How to budget a house build and use a BOQ

Most overruns have the same three causes. The estimate was for a smaller scope than the house you ended up building. It left out costs that sit outside the contractor’s price. And the finishing, which varies most, was decided late.

1. 1

   The scope was not defined

   A “per square foot rate” means nothing unless you know what is in it. Is it grey structure only, or complete? Are doors, windows, tiles, sanitary ware, wiring, paint, kitchen and wardrobes in or out? Are the boundary wall, the water tank and the septic tank in or out? Two quotes at the same rate can be hundreds of thousands of rupees apart in what they include.

2. 2

   The area was measured differently

   Covered area can include or exclude the walls, the stairs, the balconies, the porch, the mumty and the basement. Agree one definition, in the contract, and use it throughout.

3. 3

   Costs outside the build were forgotten

   Design and approval fees, soil test, utility connections, boundary wall and gate, furniture, curtains, appliances and the cost of living elsewhere while you build are not in a contractor’s quote but are part of your cost.

4. 4

   Finishing was decided late

   The structure is mostly steel, cement, sand, aggregate, bricks and labour, which can be measured from the drawings. The finishing depends on your taste, and the choices from basic to premium cover a very wide range. Deciding tiles and fittings during the build, in a hurry, is when budgets grow.

How to measure covered area

Covered area is the built area of each floor, measured to the outer face of the external walls. Roofed porches and car sheds are usually counted. Open balconies and terraces are usually counted at a fraction, and basements and mumties are separate lines. The share and the treatment vary from contractor to contractor, which is why you write the definition into the contract. Whatever you pick, apply it to every quote you compare.

Start with the money, not the design. Decide the most you will spend in total, including everything below. Then see whether the design you want fits. It is much cheaper to change a drawing than a building.

A rate per square foot is a good way to see whether a design is in the right range, and a bad way to decide a price. It averages everything out, so it hides the differences that matter. Use it at the start, then replace it with a BOQ.

1. 1

   Collect recent quotes for similar work

   Ask at least three reputable contractors for quotes on a similar house in your city this month. Ask for grey structure and finishing separately, and for a list of what is included.

2. 2

   Make the inclusions identical

   Put the inclusions side by side. Add to or subtract from each quote so they cover the same scope. A quote that excludes doors and windows is not cheaper than one that includes them.

3. 3

   Divide by the same area

   Rate = total price ÷ covered area, using your single definition of covered area.

4. 4

   Treat the result as a range

   The rates will differ. A low outlier is a question, not a bargain. Use the spread of the sensible quotes as your range.

A quantity is a measurement taken from the drawing: how much concrete, how much wall, how much plaster. You do not need to produce a full take-off to be useful. Working out the biggest items yourself shows you whether a contractor’s numbers are in the right range.

A bill of quantities (BOQ) is a list of every item of work in the project, each with a description, a unit and a quantity. The contractor adds a rate to each, and the quantity multiplied by the rate gives the amount. The total is the price. Because every contractor prices the same list, the quotes can be compared item by item.

A good item description and a bad one

The difference is that the good description says what, how thick, what grade, what is included and how it is measured. A contractor cannot quietly substitute a cheaper material if the description names the grade.

1. 1

   Make every contractor price the same BOQ

   The best method is to give the same BOQ, and the same drawings and specification, to all of them. Then the quantities are identical and only rates differ.

2. 2

   If they give their own quotes, convert them

   Put each quote into a common table with the sections above. Where a contractor lumps several items together, ask them to split it.

3. 3

   Compare the big items first

   Excavation, concrete, steel, masonry and plaster are usually most of the structure. Put the rate for each, side by side. This is where real differences show.

4. 4

   Investigate outliers in writing

   A rate far below the others is a question: what material or workmanship is being cut? Ask for the answer in writing and for the brand, grade and mix to be added to the item.

5. 5

   Check the totals add up

   Multiply quantity by rate on every line and add the amounts. Arithmetical errors in a quote are common and sometimes deliberate.

6. 6

   Compare terms, not just prices

   Time to complete, payment schedule, retention, warranty and who supplies the materials all change what a quote is worth. See hiring and paying a contractor.

1. 1

   Treat every change as a priced variation

   Before any change is built, get the contractor to price it in writing in the same style as the BOQ (a new item or a revised quantity), and approve it or not. Changes agreed verbally are the biggest source of disagreement at the end.

2. 2

   Replace provisional sums early

   A provisional sum is a placeholder. As soon as you have chosen the tiles or the fittings, replace it with a real item and a real price. The longer it stays, the more it can grow.

3. 3

   Decide whether prices are fixed

   In a time of changing steel and cement prices, a fixed-price contract is a protection for you, and a risk for the contractor. If prices can change, say how: which materials, what index or invoice, who pays. Do not leave it open.

4. 4

   Keep a simple cost report

   Once a month: the budget, the amount committed, the amount paid, the forecast to complete and the contingency left. If committed is rising faster than the work is, find out why now.

5. 5

   Order finishing materials in good time

   Choose tiles, sanitary ware and fittings before the structure is complete so lead times and prices are known and no one rushes a choice.