Find the hidden costs

The physical building and its services may account for two-thirds or less of the total project costs.

Land acquisition, VAT, professional fees, disruption, management and staff costs as well as the cost of financing and inflation can make up the remaining third – not to mention the ultimate disposal costs. And of course, the running costs and insurance of the new facility may be very different, especially if the new building reflects an organisational change.

Once again, the key point is to see your whole project and what will be charged to it. Fundraising costs, for example, may not be small and there may be costs associated with working with new partners, as well as annuality issues and complex draw-down processes. Client and user time, communications, facilities management and legal services may all be charged to the project. Time is money. If planning permission is delayed for three months that will increase costs as a consequence of the effects of inflation.

Be aware that if all the cost elements in a building come to, say £10m, the front page of the cost plan, showing Prelims (15%), professional fees (15%) and Contingency (7.5%) will suddenly transform it into a £13,750,000 building – so ask for more detail on those items!

Adding a figure for Optimism Bias (based on historic data from previous projects) to the anticipated cost may make a scheme unviable, so it is worth examining that issue carefully to see what  figure might be justified.