Ep 05 - The 4 phases of the build process - Stage 03 - Costing & Contracts

In episode 05 we continue our journey on the 4 phases of the build process, with this episode about stage 03 which is costing and contracts. We discuss how detailed your quote should be, what should be included and what happens if your build quote comes in over budget.

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Speaker 1 (00:03):

Welcome to building with Bluebird, the design and renovation podcast brought to you by Christian Case and Jeremy Thomason directors of Bluebird design and build highlighting the dos and Don's of renovating or building your dream home. This podcast will give you the insider's guide to the home building journey, as well as interviewing other industry specialists, Christian and Jeremy bring their knowledge and expertise to the table for you. The people now let's get into this episode and if you enjoy, please like share and subscribe. 

Speaker 2 (00:33):

Welcome back to building with Bluebird. You're here with Jeremy and Christian, and today we're gonna be discussing the costing and tracks phases of the construction process. 

Speaker 3 (00:45):

Yeah. So this is probably the, the boring part of the build, I guess, in terms of the whole process or most people think it's the boring part, but it's probably one of the most important parts of the whole process. 

Speaker 2 (00:55):

I think it's the exciting part. 

Speaker 3 (00:57):

Oh, everyone's excited until they see the, the tunnel price. 

Speaker 2 (00:59):

See the number that's right. 

Speaker 3 (01:01):

So this episode will be looking at costing and contracts. You've gone through the design phase. You should be on par with your budget. Hopefully if your design has done it correctly, 

Speaker 2 (01:10):

Hopefully do you have a plan if that hasn't happened once you've gone out to what? Like 1, 2, 3 builders. Yep. Try not to go to more than three. 

Speaker 3 (01:18):

I think three is probably the magic number, cuz then you get a, a low, medium and a high number. 

Speaker 2 (01:22):

And I guess you're hoping that two out of the three are close-ish 

Speaker 3 (01:26):

And then you also get a feel, I guess, in terms of layouts of the quotes and how detailed they are and how not 

Speaker 2 (01:31):

Detail they are. Yeah. If one is super cheap, I'd always be wary of that quote there's something missing most likely or is trying to buy the job. Yeah. He or she, but then probably hit you the client up with variations and things that weren't included later. 

Speaker 3 (01:46):

Yeah. So that's like a big one, I guess, and is sort of a, a red flag that if you've got three quotes and that's why I like having three quotes that if you've got one price and it's come back and it's wildly different to everybody else's why is that different and why is it that high? Or why is it that low? Because ultimately they should all be quoting off the same plans and specifications. 

Speaker 2 (02:07):

Yeah. I mean most builders will be paying their subbies, roughly the same rates and figures and with materials as well. Like we don't, unless you're a really huge builder, I don't think you're getting way better rates from suppliers. So the only then variable then is probably the builders business running costs. So yeah, I guess that's the other reason you don't wanna go with someone super cheap is you wanna make sure that they're there to finish your build, not go broke 

Speaker 3 (02:32):

Yes. 

Speaker 2 (02:33):

And make sure that they're not having cash issues through the build. So, you know, they're struggling to make a payment for doors and windows to turn up and then your build ends up taking longer, cuz things are aren't there when they're supposed to be. 

Speaker 3 (02:45):

Yeah. Which is like a big, big issue I guess. But the first step of costing and contracts is obviously getting your documentation together. That includes your design drawings and specifications. We obviously doing the in-house design. We make sure that we've got all those things detailed in terms of finishes, fixtures, fittings, locations, air conditioning, where if there's power pole, all those sort of things. And if we receive a set of plans from somebody else, then we normally go through our own specification list just to make sure that those items have been accounted for 

Speaker 2 (03:18):

That really important. Cuz if you have a set of plans that you've just had finished architecturals and engineering and you send them out to three builders for quotes, if everything's not specifically detailed, like floor finishes, like what type of timber flooring is it? Or 

Speaker 3 (03:33):

Yeah. What are the thresholds 

Speaker 2 (03:34):

