Guest Column - November 2009
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Design Corner

Budget Reality: The True Bottom Line

By Janet L. Jordan, CPRP


The Contingency Factor(s)

Site development costs often have a critical impact on the hard cost budget and include utilities, grading, parking areas, landscaping, hardscapes, roadways, bridges, traffic control equipment, environmental remediation and occasionally demolition of existing structures. It's logical to include those components that relate directly to the new or renovated facility such as basic utilities, parking and landscaping. The difficulty arises when unanticipated or predetermined requirements are imposed on the project.

The regulatory body that permits or approves the project may require your project to cover the cost to improve an existing infrastructure condition proximate to your project site. The local engineering authority may require that a traffic study be completed and expect your project to construct a turn lane, add a traffic light or enlarge a stormwater detention basin that serves an area much larger than your site. If wetlands are known to be on the site or are discovered through investigation, you may be interacting with the U.S. Army Corps of Engineers for approval permits or remediation.

Hazardous materials abatement cost is frequently overlooked when the project is a renovation or addition to an existing structure. Again, others' expectations may be that your project will bear the cost to investigate and fix old problems such as asbestos. Many public entities require a Phase 1 Environmental Site Assessment (ESA) prior to purchasing land as due diligence. If the site is considered contaminated, or is a known brownfield site, a Phase 2 ESA will be necessary to definitively determine the contaminants. The results of the Phase 2 ESA will define the appropriate cleanup action, some or all of which may affect your hard cost budget.

A second essential contingency—the construction contingency—is also included in the hard cost budget. These funds or allowances are necessary to manage the risk of unknown conditions, errors and omissions, or modifications to the design once the project has begun construction. The construction contingency amount will vary depending on whether or not your project is a new construction or renovation, as well as the construction delivery method: traditional design-bid-build, design-build or construction management.