| Should I Tell My Contractor My Budget? |

Budget is a sensitive topic for most, but it is one of the most important factors to discuss, especially at the beginning of your contractor selection process. You, as a homeowner, must decide on your budget before you start hiring a contractor. Even if you have no idea how much the project will cost, you know how much you are willing to spend. First, I understand your reservations about not revealing your budget to the contractor.

“If I tell my contractor my budget is 1 million, he will find a way to charge me 

1 million even if it costs less.”

“Pag sinabi ko ang budget ko, gagawan ng paraan ng contractor na singilin ako nang ganun kalaki kahit na mas mura talaga dapat.”

Here’s the hard truth, most often than not, homeowners underestimate the cost of construction. Even professionals in the field may underestimate the cost of construction. Almost always, your budget is insufficient for the scope of work you want; sometimes, it is doable, but rarely is it above the standard cost. Also, if you think this way right from the start, you are not trusting your contractor from the get-go. A trusting relationship is a two-way street, and if you are going to hire a contractor, trust is the number one factor.

“I want my contractor to give his best offer, so I will not reveal my budget cap.”

“Hindi ko sasabihin ang budget ko dahil gusto kong makuha ang pinakamurang offer.”

You may do this if you only have complete architectural plans or working drawings done by professionals. These drawings must contain material specifications. These will be used by the contractor to conduct their estimates. If you don’t have complete working drawings, don’t say this to your contractor, or you will run the risk of attracting “low-ballers.”

“I am bidding out the project, so I won’t disclose the budget.”

If you are bidding out your project, make sure you have complete working drawings and tender documents. You must qualify the contractors to bid, and you must have identical quantities for each bidder, and all the bidder has to do is offer their price for those quantities. This way, you are comparing apples to apples. Otherwise, do not bid out your project. Check out this article for the disadvantages of bidding out your project.

These are all valid concerns for not disclosing your budget to the contractor. However, the answer to the question in the title is YES; you should tell your contractor your budget because here are the things that would happen if you don’t.

1. The Contractor Is Left in the Dark

If you also require a design (as most homeowners do), not disclosing your budget will put the contractor in a position where they have no idea what kind of project you want. For example, you want your contractor to build your 3-storey house on a 200 sqm lot. The cost can range from 5 million pesos to 50 million pesos. Even if you describe your project as “wag mahal pero quality dapat, modern design”, it is still too vague for the contractor to gauge your project’s feasibility and constructability.

2. The Contractor Only Makes Assumptions

If the contractor is not keen on discussing the difficult matter of budget, he will assume. He may think you have 5 million pesos to spend when in reality, you only have 3 million pesos. You start your project with an elephant in the room.

3. Resources Are wasted

Your contractor may start working with his assumptions. He may visit the site, begin the design process (if he is a design and build contractor), even if your project’s feasibility is not studied and discussed. You may have already paid the contractor a fee, or the contractor may do all these things without charging you a peso; either way, resources are wasted.

4. Trust Is Compromised

You will be hiding vital information at the start of the project if you choose not to disclose your budget. You surely expect your contractor to be transparent with you, so you must also set an example and be transparent with your contractor.

5. Expectations Are Not Managed

You go through the project process thinking your project is feasible. In the end, the truth will reveal itself, and all parties will realize that the project is a dead-end from the start. There is a chance that you will resent your contractor for leading you on or “pinaasa ka”, and the contractor may suffer financial losses due to the simple fact that you as the homeowner would not reveal your budget, and the contractor did not assert the importance of the matter.

Here is why you should disclose your budget at the earliest stage of the project:

1. The Contractor Will Assess Your Project’s Feasibility

When dealing with private residential projects, feasibility is always an issue. Of course, homeowners are not aware of the construction costs and typically underestimate how much their project will cost. For example, you want to build a 3-storey house with a 120-sqm floor area and your budget is 500k pesos. 

At Archadius Construction Corporation, we will tell you the truth that the project is not feasible with the allotted budget, and we will suggest alternatives for you.

2. The Contractor Will Gauge the Quality of Your Project

If you disclose your budget at the beginning stages, the contractor will have an idea regarding the finish quality of your project. For example, you have a 30-sqm 1 bedroom condominium unit and your budget is 2 million pesos. We can therefore conclude that a premium finish that can be featured in magazines is feasible for your project. 

At Archadius Construction Corporation, we will ask you if that is indeed your goal because it is a possibility that you would merely want standard finishes which only entail a lower budget.

3. The Contractor Will Make Sure You Do Not Exceed Your Budget

At Archadius Construction Corporation, we always ask homeowners for their budget cap. Setting a budget cap means that the project cost shall not exceed that amount. With this information, we can plan accordingly. For example, you have a renovation project, and your budget cap is 2 million pesos. We may plan the project for 1.5 million pesos and leave the remaining 500k as a contingency.

4. The Contractor Will Design Your Project According to Your Budget

This only applies if your contractor provides design services (make sure a registered architect does the designs). At Archadius Construction Corporation, we design according to your budget. For example, you have a condominium unit for fit-out and your budget is 500k. We will design your unit with consideration that a portion of the 500k will be spent on the design fee. If the design fee is 40k, we will design your unit in such a way that the construction cost will not exceed 460k.

5. It Builds Trust

If the homeowner withholds the budget information, it makes contractors think about what other important information the homeowner is not disclosing. Being transparent with information helps build trust both ways. It is one of the most important factors to get right at the beginning of the project in order for it to be successful.

Archadius Construction Corporation specializes in residential construction and remodeling as well as condominium and commercial fit-outs. For your construction needs, you may reach us through Facebook: https://www.facebook.com/archadiusconstruction. You may also email us at contact@archadiusconstruction.com or call/text us at 0916-321-6094 / 0969-277-4634.