Like? Yeah. Like what are the services doing? Is it gas? Is, is there a boundary fence? Like all these different things. If it's not specifically noted on the plans or in a specification sheet and you send it out to three different builders and don't give them proper direction on that, how do you know that they're pricing on the same thing? Yeah. And if they're not pricing on the same thing, the builder that's, the cheapest might have put in, you know, rubbish flooring, rubbish, 

Speaker 3 (04:00):

Unrealistic specification. Really 

Speaker 2 (04:02):

The other thing to be really careful of is PC and PS mounts. Sometimes builders will buy the job. And that means they'll put in a cheaper price based on putting in a thousand dollars provisional sum for excavation higher or asbestos removal, they might put in $500 as a provisional sum. Whereas another builder has done some calculations and worked out your machine hires gonna be $10,000. So that's what we call buying the job. 

Speaker 3 (04:27):

Yeah. That's a big one, especially for something that hasn't been decided. Cabinetry's a big one as well in terms of 

Speaker 2 (04:33):

Lot of 

Speaker 3 (04:34):

S and PC, um, PS and PC on those and tiles, you might have in your mind that you're gonna to certain tile and it's costing between a hundred or $120 a square meter. And the builder's only allowed $40 a square meter that could make a project total build price can vary, especially from builder to builder doing that sort of scenario. 

Speaker 2 (04:55):

Yeah. Especially if there's like, if it's not just wet areas, but then you're doing all outdoor balconies and pool areas and stuff there. That can be a, a huge difference in total. So yeah, checking those things is really critical. 

Speaker 3 (05:08):

So with those, having that list together, if your builder hasn't asked you all these sort of questions, you need to be talking to them and discussing with them what make sure everything's covered. Normally some builders provide, if you're getting a quote that's only a couple pages long, then I'd be pretty worried because you think about, if you are building $100,000 home and you've only got five pages information of costings, then it's a bit scary in terms of what's actually included on that. 

Speaker 2 (05:34):

And this sort of ties back into last episode of design as well, because as part of the design, you really wanna to make sure that you have all of this detailed and specified yeah. Like a full specification sheet so that when you do get to this stage that you are not going out with too many unknowns. 

Speaker 3 (05:53):

Yeah. A lot of guys these days as well are using decent software as well to quote with so they can do a material takeoff. And some of the quotes that we provide are normally 15 to 20 pages long and we'll itemize every item that's used in the build and they can actually be ordered using that same software. So what you're actually getting from us when we send something out is a true documentation. So other builders should be doing the same as well. They should be categorizing or breaking it down into headings. How much things are costing. Obviously you don't wanna get a quote and it's just got a lump sum at the end of it, which you just don't know where the money is going. You can't determine if something's been allowed for or not. So we sort of got category headings, which is like broken up into tiles, the tree Siteworks, windows and doors roofing, external 

Speaker 2 (06:42):

Works basically every different area of the project. Because even though you as a client may or may not be super familiar with the construction process, you should be able to look through the quote and understand it. Like I can see that they've allowed this many square meters for tiles. Does that sort of match up with the amount of wet areas we have and internal and external doors, you should be able to work through it and sort of, and understand it. Even if you don't completely understand it, you should be able to sort of piece it together. 

Speaker 3 (07:11):

Yeah. And just because it's on the plans doesn't mean it's been allowed for, and the quote, a lot of guys, if they're, they've come from trade backgrounds, they don't have a Q us background or a contract admin background. So they're basically just going with the most guys are going through a set of plans with a highlighter and just ticking it off. So 

Speaker 2 (07:26):

Yeah. And then putting that into a word document or a Excel spreadsheet. 

Speaker 3 (07:30):

Yeah. So don't take a quote as sort of a gospel that they've actually priced on exactly. The plans. So this is where you've gotta do your own due diligence and go through it. 

