally had early contractor involvement and that was probably the reason why it was more competitive, because you understand the complexities from the get-go.
Sam Brown:Was that internally? Was that with MakersArchitecture and MakersFab, or are you just talking about as a contractor in general?
Ben Sutherland:No Makers Architecture, Makers Fab, and even now, with bare architecture and bare construction, it's just keeping it internal is always our preference, because the transfer of information from the architect to the construction side you know's, are you then blurring into design build?
Sam Brown:that's yeah, okay, yep, but it's not like we weren't tendering at all I guess this kind of peels us all the way back to, I mean, this sort of discussion is it's important for architects and builders to listen to this and kind of, you know, think internally about their systems and the way to reduce building, because the cost of building is out of control. But from a client perspective, I mean, like, what can they take away from this? What are the mechanisms for building, you know, trying to avoid cost overrun? What are the mechanisms for, you know, trying to get value in your project or anything like that? I mean, what have you guys got off the top of your head that that they could take away?
Gerard Dombroski:I think a thorough set of documents helps every time, because quite often in the past we've tried to save money by I don't know save design fees, assuming that then that would roll over into, say, building. You know you get extra 10 grand or whatever to spend on your building. But so often like the more thorough your documentation, like the more accurate your pricing is going to be. Like if you're going down that route of attended project or even like if you're going fixed, then you've got more price, more accurate information to price on. So I think the just being as thorough as extremely possible yeah, up front which, if you asked me five, ten years ago, I would have had the opposite opinion no, I agree.
Ben Sutherland:I think rigor like having a rigorous process within the architectural realm of the design stage man. It has such an immense flow-on effect through the construction phase. It's interesting though it is, I've got to say, though it's pretty hard to put a dollar value to that.
Sam Brown:Those savings do you yeah, well, that's the thing right like, and do you find I mean this is an issue that I find is when you're setting fees, clients aren't looking that far ahead. So they see your fees and they go, oh they're high. Yeah, well, they're high because you know we want to be able to, like you said, you're a producer really thorough documentation set and we we load that stage b5 pretty heavily. You know that detailed documentation stage pretty heavily, because we want to do that within our studio. But you know an extra sort of five grand or 10 grand or whatever in architects fees at that stage could save you 20 to 30 to 40 more in a build stage. You know, but clients don't, they don't really make that correlation. That. How do we, you know, how do you best? I don't know. I guess what I'm trying to say is how do you best communicate that and justify your fees?
Gerard Dombroski:Yeah. I think that's because most people are coming from a background where they're like it's down to that percentage value again of 5% of houses that are architecture or done by an architect, or probably less of houses.
Sam Brown:Yeah.
Gerard Dombroski:So if all your friends' experience of getting a house built or something is their plans cost five grand because it's off the set, yeah. But if you want architecture and you want an element of bespoke, an element of design in there, you unfortunately have to pay for that.
Sam Brown:and I would then be slightly worried if your architecture fees were too cheap, because then you're going to run into some issues on site and that's often where that like project overrun comes into it, I think is yeah, like low, yeah, poor quality documentation, lack of like understanding, lack of information, lack of surety. You know, moving into, moving into the start, you know you might get through consent, but if you're starting construction and there's not like a complete project overview and understanding, it's so risky from a like, a cost over run point of view.
Gerard Dombroski:Yeah, just the unknowns are way higher. So that's the RFIs and extra money you're going to have to pay on site. This is in the ideal world. You know there's still chances you'll find things you don't know that were there underground. Yeah, it's generally more like jobs are more relaxing when they're out of the ground yeah, it's hard to.
Ben Sutherland:I think the ideal contract is more or less what we're doing is it's hard to do a fixed price on anything to do with the soil at any point in time, really anything earth related. You just don't know. It's impossible, you don't know what's under there.
Sam Brown:So yeah, well, me and gerard were talking about that before you jumped on ben, I got a raft of rfis today that were just like 17 rfis, and 15 of the responses were.
Sam Brown:Read the drawings, you twat you know like, but right there yeah, and like we don't, we don't charge hourly for rfis, but maybe we, yeah, you know, everyone, everyone I talked to are like why? And yeah, I know we felt funny about it for a while, but maybe we need to because you know you're just wait, you're just wasting your time, yeah responding to stupid queries like that.
Ben Sutherland:We do. I would happily even just lower my rate slightly if they had an issue with it.
Sam Brown:Yeah.
Ben Sutherland:But I would never not do hourly rate.
Sam Brown:Far advice Good lesson. Take that on board.
Gerard Dombroski:Yeah, it's a big unknown, the old council.
Sam Brown:Yeah.
Gerard Dombroski:Whatever, the flavour of the month is that they've been told to look at. Yeah, that's.
Ben Sutherland:That has to be a podcast in itself, though, surely. I've been thinking about this a lot and I'm like how do we do that podcast without just absolutely annihilating the council? Maybe we just need to get like a council worker of some description on here and have a proper conversation.
Sam Brown:Oh, it'd be so hard not to just kind of fly off that handle that way.
