Preparing the decision paper on a budget overrun

Two pages are enough if each part answers only one question. Longer material, such as the full cost calculation or drawings of alternatives, belongs in the appendix.

1. Header. Project, version and date of the paper, version of the underlying cost calculation, price base, gross or net, Kostengruppen (cost groups) covered. Without these details, every amount that follows is ambiguous.

2. Variance. Budget, current cost calculation, difference in euros and as a percentage, on the same basis. How the client checks whether both figures really measure the same thing is described in the article Checking the designer's cost estimate.

3. Causes. The difference is broken down: programme, quantity and level of design detail, price and price base. The causes must add up to the difference. Any unexplained remainder is shown as such, not spread across the others.

4. Options. Three to five options, each with estimated saving, risk, effect on the schedule and effect on the designer's fee. An option "raise the budget" is always included, so that the paper does not pretend that savings are the only choice.

5. Recommendation. Which combination is recommended and why, with the result in euros against the budget.

6. Resolution. What was decided, by whom, on what date, and which instructions follow from it. This part stays blank until the meeting.

An option is only ready for decision when it is described in the same four columns as all the others. The saving alone says little.

Column	Question	Typical mistake
Saving	How much does the option save on the basis stated in the header?	Saving gross, budget net
Risk	How certain is the saving, and what could eat it up?	Estimate with no statement of uncertainty
Schedule	How long does the redesign take, and does contract award slip?	Time treated as free
Fee	Does the option trigger a design change that must be paid for?	Redesign not priced in

The fee is not a side issue. Under section 650q(2) BGB (Bürgerliches Gesetzbuch, the German Civil Code), a design change ordered by the client is paid for in accordance with the fee calculation rules of the HOAI, insofar as the service is covered by it. For each option, the paper should therefore state whether the designer expects to be paid and in what order of magnitude. How cost management works as a technique is described in the article on cost management and intervening early.

One option concerns risk rather than cost. The choice between separate trade packages and a general contractor, or between a unit-price and a lump-sum contract, rarely lowers the cost calculation, but it can change who bears later variances. It belongs in the paper as a separate line, with no saving counted. The trade-off is covered in the article Unit price, lump sum or general contractor: which contract protects the budget.

The following example is entirely invented. The amounts are rounded and serve only to show the arithmetic; they are not benchmarks and cannot be transferred to any real project.

An office building, budget for cost groups 300 and 400: EUR 4,000,000 net, at the same price base as the cost calculation. The cost calculation comes to EUR 4,480,000 net. The variance is EUR 480,000, or 12 per cent of the budget.

Cause	Amount
Programme: additional meeting area at the client's request	EUR 200,000
Quantity and level of design detail: more elaborate foundations following the ground investigation report	EUR 180,000
Price: higher unit prices for building services	EUR 100,000
Total	EUR 480,000

Option	Saving	Risk	Schedule	Fee
A: meeting area omitted	EUR 200,000	Low	Redesign of a few weeks	Design change, to be paid for
B: facade with a simpler system on the upper floors	EUR 150,000	Medium, coordination with the building permit open	Redesign, contract award slips	Design change, to be paid for
C: cooling as an option, pipework provided in advance	EUR 90,000	Low	Hardly any effect	Minor design change
D: review the form of contract	Not counted	Changes the allocation of risk	Effect on contract award	Depends on the solution
E: raise the budget	EUR 0	None for the design	No effect	None

The recommendation combines A, B and C. Together they come to EUR 440,000 (200,000 plus 150,000 plus 90,000). On paper, this brings the cost calculation down to EUR 4,040,000 (4,480,000 minus 440,000). The remaining difference of EUR 40,000 is not chased through further savings, but put forward expressly for decision as a budget increase, in other words option E for this remainder.

The resolution might then read, for example: options A, B and C are commissioned; the budget for cost groups 300 and 400 is set at EUR 4,040,000 net at the price base of the cost calculation; option D will be presented separately before the tender documents are sent out. The fee for the redesign will be agreed in writing before it is commissioned. It is important that the saving from option B remains marked as an estimate with medium risk and is checked in the next cost determination.

The decision belongs to the client, not to the designer. The architect proposes and assesses, but which objectives are given up and which additional funds are made available is decided by whoever is responsible for the budget. In a company, that is the body that approved the budget, not the project management if its authority is lower.

For federal building projects, this is laid down. Under the RBBau (Richtlinien für die Durchführung von Bauaufgaben des Bundes, the federal guidelines for carrying out building projects, E 3.3), only the Lenkungsebene (steering level) decides on changes that substantially alter the framework of the project, and if the approved framework cannot be kept to, a decision must be obtained from the body that approved the project or released the funds. The decision paper is the right format for that body.