Speaker 2 (07:39):

Yeah. That's right. Assuming that things have been included is really dangerous. Yes. So yeah, you're right. You need to spend the time reading it, understanding it. If you can't understand it, find someone that does maybe have a, your designer can help you work through it or sit down with the builder. That's given you the quote with all your questions and work through it, make sure that they have included the, the things that you really want to see in there. 

Speaker 3 (08:04):

Yeah. Don't skim over your contracts. I heard a great quote from someone I don't who, what builder it was, but they basically stated that a lot of people probably review when they're buying a car, they'll know more information about the specs on the car and the, and everything in their contract for when they purchase a car. But when they go to review a house contract, it's just sort of skimed over. Yeah. 

Speaker 2 (08:26):

And it's a massive investment for most people. 

Speaker 3 (08:28):

Yeah. It's, it's normally most your biggest investment. And the thing is, there's so many working parts on a build site and a house being built what's included. And what isn't included is a big issue. Especially like if you're gonna borrow a money and then you get halfway through the building, you find out that the builder hasn't allowed for something. And now you've gotta go back to the bank. 

Speaker 2 (08:45):

Yeah, that's right. And that, that's another reason it's really critical to check exclusions on the quote, because sometimes it is legitimate reasons that a builder will exclude things like maybe he doesn't have the information on the finish over retaining wall. Like is it to be painted or rendered? Yeah. So the retaining wall's in there, but finishing it with render or paint may or may not be. So there are legitimate reasons that builders will exclude things in quotes. So important to understand those too. And if it has been excluded, do you need more money to pay another contractor or tradey to get that sort of work done? 

Speaker 3 (09:19):

Yeah. And why has it been excluded? Yeah. From the quote, because it might be simply just because you haven't given them a specification. Yeah. 

Speaker 2 (09:25):

That's right. 

Speaker 3 (09:26):

So nuting these things out early on just makes the bill process a lot easier. So 

Speaker 2 (09:31):

It comes back to open communication and yes. Working someone that you trust. 

Speaker 3 (09:36):

Yeah. And, and no, and not being afraid to ask the question, like you're investing a lot of money in your home, so why not get that detail nutted out at the beginning? 

Speaker 2 (09:45):

Don't just go price shopping. Yes. Find someone that you think you're gonna be able to spend the next 2, 3, 4, 5, 6, 12 months, whatever it is, working with collaboratively, having an open communication with 

Speaker 3 (09:58):

Yes. Obviously with that as well is with the shopping around, like, what are you actually trying to get out of that is you are obviously just trying to get the cheapest quote, which is quite easy to do from a builder's point of view because you can just bang a number in there and just PS it and go, Hey, this is what we've allowed. And then you sign a contract and you've got, see the cheapest build out of all, everybody. Yeah. You're not actually looking for the quality or the someone who's included everything. 

Speaker 2 (10:24):

Is it a brand new house with three, four bathrooms in a kitchen and a bar area? And have they allowed $20,000 for a provisional sum for cabinetry? Like yeah, 

Speaker 3 (10:33):

Got stitched up 

Speaker 2 (10:34):

With that on one. That's never gonna cut it. So, you know, are those figures, um, adequate? 

Speaker 3 (10:39):

So that's actually probably a good example where we got quoted out of a, a project because the other builder came in 50 grand cheaper. There was three prices for the build and two of our us and the other builder were very close. I think it was five or $10,000 difference. And this is a massive brand new house. So we're talking a eight, $900,000 home. And then one guy came in 50 grand cheaper and he was allowing 10 grand for a kitchen, five grand for a Butler's pantry and all these things. But yeah, we got priced out of the job and that's a pretty common thing in our industry where guys will in PS items under quote it so that they come in cheaper and then they'll have to, to you and go, Hey, 

Speaker 2 (11:18):

Sign you up and they 

Speaker 3 (11:19):

They'll sign you up. And then you've got you go to build and you go like, oh yeah, we're gonna get this kitchen. And then they go, oh no, we didn't allow for that. And it just, it happens all the time. So 

Speaker 2 (11:30):

We didn't allow for stone benchtops 

Speaker 3 (11:31):

Yeah, exactly. Like who doesn't allow for stone bench tops or who doesn't allow for benchtops full stops. So you're gonna get this kitchen without bench hops. Like it's, it's, it's actually it's we laugh at it, but it happens a lot and it's, it just comes down to documentation and specifications and being accurate, getting a five page quote is just not acceptable when you are spending 700, 800 and over a mill on a home. Yeah. You need that detail if they just say, oh, we've allowed a basin. It's okay. Well what basin? 

