Building Costs

Construction cost of a building usually is a dominant design concern. One reason is that if construction cost exceeds the owner’s budget, the owner may cancel the project. Another reason is that costs, such as property taxes and insurance, that occur after completion of the building often are proportional to the initial cost. Hence, owners usually try to keep that cost low. Designing a building to minimize construction cost, however, may not be in the owner’s best interests. There are many other costs that the owner incurs during the anticipated life of the building that should be taken into account.

Before construction of a building starts, the owner generally has to make a sizable investment in the project. The major portion of this expenditure usually goes for purchase of the site and building design. Remaining preconstruction costs include those for feasibility studies, site selection and evaluation, surveys, and program definition.

The major portion of the construction cost is the sum of the payments to the general contractor and prime contractors. Remaining construction costs usually consist of interest on the construction loan, permit fees, and costs of materials, equipment, and labour not covered by the construction contracts.

The initial cost to the owner is the sum of preconstruction, construction, and occupancy costs. The latter covers costs of moving possessions into the building and start-up of utility services, such as water, gas, electricity, and telephone. After the building is occupied, the owner incurs costs for operation and maintenance of the buildings. Such costs are a consequence of decisions made during building design.

 Often, preconstruction costs are permitted to be high so that initial costs can be kept low. For example, operating the building may be expensive because the design makes artificial lighting necessary when daylight could have been made available or because extra heating and air conditioning are necessary because of inadequate insulation of walls and roof. As another example, maintenance may be expensive because of the difficulty of changing electric lamps or because cleaning the building is time-consuming and laborious. In addition, frequent repairs may be needed because of poor choice of materials during design. Hence, operation and maintenance costs over a specific period of time, say 10 or 20 years, should be taken into account in optimizing the design of a building.

Life-cycle cost is the sum of initial, operating, and maintenance costs. Generally, it is life-cycle cost that should be minimized in building design rather than construction cost. This would enable the owner to receive the greatest return on the investment in the building. ASTM has promulgated a standard method for calculating life-cycle costs of buildings, E917, Practice for Measuring Life-Cycle Costs of Buildings and Building Systems, as well as a computer program and user’s guide to improve accuracy and speed of calculation.

Nevertheless, a client usually establishes a construction budget independent of life-cycle cost. This often is necessary because the client does not have adequate capital for an optimum building and places too low a limit on construction cost. The client hopes to have sufficient capital later to pay for the higher operating and maintenance costs or for replacement of undesirable building materials and installed equipment. Sometimes, the client establishes a low construction budget because the client’s goal is a quick profit on early sale of the building, in which case the client has little or no concern with future high operating and maintenance costs for the building. For these reasons, construction cost frequently is a dominant concern in design.