Ancillary construction costs under KG 700: items and percentages

DIN 276 gathers into cost group 700 the services required for the project alongside the construction work and supplies themselves. The second-level structure: Its share is routinely set too low in early appraisals.

The largest block is as a rule cost groups 730 and 740, the fees for design and specialist engineering. Their level depends on the chargeable costs, the fee zone and the agreed fee rate. The framework for this is set by the German fee ordinance for architects and engineers, whose structure is covered in the article on the HOAI work phases.

With the December 2018 edition, financing costs were removed from cost group 700 and given their own cost group 800, covering financing charges, debt and equity interest, guarantees and other financing costs. Percentages from the two editions are therefore not interchangeable.

This carries an awkward side effect in practice. Anyone calculating on older rules of thumb, or adopting a percentage from an older source, may expect financing to sit inside the ancillary costs and consequently drop it without noticing. Depending on interest levels and construction period the amount is substantial, particularly on long refurbishment programmes.

Check rule: for every percentage figure adopted for cost group 700, establish which edition of DIN 276 it came from. The 2008 and 2018 editions delimit the group differently.

The statement that ancillary costs run at 15 to 20 per cent appears in practically every source. What is rarely stated alongside it: 15 to 20 per cent of what.

At least three bases are in circulation:

A worked figure shows the scale. On building cost of 3,600,000 euros, 18 per cent against that base gives ancillary costs of 648,000 euros. The same 18 per cent against total construction cost of 4,700,000 euros gives 846,000 euros. The difference is almost 200,000 euros, with nothing about the project or the rule of thumb having changed.

Anyone adopting a percentage must therefore adopt the base with it. If the source does not state it, the figure cannot be used.

For German public sector building, cost benchmarks exist in which cost groups 200, 500, 600 and 700 together are applied as an uplift in the order of one third on top of building cost. Ancillary costs are the largest single item within that, but not the whole uplift.

For private projects two regularities hold across the sources. They replace no calculation but give the order of magnitude.

The percentage share rises as the project gets smaller. Fixed items such as surveying, ground investigation, permit charges and utility connections spread across a smaller construction sum. On a detached house the upper end of the range is therefore the more realistic assumption.

The percentage share against building cost varies less between building types than commonly assumed. Even on elaborate special buildings with very high absolute ancillary costs, the ratio to building cost stays within a comparable band. The exceptions lie with projects carrying unusual design effort relative to the construction sum, such as listed buildings or schemes facing protracted consent procedures.

Almost as common as underestimation is misallocation. Three boundaries cause recurring difficulty.

Site acquisition costs. Land transfer tax, notary, land registry and agency commission are not ancillary construction costs. They belong to the site and therefore to cost group 100. The similarity of the German terms leads guides written for private clients to conflate them, producing either a double count or a gap.

Servicing and utility connections. Preparing the site, demolishing existing structures and public servicing belong in cost group 200. The utility connection costs themselves, for water, drainage, electricity, gas and telecommunications, belong instead in cost group 400 under the respective services installation. Charges and contributions levied by the municipality sit, depending on their nature, either in cost group 200 or in cost group 760.

Site establishment. Cranes, scaffolding, hoardings, cabins, temporary power and water are construction work and belong in cost group 300, normally within the contractors' site overheads. They are not ancillary costs, even though everyday usage often calls them that.

The underlying rule is straightforward: cost group 700 holds design, advisory, checking and administrative services. Anything executed or installed on the building itself belongs in cost groups 300 or 400.

Since cost groups 730 and 740 make up the bulk, how they are assessed determines the quality of the whole allowance. Three quantities set the level.

For an early allowance it is enough to derive the chargeable costs from the estimated building cost, assess the fee zone and name the work phases envisaged. The result is considerably more robust than a flat percentage on the construction sum, because it reflects the three actual drivers.

Note that chargeable costs are not identical to building cost. They are formed under their own rules, which recognise particular cost components in full, in part or not at all. Taking building cost unexamined as chargeable cost yields an allowance in the right order of magnitude, but not one that can serve as the basis of a fee agreement.

In the cost framework, ancillary costs are shown as a single sum at the first level. The cost estimate brings the second level, the cost calculation the third. This staging is not a formality; it describes how accuracy is built up.

For the cost framework a staged approach works. It separates the items that can be evidenced from those that are estimated.

1. Calculate fees separately. Cost groups 730 and 740 can be assessed early once the chargeable costs and the fee zone have been estimated. That is more accurate than any flat rate.
2. Set fixed items individually. Ground investigation, surveying, permit charges, independent structural checking and utility connections can be quantified early with acceptable uncertainty.
3. Apply a percentage only to the remainder. For the residual items in cost groups 710, 760 and 790 a percentage suffices, provided its base appears in the same line.
4. Do not forget cost group 800. It has not formed part of ancillary costs since 2018 and needs a line of its own.

This approach takes barely longer than a flat rate, but it is traceable for the client and survives a challenge. It also makes the assumption checkable.

This closes the loop back to the opening question about any benchmark. A published figure in euros per square metre of gross floor area refers as a rule to building cost and does not include ancillary costs. There are exceptions: benchmarks drawn from property valuation already include ancillary costs at a fixed percentage, yet carry the same unit.

Two figures with identical units can therefore mean one thing with and one thing without ancillary costs. Checking the cost scope is consequently not an academic exercise but decides a difference running into double-digit percentages.

• What a construction cost benchmark includes
• Reading and updating German construction cost benchmarks
• Construction costs per m² in Germany
• Cost planning under DIN 276
• HOAI work phases