Speaker 2 (12:00):

Yeah. Which, which basin? 

Speaker 3 (12:01):

Yeah. Is it top Mount? Is it under Mount? And then obviously yeah. Itemizing everything that you're allowing for it in the build. So fixtures, what baths abouts using, what color is it painting? We don't really go into, obviously we'll allow a few colors cuz normally painting's one of those things that you do on site and do a test to see what the sunlight does and yeah. Ideally you want an idea of the trims are gonna be a different color or 

Speaker 2 (12:24):

Yeah. Most painters all allow for like two to three colors over a job. 

Speaker 3 (12:28):

Once again, that should be detailed and you quote as well. 

Speaker 2 (12:30):

Yeah. Going back a step with when this process starts, you're gonna get your first construction quote, if it comes in over budget, which it may or may not a hundred percent. Um, it does. Yeah. So I guess you're gonna be prepared to have a few goes at this and 

Speaker 3 (12:45):

Don't be deflated though. 

Speaker 2 (12:47):

Yeah, no, I mean, it's just, it's the start of a process, especially on a custom home. So you're gonna probably have at least one to two quote revisions where you tweak finishes, take some things in and out of scope. Maybe reduce a couple of room sizes yep. To try and sort of get, get it in line with the budget, the better a job that you and your designer have done in the stage before the less you will have to, to take out. Hopefully. Yeah. So yeah. I mean, in some cases we've had up what, eight quote revisions and the rest nine. Yeah. 

Speaker 3 (13:18):

And that's because obviously documentation hasn't been up to par or it wasn't ready to go to costings. 

Speaker 2 (13:24):

Yeah. The design was still overcooked and Then spent a lot of time sort of changing things after documentation had been sort of at a standard that was finished. So depending on how well that's all gone, this process could take anywhere from four weeks. If it's one to two quotes up to 4, 5, 6 months, if you're doing a lot of revisions, especially when drawings have to be updated 

Speaker 3 (13:48):

Because those drawings actually form part of our contract. Yeah. 

Speaker 2 (13:51):

So 

Speaker 3 (13:51):

We reference those in our contracts. So they provide basically document and they're basically a schematic for the build. Yeah. So, 

Speaker 2 (14:00):

So I guess once you've finally gone through all these revisions and got to a price that you're happy with. Yeah. You'll be looking at signing the build quote that you are happy with. So 

Speaker 3 (14:10):

Just with a, a step back though with that is don't be deflated at and don't get defensive or I guess emotional, when it comes back the first quote, because it happens all the time, obviously it's deflating or it's upsetting that your build's not coming in on that price. Yeah. 

Speaker 2 (14:30):

Yeah. 

Speaker 3 (14:30):

But this is all part of the process and you just work through it, you work through it with the builder, you work through it with the designer. Yeah. You manipulate it and play with it until you get to where you need it to be. 

Speaker 2 (14:39):

Don't feel like you've done anything wrong. It's not your fault. It's just particularly with custom homes. There's no exact science to getting that budget. Exactly. Right. 

Speaker 3 (14:48):

Like, no. And the thing is every custom home, none of them are the same. So no one's got the exact yeah. Like there is no correct formula saying we can nail this price and this will nail on the budget because every home is different. Yeah. 

Speaker 2 (15:01):

That's right. 

Speaker 3 (15:01):

Unless it's like a brand new home and it's like a kit home flat 

Speaker 2 (15:04):

Site and 

Speaker 3 (15:05):

Yeah. And they're built it before, but never have we ever had a quote that's coming on exact same price as another one because every house is different. Yeah. 

