5 Tips for Avoiding Project Sticker Shock When Building

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Credit: Courtesy Animal Arts Your architect can act as a trusted advisor to you, but only your contractor can tell you exactly how much something will cost.

Credit: Courtesy Animal Arts Your architect can act as a trusted advisor to you, but only your contractor can tell you exactly how much something will cost.

Building is much easier now than it was in 2008. Loans are easier to get, and there’s more stability in the market. While these trends are positive, new emerging challenges face veterinarians who are ready to build. Contracting firms that survived the recession are suddenly busy, yet many firms are still reluctant to hire. The result is higher and more unpredictable pricing for construction projects. In this article, we offer some tips for equine veterinarians who are interested in constructing or remodeling. With a few of the right steps, you’ll be able to avoid project sticker shock.

Tip 1: Expect that your project is going to cost more than you think it will. This isn’t the most upbeat advice, but it is practical. If you’re talking to colleagues who built hospitals before the recession, their projects cost a lot less than they would today. Inflation in construction prices is normally around 3% per year, and while prices dipped during the recession, they have sprung back as if the recession did not happen. On top of these general increases, global markets can also affect your project. For example, steel is a lot more expensive than it was a decade ago because of the shrinkage of U.S. steel manufacturing and the trend to purchase steel from overseas. If a colleague’s hospital cost $200 per square foot to build in 2004, the same project would cost at least 30-40% more today, depending on the location of the project.

Tip 2: Align your expectations with your budget. State-of-the-art equine hospital space costs at least as much as small animal hospital space, or at minimum $250 per square foot. While equine spaces are simpler, they’re pricey to construct. For example, high-performance equine flooring can cost at least $20 per square foot, while the sheet vinyl flooring used in small animal hospitals is only about $6 per square foot. Nevertheless, if you’re willing to spend money very selectively, it’s still possible to build an equine hospital for fewer dollars per square foot than a small animal hospital. The key is prioritization. Your surgery room could be constructed with high-end finishes, while you might settle for a simple roof covering and a concrete slab in the equine exam rooms.

Tip 3: Add in the soft costs. Some first-time practice builders are unaware of all of the expenses that are involved in constructing a project. In addition to hard costs, or the capital improvement costs, there are many “soft costs.” These are additional costs that must be incurred in order to bring a project to fruition. Soft costs typically include:

  • Professional fees (approximately 8%)
  • Permitting and entitlement (varies by jurisdiction)
  • Contingencies (5-10%)
  • Inflation (if you’re not building it tomorrow, you should account for inflation 
  • Furnishings, fittings and equipment (F, F, and E)

The furnishings, fittings and equipment category is often the most difficult to anticipate. This category typically includes all the loose owner-purchased items, including medical equipment, equine supplies, furniture, computers and even some specialty items. This category can vary widely, but it typically adds around 10-12% to a project.

Collectively, it is not unusual for soft costs to amount to 30-36% of the hard costs of the project. If you can’t afford your project when you add in the soft costs, look for ways to reduce the scope rather than skimping on your contingencies and hoping for the best.

Tip 4: Bring your contractor in early. Your architect can act as a trusted advisor to you, but only your contractor can tell you exactly how much something will cost. Therefore, it is a benefit to you (and your entire team) to have your contractor at the table early. Retain your contractor for pre-construction cost estimating. This is money well spent. If you find you’re over budget, you’ll have time to make revisions and bring the project back on track before you get the drawings finished. Once you have your contractor on board, you can consider negotiating with him to construct your project. In general, our veterinary clients have had better experiences with negotiated contracts than with “bidding” the work, especially given today’s volatile construction market.

Tip 5: Keep your site work simple. While it’s relatively easy to anticipate the cost of a building, the cost of developing an equine site can vary tremendously based on many factors. The cost of earthwork, utilities, drainage infrastructure, roads and fencing can add up very quickly. It is often the site costs that cripple an equine veterinary project. If you’re looking to prevent budgetary surprises, keep the site work as simple as possible for the first phase. Forgo your loop road, hay barn, arena and paddocks for now if you can and focus on getting the medical building built. Many site improvements can be done over time as your budget allows.

Tip 6: Buy things yourself. Although the owner-furnished items are a significant portion of the budget for a project, it is still possible to save money in this category. Every time you purchase something through your general contractor, you pay a markup. This markup can be avoided by purchasing some items directly. The following are some items you might not have considered purchasing yourself:

  • Materials and installation of induction/recovery stall padding
  • Stall fronts
  • Pre-manufactured barns and accessory buildings
  • Fencing materials and installation

If you’re going to purchase an item, be sure you coordinate carefully with your contractor to ensure he knows that you’re purchasing it, accepts the arrangement, and has money in his budget for installing the item if he is required to do so. If your contractor is helping with installation, it will be especially important to coordinate the order and delivery so the items are on site at the right time.

Take-Home Message

We’re thrilled to see times improve for veterinarians, but we have also seen a kind of unpredictability in construction pricing that makes projects difficult to budget. Avoid your own project “sticker shock” with the same solid approach that has always worked: realism, thorough budgeting and a competent team to help you through from start to finish.

Tony L. Cochrane, AIA, is a 20-year veteran and senior member of the Animal Arts team. He is often the one the company turns to for his unique ability to take a design idea and turn it into a three-dimensional reality. Cochrane has demonstrated his ability to work cooperatively with large and diverse organizations, municipalities and local architectural firms. Cochrane recently teamed with other architectural firms and contractors in a design-build process for both the Animal Rescue League in Des Moines, Iowa, and the Franklin County Dog Shelter in Columbus, Ohio.