Gerard Dombroski:You guys think tendering's coming back.
Sam Brown:Yeah. I asked the builder the other day, would you tender this project? And he was like yep, yeah, it's the first time I've ever heard him say that it's still quiet, so builders need work. Uh yeah, the demand is there for sure so you kind of hope that a bit of you know, because because there's competition there'll be a little bit more cost reduction yeah, yeah, and don't be afraid to ask can you go any lower on this?
Ben Sutherland:where the savings would you we have? Like I had, literally, we literally would have that conversation every single day with either a contractor or a subcontractor. I, I just don't, I don't think it's. It's not like we're trying to like shaft anyone, it's just trying to understand where the costs are.
Sam Brown:It's a good point actually.
Ben Sutherland:And where the savings can be made, and how are you going to know without asking?
Sam Brown:It's a good point actually, because I think even with our fees, to a degree as well, there is a little bit of a barter process. I feel like there should be a little bit of a barter process like architect's fees as well as build costs, because everyone's just going to put their best foot forward, right, and I think so often everyone either blindly accepts it or they don't question it or even just have an open discussion about it. You know what I mean, and I think that there should be a bit more of that, both with building, like you said, ben I think that's a great idea I mean, you so often just accept it for gospel but I also think with our fees as well. Like you know, sometimes you put a fee offer out there and you just never, ever hear back from somebody and you might, you know, chase them up a month or two later and they're like, oh, you're too expensive. I'm like, well, we could have talked about things, you know yeah, yeah, yeah, yeah, that's.
Sam Brown:They don't even write that in there like, oh, please feel free to discuss I do and you know, and they're just like, but your fees said this and I'm like, yeah, but like you know, let's talk about it.
Gerard Dombroski:We need work as well what do you guys think about predictions moving forward? Are we the world looking, looking better?
Ben Sutherland:it's definitely looking. The interest rates will be coming down soon. Well, that's just obviously my opinion, but I would say within the end of the year it'll be a bit of a decent reduction. I think that means that hopefully, building will pick back up a little bit as people start borrowing money purchasing property again.
Sam Brown:Yeah, you'd hope so, but I think there's always going to be. I think, you know, a decade or however long you know working in this profession, there's always going to be something. Right, you know interest rates might drop, but then a new legislation will come in yeah, something, you know something will happen and then, like a factory will burn down and you know you can't buy any jib anymore, or something you know like there's always like there's always something that's impacting our industry and like, personally, I think it's just on like a very, it's just like a steady inclination.
Ben Sutherland:Well, holistically, it is.
Sam Brown:Yeah, obviously.
Ben Sutherland:But within that cycle where we are currently, it's definitely slower.
Sam Brown:That. You know that era of building a I hate this term, but an architecturally designed home. You know the era of building that for four and a half thousand a square meter is pretty well done well, that's a standalone right, what you're talking about yeah, yeah, sorry, standalone, yeah, yeah, but yeah, that's my, that's my thoughts oh, square meter rates.
Ben Sutherland:How ballsy of you to start dropping some square meter rates all right but what if they want to buy? What if it's only a small? No, I'm just kidding small small.
Sam Brown:Small means way higher square yeah, what if it's massive?
Ben Sutherland:then what if it's massive? But if you, if someone came, to you with a brief of 4,500 square metres. Would you do it?
Sam Brown:We tried really, really, really hard the restricted section, that project, that sip house in Newtown. Clients came to us with a brief. They said we don't want to spend more than 4,200 a square metre and we did everything we could on that project to get the cost of that building down. Like it is, it's a. I reckon it's an awesome building but it's a shell Like. There's very little ornamentation to that thing at all and we did that for $4,800.
Ben Sutherland:That's a man who's clearly run his numbers, to be that specific, though, so I respect that yeah.
Gerard Dombroski:There was that old, old, uh, frank lord bright. When he got asked to do that five thousand dollar house or something, some some guy asked him to do a, an affordable house, and uh I think he said he was surprised that nobody, nobody had him before. So he took it up and in that one he lost money on the job so he could reach the target.
Sam Brown:Just took no fees. That doesn't count. Surely that doesn't count.
Gerard Dombroski:Buy the on-forbiter or something, yeah.
Sam Brown:Isn't that like you doing all the landscaping at your mum's place, Gerard?
Gerard Dombroski:Oh yeah, oh no, at the hospital we did yeah, yeah.
Sam Brown:Oh no, at the hospital we did yeah, yeah, yeah, yeah, the hospital exactly.
Gerard Dombroski:It's a commercial job and I'm out there in the rain for a week on my hands and knees.
Sam Brown:We're suckers for punishment, old architects? Eh, it's all for the end product. I love the garden.
Gerard Dombroski:The garden pops off a building. Yeah, yeah. Really puts that finishing touch. Fight to drive past and not see a garden.
Sam Brown:Oh, it'd kill you, eh, yeah.
Gerard Dombroski:I think architects though you know maybe sometimes we can't be bothered finding what other plasterboard there are out there, but I think we're ever reinventing the wheel to try and make things cheaper.