Speaker 2 (15:13):

They all have their own little idiosyncrasies and yeah. Differences in labor and, and whatnot. 

Speaker 3 (15:19):

Yeah. So this is just part of the process as well is just working through it, not just throwing your hands up in the air and having enough of it. Like that is the process that you just work through. It, you, you figure out like if they've itemized everything, you can figure it out and see where there's some big ticket items that need to be reduced and then go from there. I guess. So yeah, yeah. Back to you with the, the next step. Sorry. 

Speaker 2 (15:42):

So you've interrupted my train of thought now. Sorry Don't ever do that again. So yeah, I guess once you've, you've decided that you're happy with the price and the that's included and the builder's quote is looking great and you're excited and ready to sign you'll sign that, send it back to the builder. And then depending on what contract that builder uses, they'll then sort of start firming up the proper construction contracts. There's a myriad of different options. We use master builders, contracts generally, Hey Chi have their own as well. 

Speaker 3 (16:14):

I think QVCC have got their 

Speaker 2 (16:15):

Own QVCC have their own, which I think are probably not as good as some of the others. Yeah. If you've got an architect that you've worked with, there's the ABIC contract, 

Speaker 3 (16:24):

Which, which I'd probably steer clear of those. 

Speaker 2 (16:27):

Yeah. Generally would probably say to steer clear of them. They're just a bit, not, not super detailed, a bit sort of 

Speaker 3 (16:32):

There's some vague things in it. 

Speaker 2 (16:33):

Lots of vagueness. 

Speaker 3 (16:35):

The thing is a lot of the ABIC contract, it allows for management from the designer or the architect. Whereas a lot of the other contracts never used to allow for that. So with the times obviously master builders and hi, I know they've gotta actually a spot now that allows for that architect or designer to be part of it and to 

Speaker 2 (16:53):

Manage, manage it the yeah, yeah. 

Speaker 3 (16:55):

The reason why they never did it. Yeah. Yeah. So that's why the AB contract's always been around, I guess. Yeah. And obviously cuz it's a Tex Institute contract, but now that master builders and hi and a few others out there, whoever the governing body is for that state, they are allowing for those, somebody else to project manage it and do contract admin in which is great. Yep. Um, 

Speaker 2 (17:15):

So that I was drawing one up last night and saw that. 

Speaker 3 (17:17):

Yeah. Yeah. 

Speaker 2 (17:18):

So once you've sort of into that stage, a lot of the things from the build quote that you've signed will be sort of transferred straight into the actual contract. So again, you need to really read the contract before you sign it and send it back. 

Speaker 3 (17:32):

Especially terms and conditions. Yeah. Those, the terms and conditions I think are longer than the actual contract. 

Speaker 2 (17:36):

Yeah. So destination, you just need to spend the time and if you don't understand the contract or the legal terms and jargon involved, speak to your solicitor and just get them to run their eye over it. Yeah. Make sure it matches the build quote so that you know, what you're signing is what you think you're getting as well. 

Speaker 3 (17:53):

Yeah. It's not like one of those things where you take at the bottom of the screen and you don't read any of it. 

Speaker 2 (17:56):

Yeah, that's right. I know with master builders now we actually upload our quote and the full construction documentation set of plans into the document as well, the contract so that everything's in one place it's all been signed off and yeah. That all sort of forms the binding set of the job. 

Speaker 3 (18:16):

And also one thing, um, probably a lot of guys miss, and I think we did this for years. Make sure you initial and sign the documents that the original build are part of, because then you've actually got a reference point because some and go, oh, that wasn't on the drawings. And it's like, well, hang on. Yeah. We've signed these documents. Yeah. 

