Akers Cost Guarantee

Some time back, a large motel chain advertised their inns with the slogan, "No Surprises!" Now occasionally, surprises can be fun. A birthday party, a bonus in the pay envelope, an unexpected visit from a dear friend--we enjoy those. But when you are trying to build a large project like a church building, you want "No Surprises!"--at least not any unpleasant ones. Thus the idea of some kind of guaranteed price, early in the process, becomes very attractive. 

However, in spite of what you may hear otherwise, the only time a truly competitive guaranteed price can be given is not early at all. In the early stages, the architect, with your input, determines the design and quality level of the building--things which will indeed impact the price. But the actual overall price is not ultimately controlled by the architect, or even by a general contractor or construction manager who might be the "builder." That final cost is determined by the price of the materials used and the cost of the labor--costs set by the suppliers who provide the materials and the sub-contractors and craftsmen who do the work. 

True competitive prices can only be obtained when construction documents--the working drawings (blueprints) and specifications--are complete. Only then can the various sub-contractors and suppliers prepare their bids and be sure they are all bidding on similar materials and equal quality, so that you can compare bids, as they say, "apples to apples." Since inflation in the construction industry is much more volatile than in the economy as a whole, suppliers and sub-contractors will ordinarily guarantee their bid prices for no more than 30 to 90 days. Thus real costs cannot be accurately determined until very shortly before construction begins--after all the bids are in and totaled. Any price given before that time is simply an estimate, and sometimes not a very reliable estimate at that. 

But by then, design is all done, and the building is fully planned. If prices come in high, none of the options that seem open to the church are very appealing. You don't want to set out to build more than you can afford. Plans you cannot afford to use are useless. You have paid too much money to leave them lying in the bottom of a drawer somewhere. If you must pay for re-design, that's more money down the drain. It's a "Catch 22." You need to know the price early. You cannot know a true competitive price until late. 

Some firms try to overcome the problem and assure "no surprises" by giving the church a "guaranteed price" early in the planning stages. If the price runs over the pre-determined guarantee, the design firm will pay the difference. That sounds good, but there are some inherent problems with such an approach that are not at first apparent. Simple business economics dictate that a firm not lose money on more than a small percentage of their projects, or they cannot continue to operate. So, in order to stay in business, they cannot guarantee many prices unless they are certain that the real cost, after all bids are in, is not above the stated guarantee. Thus, with inflation always a threat, the "guaranteed price" must be set significantly higher than the actual cost anticipated by the designer/builder, even allowing for unforeseen increases. 

Now it is not unfair for the design firm to set the guarantee quite high. After all, they are the ones taking the risk. But the cost of that risk--often a very substantial cost--is passed on to the church. And once the church has accepted the guaranteed price, there is little incentive for the designer/builder to work hard to reduce costs throughout the design and bidding process. Under such a system, either: 

• You pay more for your building than you should, because you pay someone else to take all the risk, 
• The quality of the building drops, if inflation kicks in, so the builder can maintain his guarantee, or 
• You build a smaller building than you might otherwise be able to afford.

If the designer/builder agrees to split any savings below the guarantee, his share of the split can be a sizable bonus, a bonus which could have increased the size of the building or decreased the cost to the church. 

At Akers Church Building Services, Inc. we have developed a program that will assure the church of "No Surprises" yet give you more building for your money, securing the very best competitive price. 

• Early in design, we work with the church to establish a project budget and quality level consistent with the church's needs. 
• We design with that budget always in mind, aware that good stewardship dictates that the church get as much building, as high in quality as possible, for their money. 
• When preliminary design is done--prior to the congregational vote--we prepare a "materials take-off" cost estimate, then fine tune the design and project scope and make sure it is in line with the budget. 
• Upon approval by the church, we prepare detailed and concise plans and specifications which are used to obtain competitive bids for all parts of the project. 
• When construction documents are complete, and bids are in, if prices are over the budget, we will do whatever is necessary to get the costs down, at no extra charge to the church. -- part of our "team" commitment.

(Please refer to the Akers CBS "Design Guarantee".)

• Akers CBS will bid your project on the open, competitive market, assuring that you get the best prices available at the time. These bids will be guaranteed by the sub-contractors and suppliers, and will total somewhere between 80% and 90% of the anticipated cost of the building. 

• For bidding, Akers CBS will separate materials from labor in many prime bid areas, buying directly from suppliers rather than through sub-contractors, eliminating much of the middle-man mark-up. 

• Some parts of the project will be constructed on a "time and materials" basis, with laborers and carpenters hired by the hour and directed by the job-site superintendent. Costs for this work (less than 20% of the total project) will be estimated by Akers CBS, with a contingency in the budget in case some of this work takes longer than anticipated. If this work goes well, all the savings go to the church, not to Akers CBS. [This is an excellent area for the church to save even more using volunteer labor.] 

• If bids (on work not needed at the outset) come in higher than we think they should, Akers CBS will continue to receive bids and look for the best prices, even after construction has begun, so that the final cost is often less than that quoted at the bid summary. 

With this system, Akers CBS does not guarantee the construction cost, so we do not have a large risk-factor built into our fees  or the building costs for which the church has to pay. However, the vast majority of the cost is guaranteed by sub-contractors and suppliers in their bids.