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The collaborative nature of design-build can be beneficial.
An array of variables impact branch cost. Some are obvious, such as facility size or the amount of new technology. Others are less obvious, like the cost of delays, poor communication or design decisions that don’t support a CU’s goals. All can add up. The collaborative nature of design-build helps to minimize the impact of these less obvious cost factors, according to Jim Haack, president of CUES Supplier member Momentum, Inc. a design-build firm based in Seattle.
“With branching projects, it’s difficult to estimate (the cost of) projects by the square foot,” Haack. “Many factors relating to the purpose and function of the branch impact cost much more than the physical size. Banking technology (interactive teller machines, teller line vs. teller pods or café style) and the level of finishes, all impact cost,” says Haack.
Using the design-build approach, “we bring everyone to the table from the beginning—the architect, interior designer, suppliers and client—and conduct alignment meetings to determine the scope of the project with the cost of design and construction in mind,” explains Haack. Doing this, “timelines run more smoothly, and there’s no sticker shock when construction bids come in because real-time construction costs have been integrated from the earliest design stage.”
To ensure a client’s requirements are met, Momentum also establishes a rough order of magnitude budget during the design and planning process.
The ensuing budgeting process is iterative and targeted, with the furniture and equipment encompassing up to a third of the total cost and causing a disproportionate (outsized) impact on the cost per square foot, notes Haack. This changes the cost per square foot dramatically relative to the size of the branch, with smaller branches costing significantly more per square foot.
No matter the size, branches usually have a teller cash recycler and ATM, a heating unit, etc. For larger projects, a CU can spread these costs over a more extensive square footage, but in a smaller branch, these components magnify the cost.
“Communicating costs at the beginning ensures no surprises and leads to better communication and a clearer understanding of objectives and decisions that lead to success,” adds Haack. “Having a branch that delivers on these business objectives is the ultimate way to improve an organization’s return on investment.”
Going Low, Medium or High
Last-minute changes or going over budget isn’t hoped for in any aspect of life, especially when it comes to an expensive building project.
“Overall, the surprises in cost typically come from change-orders and going over budget,” says John Smith CEO for DBSI, a design-build firm based in Chandler, Ariz. The traditional design, bid, then build approach of hiring an architect, bidding out the plans and hiring a separate general contractor often leads to numerous—and potentially costly—change orders.
Why?
“Because the contractor didn’t make the plans and will bid low, knowing they can find ‘mistakes’ in the plans and charge a lot more for change orders,” says Smith.
Additionally, executives don’t always consider the all-in costs or they hire a firm that cannot attain an accurate number for the overall costs. The result is the CEO having to ask the board for additional money.
“A traditional designer or architect doesn’t assist in budgeting or get construction input and costs until they have full plans to review,” explains Smith. “You can end up with a pie-in-the-sky design you can’t afford, but don’t realize it until you go out to bid.” Once costs come in a CU may be forced to “value-engineer” (or downgrade the design) to fit the budget, adding more work, time and design fees—not an enviable position.
“At DBSI, we start with defining a budget together and then designing a branch that will fit it,” continues Smith. “By working with our construction team from the early stages to reviewing materials, structures and phasing of work, we ensure what we design can be effectively built at an optimal cost.”
Smith notes that it’s important to obtain an all-in cost of a branch transformation, cost ranges and averages, and some construction stats, before building. Ranges are also dependent on the level of finishes and desired technology.
Finally, having a 10 percent contingency in your budget is smart, as there will almost always be unforeseen costs. A contingency fund not only gives peace of mind, but more importantly provides flexibility when decisions arise regarding technology, millwork, fixtures, flooring, etc., making for a better plan and execution.
Stephanie Schwenn Sebring established and managed the marketing departments for three CUs and served in mentorship roles before launching her business. As owner of Fab Prose & Professional Writing, she assists CUs, industry suppliers, and any company wanting great content and a clear brand voice. Follow her on Twitter @fabprose.
