Buying design and construction services has never been an easy task for churches. In today’s economic climate, the challenge has become exponentially harder as struggling builders become increasingly creative – or misleading – in how they represent the expenses associated with building a church.

Before exploring the accounting side of a construction project, it is important to define what the primary costs are and how these costs can be represented – or even manipulated – to the financial gain of the builder, without the church even knowing it. The primary cost items for a construction project are design and engineering; general condition costs; building construction costs, which can include self-performed construction costs; reimbursable costs; fixture and furnishing costs; and builder overhead and profit.

Design and Engineering

Design and engineering expenses are related to the architect, building engineer, site engineer, acousticians, mechanical and electrical engineers and others who are responsible for the plans from which the builder will construct the building.

General Conditions

Creative accounting abounds in general conditions, a very important area for churches to focus on. General conditions are costs that the builder incurs but are not actually part of the building. Examples include the site trailer, temporary utilities, temporary restroom facilities, trash removal, site storage trailers, barricades, safety fencing, first aid kits and various safety equipment, quality control and material testing, traffic control, governmental compliance issues, site cleaning and building cleaning. The largest general conditions cost to any project is the site superintendent. The superintendent is typically the only person who is charged to the job. However, firms may often lower their stated overhead and profit by moving up various office staff costs to general conditions. When comparing bids, churches should add the general conditions cost to the builder’s overhead and profit. This figure will offer a true picture of each builder’s fees.

Construction

Construction costs are the basic bricks and sticks of the project along with the labor to put them in place. Construction costs cover everything from the bulldozer pushing dirt to the carpenter installing studs to the painter putting the finishing touches on your new facility. Some builders may include self-performed work in their cost summary. Self-performed work is labor and materials that are supplied by the builder’s own employees and is rarely competitively bid on the open market.

Reimbursable costs are those costs that the design-builder is not able to get a firm estimate on. Many of these costs are related to owner-preference. Churches should eliminate as many of these unknown variables as possible. Every unknown can lead to cost overruns for the church.

Fixtures and Furnishings

Fixtures and furnishings, also known as FFE, can become a large portion of a project. Typical items considered FFE are seating, audio/visual systems, platform furnishings, office and classroom furnishings, café and kitchen equipment, and athletic equipment. Before beginning any project, make sure that you have a point person who will work closely with the designer and builder to establish budgets and costs for your FFE accounts.

Builder Overhead and Profit

The builder overhead and profit, needless to say, is an important area for the church to evaluate. The overhead and profit allows the builder to pay their office support staff, maintain their home office, provide warranty on the finished project and supply a profit to the stakeholders for the risk taken and managed to build your building. Choosing a builder solely on their low overhead and profit percentage has sometimes become a rude awakening for churches when they finally stumble on the hidden costs of the project.

Faced with the daunting task of choosing the right builder for their project, building committees have resorted to shopping building firms based on their monthly general conditions costs and their overhead and profit percentage. The thought is that these two items are the only variables between builders. After all, the remaining project costs (design and engineering, construction costs, and fixtures and furnishings) are somewhat fixed. Unfortunately, that assumption is far from accurate. As a picture says a thousand words, numbers, especially dollars, speak even more.