Speaker 2 (18:33):

That was on the drawing. Yeah. Just, and it wasn't an exclusion, so yeah. Really should have included it. Yeah. Once that's all signed and lodged with sent back to the builder, you've got your own copy. Um, then the builder will generally issue you with a deposit. Yep. And the size of that deposit will vary depending on the size of the job. But once you go over as it 20,000. Yeah. Yeah. It's just a flat 5% fee here in Queensland. I'm not sure if that's the same nationally, but he or she or the building company will issue you with you referring 

Speaker 3 (19:03):

To me yes. 

Speaker 2 (19:05):

Will issue you with that deposit. And then once you've paid that the build will then pay home warranty, insurance and Q leave if they're required. 

Speaker 3 (19:13):

Yeah. Depending on the job and the state and everything like that, but yeah. There's council requirements that we need to pay. Yeah. 

Speaker 2 (19:19):

So, and then once they've paid that they'll be sent to your certifier and then you can finalize building approval. 

Speaker 3 (19:24):

Depends. If building approvals hasn't is actually included in the contract. So most contracts will have if it's it or not. And that's another thing that people get caught out on. Who's getting building approval for the project. Yeah. 

Speaker 2 (19:35):

But before, if, if the client is organizing building approval, you'll still need those two documents from the builder. Yeah. So it's also essential to check that they've been included in the quote, as I have heard of several occasions that builders don't put it in and then hit up the client later for a variation for Q BCC, 

Speaker 3 (19:54):

Which yeah. Blows online because that's something that we need to log. 

Speaker 2 (19:58):

I'm not actually sure if you have to include it, but 

Speaker 3 (20:02):

I don't know from 

Speaker 2 (20:02):

A legal, a new master builder's contract, has it? Yes. Has a its own heading for it that you have to put it in. So it 

Speaker 3 (20:08):

Obviously has come up a fair few times yeah. For them to put it in a contract. 

Speaker 2 (20:11):

Yeah. That's really sort of it in this, this area, once you've got all this signed off, paid, paid those statutory fees and you've got your building certification and building approval, then really your right to start setting up on site and the builder can get going. 

Speaker 3 (20:27):

So yeah, with that as well. That's another thing I guess, which falls back into detailing is who's looking after what, in terms of is structural engineering covered is building approvals covered. Is there a da involved? Ideally you want, all those things wrapped up before the contracts are signed because they can obviously change. Yeah. 

Speaker 2 (20:47):

Not to the pricing and of the build. 

Speaker 3 (20:49):

Yeah. A lot of people try to include engineering or certification into the build quote. I'm personally not a fan of it because it can change. And it just means that you need to put a variation in for the structure. Yeah. Depending on what sort of home, if it's a new home and you've got a floor structure, the of suppliers detailed it, then that's fine. But if you are going back and trying to lump board these items into your, into your loan, it can cause an issue in terms of a variation, having to be issued for the build. You're better off just getting it all your ducks in a row and having your documentation ready from the get go. 

Speaker 2 (21:22):

Yeah. And I mean, we'll when we do a full episode on the build quite yeah. Will really drill down into all the areas and what you should look at to make sure that they are included to make sure that things that should be in there aren't being missed to make sure that it's all covered. 

Speaker 3 (21:37):

Yeah. That'd be great. Actually, we should probably just go through our quote and just rattle off our headings and 

Speaker 2 (21:42):

Like a two, so, 

Speaker 3 (21:43):

Oh. Or we could probably upload a PDF I guess, and say, Hey, these are the headings it, or at least questions that we see on a very regular basis that people can download and use as a checklist, I guess, to help guide them through the contract phases. 

Speaker 2 (21:56):

Yeah, for sure. 

Speaker 3 (21:57):

So I think that's about it. Thanks for listening. And if you've got any questions, shoot us an email at info, Bluebird dc.com.au. Check 

Speaker 2 (22:05):

Out our Insta. 

Speaker 3 (22:05):

Yeah. Check out Instagram and check out all the other episode as well on our podcast. You've enjoyed what you like. Subscribe sent us an email and if there's a topic you want yeah. Just hit us up. 

Speaker 2 (22:14):

See you. Thanks.