So you want to build a house extension in the UK, you’ve never done this before but you've heard somewhere that contractors can do projects for a fixed price. Ive run my own architecture practice in the UK since 2009, I specialise in altering and extending private homes. And I can tell you that fixed-price projects are real, they do exist.
But after I explain how they work, I seriously doubt you will want a fixed-price contract for any work to your home. If I'm wrong, let me know in the comments. And if you decide a fixed price is not for you, I have alternatives you can check out. So, read tuned to the end for those. And if you need more advice about a house extension project, you can book a consultation with me to discuss your options.
There are two ways you can get a fixed price for your house extension.
The first way to persuade a building contractor to give you a fixed price is to let them design your house extension. I'm serious, you give them a written brief, describing what you need from the finished project. And, crucially, you declare the budget for the job upfront. So you might tell the builder how many additional bedrooms or bathrooms you need and what you are prepared to pay to get them. The builder then hires an architect, and this is the important bit, the architect designs the project for the builder, not for you. The builder will have the architect work overtime to keep costs well under the budget. Everything from the layout, the construction method, building materials, fixtures and fittings are chosen with budget in mind.
If the builder can get the project built for half the budget, that doesn’t mean you make a saving. Oh no. It's a fixed price, remember. The builder keeps the budget. All of the budget. And you get a project designed and built for the lowest possible cost. Now, if you think this is far-fetched, or that I am making it up, keep in mind this is exactly how every state school and hospital in the UK has been built over the last 25 years. It goes by different names; Public Private Partnership and Private Finance Initiative are two, but Design and Build, or D&B, is what the construction industry call this type of work.
When I graduated I spent a year working for a large architecture firm that bid for D&B contracts for schools across Scotland. I remember reading through a massive briefing document, listing the number and size of every room in the building. Right down to the broom cupboards. The deal was that the builder would form a consortium to fund the construction of the building, and then rent it to the school for 25 years. The contract even had a clause that required the school to hire the same builder to maintain the building.
So they had to spend the next quarter century paying the builder to fix any problems that came along as a result of the builders' poor workmanship. I am not going to wade into the politics behind this but I should point out that Design & Build contracts do not automatically mean the builder owns the property or that they rent it to the owner.
As far as I know, they're isn't any legal or practical reason why a D&B contract couldn't be used for a house extension. You could have the contractor design you're home and, after they finish work, you own the building. Design & Build might work for a landlord who wants to squeeze in more tenants, doesn’t care about the design or quality of work, and wants to keep costs as low as possible. But, ask yourself, would you really want this for your own home?
The other way to get a fixed price for your house extension project is to pay the contractor way more than necessary. Let me explain. In this situation you hire the architect and the project is designed to suit your needs. You can specify anything you want. You then tender this wonderful design to a few suitable builders. You don’t need to declare the budget, you just need to tell them you want a fixed-price contract. The builders look at your design and specifications, they think to themselves;
"That looks like a £200k project, let's call it £300k - Fixed Price."
And that’s it. The builder massively overinflated the actual cost. They know that even if there are unexpected design changes, unfortunate delays or mistakes on site the price is so high it will cover any eventuality. You get your fixed price by paying way over the odds. And yes, this kind of procurement also goes on in public sector contracts. Politicians love being able to say they got a fixed price. And the easiest way to make sure a project comes in on budget is to massively over-inflate that budget to begin with. Procurement methods designed to keep voters happy are not really the best way to approach house extension projects.
But what alternatives are there for anyone needing work done to their home?
There are two ways you can arrange a contract that isn't fixed price but still keep control over the costs. If you want to manage the builder yourself you can use the JCT Homeowner Contract. If you are in Scotland, like me, the SBCC publishes a version of the Homeowner contract that works with Scots law.
The homeowner Contract is written in plain English and covers the basics. It is designed to be understood and used by anyone, regardless of their construction experience. It gives both you and the builder some reassurance that, if a dispute arises, it can be dealt with formally. So, if you are dealing directly with a builder for your project this is the contract to use. The works are carried out for an agreed lump sum, which can be paid in a single payment on completion, or agreed interim payments while work is ongoing. And, crucially, the contract has provisions to change the cost by mutual agreement during the project. So, if you change your mind about the design or if the Contractor discovers something wrong with your house that needs to be fixed, the contract allows the price to be varied.
If that sounds like a lot to take on, you could use the traditional route and hire an Architect to administer a contract on your behalf. The type of contract I use on my projects is the Minor Works 2016, published by the JCT and the SBCC. I will go into chapter and verse on this in a future post but it gives whoever is administering it the ability to vary the agreed price, timescale and scope of the project. It also gives the contract administrator the ability to control the quality of work and it includes penalties for delays and a defect liability period after work finishes.
Now, Ive been administering these contracts for almost two decades and I can tell you the best way to manage construction costs is to have as much information as possible upfront. Contracts only become useful when things go wrong. A well-worked-out design and specification is going to minimize the chance of this happening and will save you money in the long run. So before you start it pays to think through all the options and find the right architect for your project. I can help with that and if your home is in the UK, you can book a consultation with me to discuss your options, check your ideas and assess your budget.