Sam Brown:I think I agree. Definitely a big picture of thinkers and always scratching the noggin to try find something cheaper I know people like to think that architects are out here just making shit expensive, but I think it's the opposite really like oh yeah, we, we work really hard, really hard to keep costs down and stay within budget and a lot of the time it's just out of our hands because stuff costs what it costs, you know can you build?
Ben Sutherland:I don't, I'm not sure you can you build like a spec home, a one-off spec home for four and a half thousand dollars a square meter these days yeah, apparently I know, I know people.
Sam Brown:People have recently told me that yeah, that they can like this.
Sam Brown:So the citrus thing, right like I, I passed that around developers because I thought it could suit them and you know we sort of were talking about build rates and I told them you know what we built comparable ones for? And they're like, oh no, I'm not interested. We can build houses for 2500 a square meter. And I really wanted to say to them how, where, and show me, because I, if I, if I went in there and huffed and puffed, I reckon I could blow that thing down yeah, purchasing power.
Sam Brown:I wouldn't underestimate purchasing power, even so though you've still got labor right, and even if your chippy's labor's not too bad, subbies kill you we haven't even touched on subtrades in this pod. Maybe that's a whole other discussion.
Ben Sutherland:You just need to once again have that conversation with the subcontractors. See the way we do it is different to how you guys do it. We give the subbies our number and be like can you do it for this, which is obviously something you can't do when the economy's up and everyone's got a lot of work on, but especially right now, you can 100% do that Like this is our value, this is our figure for this.
Sam Brown:And how do you come to that, though? Ben that figure.
Ben Sutherland:Well, experience data, just previous work, because when you've done more or less the same thing over and over again, different architecturally, but the plumbing side of a three-bedroom house with a kitchen and blah, blah, blah, blah, blah really doesn't vary that much.
Sam Brown:But then again, like I've had this discussion recently where I've said you know we're building this quite simple structure, I cannot see it costing more than I think I've worked out. I had a bit of, quite a bit of earthworks associated with it. I worked out it'd be about 7 000000 a square metre and the builder was like no, you can't build that, not a chance.
Ben Sutherland:Yeah.
Sam Brown:And you're like what the hell?
Ben Sutherland:But once again, it's a negotiation just having that conversation about price as opposed to just receiving a quote and accepting it.
Sam Brown:So what's the takeaways? Guys, Challenge prices.
Ben Sutherland:At the moment, definitely.
Sam Brown:Thorough documentation.
Ben Sutherland:Yeah, that's key Advocate for your fees.
Sam Brown:Work hard on specification, don't be lazy.
Ben Sutherland:Yeah, work hard on specification, Specify the right products.
Sam Brown:Yeah and use I don't't know.
Gerard Dombroski:Try not to be too complex just get an account at steel and chew I guess they ultimately just get clients that have more money and not have to worry about any of this the
Ben Sutherland:dream. I mean. That's what the uh, that's what 99% of architecture firms out there aim to achieve, isn't it?
Sam Brown:Yeah, I mean, maybe. I mean I like that target. You know that we're trying to provide architecture for everybody and that our target audience is, you know, is not just your high flyers. I think that architecture should be accessible to everyone and not just, you know, the top 1% or 5%, whatever. Yeah, there's got to be a way to still produce good architecture and make it affordable.
Ben Sutherland:I know this pod is coming to an end, but one thing that we definitely should have covered, because it's probably quite key in terms of cost, is the architect being the or the builder, or either being the developer or having some sort of joint venture scenario where they've got skin in the game.
Sam Brown:Do you reckon that helps reduce cost because you've got more care?
Ben Sutherland:I think just care and control is huge and I wonder, I always wonder how much just not knowing about money impacts the actual build cost. So how often? Unless you're like a, let's say, an architect who's built their own house, they probably know something about build costs. But unless you're the one that directly has to pay those bills and procure that material understanding, the cost kind of goes a little bit over your head. I don't know, is that a fair thing to say, or am I being well, I was going to say that I recently built my own house and managed to contract and so and procured a lot of material and have a very clear understanding of how much things cost.
Sam Brown:And now, almost nine months on, I'm back in the dark, because the shit just changes so quickly.
Ben Sutherland:Yeah, that's fair.
Gerard Dombroski:Okay. Yeah, Just going through that process of being so aware is, I think, important, Like doing mum's place. That hits home a lot harder than other people. Yeah, Sometimes you can in a healthy way disassociate a little bit from the full implications Totally.
Sam Brown:But when it's your money or a close friend or family person's money, it kind of yeah, it resonates a little bit harder. I think so.
Gerard Dombroski:Yeah, you can hit home, which is good. I think it makes us a little bit wiser in a small way. Yeah.
Ben Sutherland:Yeah, oh well, I guess that's the pod Nice.
Gerard Dombroski:Good chat lads.
Ben Sutherland:All right.
Gerard Dombroski:Happy days. Cheers for tuning in. We'll see you all on the next one. Peace. See you, bye-bye.
Ben Sutherland:Bye-bye, soon again. We'll see you all on the next one. Peace, see ya.
