January 17, 2018

A Building Cost Analysis and the right contractor are key to building on budget


Doing the due diligence Building Cost Analysis and choosing the right building contractor are key to building a new home within budget, and without nasty surprises.

“The value of a proper budget combined with the expertise, efficiency and materials supply contacts of a professional contractor cannot be overemphasized,” stresses Mohau Mphomela, Executive Director of the Master Builders Association North (MBA North).

“It is not uncommon for consumers to find themselves over budget on a building project. In fact it happens so frequently that friends at the braai-side will joke about doubling the estimated costs and taking out a loan to make sure the job is finished. At the crux of it is a poor understanding of the costs involved in building projects. Building costs should take into account, amongst others, variables such as labour, material, equipment, building codes, job-site conditions and standard markups applicable to the area.”

Going over budget can place the homeowner in a financial predicament. It comes with the risk of having their building bond frozen by their bank until the extra money is furnished, lead to the building project grinding to a halt and the contractor walking off site. On the flip side, having the costs of a building project accurately calculated through a Business Costs Analysis before starting the project can save thousands of rands.

A Building Costs Analysis, says Mphomela, is the only financial risk mitigation tool available in the country.

“If you haven’t had your budget drawn up or committed to by a registered builder, you can be almost sure that all sorts of costs have been overlooked. For instance, have the costs of connecting wires and plumbing points or fittings and fixtures been considered?”

Aside from including the full costs of labour and materials, a Building Costs Analysis will help to reveal hidden costs associated with a build as well as enable the homeowner to compare apples with apples when considering different contractors as their markups will not be included. Additionally, a Building Costs Analysis will help to ensure that contractors have an accurate picture of the costs involved in the project and prevent them from under quoting in order to secure a job.

A Building Costs Analysis affords the homeowner with a crucial level of protection against being over charged and going over budget. It is also a helpful tool for them to use for project managing their own building process.

With a plethora of consultants and contractors offering Building Costs Analyses as a service, Mphomela cautions homeowners against picking just anybody.

“Check their credentials, ensure that they are registered with the NHBRC, and a member of the Master Builders Association. Also remember that a Building Costs Analysis does in no way obligate you to use the same contractor to undertake the building project,” he advises.

Choosing the right building contract to undertake the project is the next important step towards getting the job done properly, soundly and within budget. Consumers are offered some degree of protection by the NHBRC and their financial institution if the project is financed via a Building Bond.

All contractors who work in the residential market must be registered with the NHBRC, as should the project itself. The NHBRC though, only provides “insurance” for defects in the work up to the value of R500 000. If the project is financed via a Building Bond, the bank’s inspectors will visit the site five to six times during the project to check that work is adequately completed before releasing the funds to the homeowner to pay the contractor. The reality is however that even if a contract has been entered into and signed, the homeowner is alone in dispute resolution and arbitration as neither the bank nor the NHBRC will get involved.

Mphomela recommends choosing a contractor who is a member of the Master Builders Association North for additional peace of mind.

“Members are continuously vetted by the Master Builders Association North which provides stringent mechanisms for ensuring homeowner’s satisfaction and protection. Our members are expected to satisfy the building requirements of their clients and are held accountable to the association’s code of ethics.

“This means that homeowners can expect them to stick to the budget and deliver on their promises. In the unlikely event that they don’t, the Master Builders Association has a dispute resolution and complaints forum for people to turn to,” he explains.

“Building your dream home should be an exciting experience. You should have to worry that the project will end up costing more than you budgeted for, or can afford. Knowing upfront what the costs will be, instead of relying on optimistic costings, and choosing a qualified and responsible contractor will help to ensure that you meet your budget and see your dream home come to fruition,” concludes Mphomela.

The Master Builders Association North represents contractors and employers operating in the building industry in Gauteng, North West, Mpumalanga and Limpopo. The association provides support services on industrial and labour relations matters; legal and contractual matter;, mediation and dispute resolution, and skills development and training programmes. A list of member contractors is available on the association’s website.

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