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What drives the cost of a project?

Updated: Nov 7, 2019

I’m often asked how much a certain type of project will cost, to which I reply “how much does a car cost?” The point being that the features of the car have to be described in sufficient detail to differentiate one from another. It’s not enough to say that this particular car will have four wheels, seats, and windows.   What determines cost is what the seats are made of, whether they are heated and adjustable, etc. So it’s really not possible to say what a family room addition will cost, for example, until we fill in many of the blanks.

That said, I have some general ideas of what drives cost that may be worth sharing:

  • Size doesn’t matter (as much as you think)- While it is counterintuitive, particularly given the fact that square foot pricing is often used for ballpark estimating, the size of a room or building only marginally affects the cost.   The cost of building or renovating houses is mainly divided into four categories: labor, materials, subcontractors, and profit/overhead.   Making something bigger or smaller generally has little effect on these items because all the steps have to be taken in either case. For example, building a small bathroom will still involve a plumber, electrician, tile-setter, plasterer, carpenter, etc. etc. If the tile setter has to lay more tile, it doesn’t affect the time he took to get to the job, set up his tools, etc. Similarly, if the carpenter has to put down a few more sheets of plywood, the labor and material increase are minimal.   I will call this Hornstein’s first rule- The middle of a room costs almost nothing. It’s the edges and intersections that are expensive.   Therefore, given the same general shape, an addition that is 10’x30’ might only cost 20% more than an addition that is 10’x15’. In other words, doubling the size might only result in a 20% increase in cost. The exception to this rule is if the design calls for extremely expensive materials or for very intricate labor.

  • Complexity does matter: An addition with a complicated roof or zig-zaggy foundation could cost twice that of a simple rectangle. That’s because of Hornstein’s second rule: Thinking costs money. Thinkers are more expensive because they are harder to find, and thinking about something takes more time than not thinking. And as we know, time is money. There is a compounding effect- if you have a project that has 20% complicated parts and the rest is straightforward, you still have to hire a contractor smart enough (and therefore more expensive) to do the hardest part of the project, even though 80% of the time you will be paying for excess brain capacity. In general, it’s not a good idea to have a simple project that has a couple really tricky parts, because the cheap guy won’t be able to do the hard parts, and the expensive guy will be largely wasted.

Some examples of complexity:

  • A design with a lot of alignments (e.g. top of window aligns with top of door which aligns with the top of cabinets). Before the carpenter can install the window, s/he has to know everything about how the cabinets and doors will be installed so that s/he can align the windows. There is often a lot of head-scratching trying to figure out where to start. Meanwhile, the crew is standing around doing nothing. This is expensive!

  • Connecting old to new- Most existing structures are not quite straight or level, but the new work will be, so somehow these differences have to be resolved. This often involves time-consuming shimming of the walls, ceiling and floor. You can often detect a poorly built addition as you move from the old to the new.

  • Unforgiving details- Many details in houses actually exist to make them easier or faster to build. For example, baseboard at the bottom of a wall makes it easier to plaster the wall, because the plaster doesn’t have to go all the way to the floor. The baseboard also hides unevenness between the floor plane and wall. A contemporary detail where the plaster meets the floor with no baseboard is hard to execute, because the floor and wall have to be built perfectly. This requires extras steps all along the way.

In broad terms, there are two types of buildings: shoeboxes (inexpensive) and jewelry boxes (expensive). The type of building you have will determine cost more than the size.

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