The independent third-party cost review

It means a cost determination or plausibility check by a person or firm not involved in the design. It is based on the same drawings, specifications and quantities that the architect has. The result is a figure of its own or a reasoned opinion on the designer's figure.

It is not a second design. The reviewer does not propose other solutions unless expressly instructed to do so. The reviewer checks whether the cost determination matches the design, whether it is complete and whether its assumptions can be followed.

Nor is it an expert report in a dispute. A review during the project serves the decision, not the evidence. If litigation is already in prospect, other requirements apply to the brief, the method and the documentation, and these must be clarified legally.

A review is most valuable where the client takes a decision that can only be changed later with effort. In the German design process there are three such points.

The first moment requires preparation. Because the special right of termination under section 650r BGB (Bürgerliches Gesetzbuch, the German Civil Code) lapses 2 weeks after the documents are submitted, the reviewer must be appointed and available before the designer submits them. A review organised only after submission usually comes too late for this decision.

The second moment is the most important in economic terms. If the Kostenberechnung (cost calculation) is above the budget, the client can still change course without touching contracts with the firms carrying out the works. How the client then decides is covered in the article The cost calculation exceeds the budget: deciding before tendering.

The third moment secures the contract award. The priced bills of quantities are the yardstick against which the tenders are measured. For public contracting authorities, according to published case law (OLG Düsseldorf, VII-Verg 14/17), the quality of the cost estimate may also determine whether cancellation for lack of funding can come into consideration later on.

There is no single professional title for this task. It is carried out by cost planners and construction cost consultants, by Projektsteuerer (project controllers acting for the client), by engineering firms or by architects not involved in the project. Two qualities are decisive: independence from the project's designer and demonstrable experience of cost determinations for comparable building projects.

Independence means more than a different name on the letterhead. The reviewer should neither be involved in the design nor have a financial interest in a particular result, for example because the reviewer hopes for a follow-on commission during construction.

Where a project controller is already appointed, the review may form part of that commission. How tasks are divided between client, project control and designers is covered in the article Project control and client representation: who does what.

A second figure only means something if it measures the same thing as the first. The reviewer therefore reconciles the bases first and only then the amounts:

• Scope: Which Kostengruppen (cost groups) are covered and which are excluded? Are ancillary construction costs, external works and furnishings included? Is the figure gross or net?
• Price base: To which date do the prices refer, and how is the time until contract award taken into account?
• Quantities: Do the main quantities match the design: gross floor area, facade area, roof area, number of technical units? Quantity errors can weigh more heavily than price errors.
• Benchmarks: Where the determination works with cost benchmarks, it must be checked which reference area they relate to and which cost scope they cover. How benchmarks are read correctly is explained in the article on reading construction cost benchmarks.
• Variances: The end result is a list of the items on which the two determinations differ, each with its amount and presumed cause. The technique of this comparison is described in the article on the target-actual comparison of cost estimates.

The client must decide in advance what the reviewer is to deliver. The brief and the fee are freely negotiable; this article does not assume any statutory scope of services for this task. A concise written brief should contain at least five points.

The choice of method is a budget question. An own determination takes more effort but produces an independent figure. A plausibility check is quicker and is often enough when only the major items and the bases need checking.

The RBBau (Richtlinien für die Durchführung von Bauaufgaben des Bundes, the federal guidelines for carrying out building projects) follows a comparable logic. For federal building projects, a provisional Projektkostenziel (project cost target) is set with the initial project document at the level of the Kostenrahmen (cost framework), and the final project cost target is fixed with the final project document at the level of the cost calculation (RBBau E 2.2, E 3.1 and E 3.2). There, the cost determination thus becomes the basis for a formal decision at set stages before it becomes the decisive control figure. If deviations from the agreed cost targets emerge later, the client must be informed without delay under RBBau D.4, with proposals for alternatives. A private client can adopt this structure by tying the independent review to exactly these stages: before fixing the budget on the basis of an early determination, and before approving the cost calculation.

A variance between two determinations is at first a question, not an error. The client should pass the list of variances to the designer for comment and bring both sides together at a meeting. Part of the difference is often explained by different assumptions on scope or price base.

What remains after that is the basis for a decision. The client records which figure will underlie further design, and why. This decision belongs in the same written approval in which the client accepts or rejects the designer's cost determination.

The review itself is an expense of the client and belongs in the overall budget. It counts among the incidental costs of the project, not among the construction costs, and should be carried as a separate item from the outset. A client who only commissions it once the figures are already worrying often finds there is no budget line left for it.

Its scope follows the risk. For a simple project with repeatable building elements, a plausibility check of the major items is often enough. For alterations to existing buildings, technically demanding buildings or a tight budget with no reserve, an own determination is more readily justified.

The review documents a variance; it does not shift responsibility for the design. The architect remains responsible for the cost determination even if a third party has reviewed it. Conversely, the reviewer does not take on the designer's duties, only those set out in the reviewer's own brief.

It can strengthen the client's file. On the trend of published case law, a client who relies on an agreed Baukostenobergrenze (construction cost cap) bears the burden of pleading and proving it (BGH, judgment of 06.10.2016, VII ZR 185/13, according to published case notes). A dated review that records a variance early does not replace this proof, but it can show when the overrun became apparent and how the client responded.

And it is only as good as the documents. A review based on incomplete drawings confirms an incomplete figure. The client should therefore make sure that reviewer and designer work with identical, dated documents.