The other avenue for creating more spending power is to increase the productivity of the dollars budgeted — effectively stretching the dollars.  There are two levers for accomplishing this; lowering project overheads and value-engineering the design.

Project overheads are soft-dollar expenses that serve to reduce the amount of capital available for “sticks in the ground” investment. Some of the overhead expenses are controllable, others are not. Perhaps the most significant controllable overhead items managed by homeowners are professional fees — namely project management fees and design fees. 

A prominent licensed architect’s fee can amount to 10-to-15 percent of the total hard construction costs.  This is a significant number and most homeowners are not willing to invest that level of resources on design; which is the reason that a small percentage (depending on how the number is defined, 2%-to-28%) of homes are custom designed by licensed architects.   The typical alternative is to purchase off-the-shelf house plans for a few thousand dollars from various publishing sources, including the National Association of Home Builders (which, by the way, may be designed by a licensed architect.)  I believe that much of the homogenization of home design is attributable to this trade-off made by homeowners.  There is a remarkable similarity across the plans since they are designed to appeal to as broad an audience as possible.  The very important design activities of merging the building's functionality to the owner's needs and of merging the location and site with the building design  are completely missing from these plans, often resulting in a home that looks and feels out of place.

Selecting a builder that has both design and build capabilities can be a good intermediate alternative for many homeowners. Bensonwood Homes is an excellent example of a design/build firm that offers true custom home designs with a very reasonable design fee structure. There are a number of reasons behind the operating approach of design/build firms that make them a more cost effective choice.  I plan to write a future blog post on this subject.

The second lever for increasing capital productivity is value engineering.  When a client makes a specific choice to incorporate a feature into the house design, it is often possible for the design/build team to identify alternative means to execute the design without sacrificing quality.  When this process is focused on identifying the least cost approach for delivering the design feature, it is called value engineering.  This is one of the major advantages in working with an experienced design/build team.

My next blog post will discuss the trade-off levers in the Quality dimension of the Trade-off Triangle.