Construction budget control for the client in Spain: setting it, checking it, holding it

Each moment has its risk and its lever, and each lever has its source. The last column gives the text on which the party commissioning the works can rely.

The first two moments cost little and pay back the most: correcting a brief at feasibility stage costs a revision of drawings; during the works, it is paid for in extra works and in time. From procurement onwards, correcting the figure costs more and more: the next three moments serve mainly to defend it.

The budget is an input to the design, not its result. Law 38/1999 on Building Regulation (Ley de Ordenación de la Edificación, LOE) defines the promotor as the person who "decides, drives, schedules and finances" the works, with their own or third-party funds (art. 9.1; unofficial translation, as are all quotations from Spanish texts in this guide). Scheduling and financing include fixing the figure one is prepared to invest. The client who asks "how much will it cost" once the outline design is already drawn has given up their main lever; the client who fixes the figure first can then require the design to fit it.

The LOE does not use the word presupuesto (budget) in the sense of cost and gives no agent the task of holding the client's budget. If the client does not write it down, nobody will do so on their behalf.

The design budget is not the development budget. The first is built up from the presupuesto de ejecución material (PEM, the net construction cost), that is, the sum of each unit of work multiplied by its price plus the lump-sum items, to which the contractor adds overheads (gastos generales) and profit (beneficio industrial) to form its price. The second adds everything the client will pay on top: design and site direction fees, the geotechnical survey, health and safety coordination, licences and municipal taxes, quality control, insurance and guarantees, utility connections, finance costs, any monitoring required by the lender, taxes, a contingency for the unforeseen and price revision.

Each item becomes certain at a different moment. Fees are known when the appointments are signed, the works price when the contract with the contractor is signed, and price revision and quantity overruns only at the end. The ratios for moving from PEM to total cost, the cost factors and the taxes are covered in this series' guide to construction cost per square metre; no ratio and no tax rate is given here.

The LOE sets an item worth planning for from the outset. The one-year guarantee for finishing defects can be replaced by the client retaining "5 per cent of the amount of the net construction cost of the works" (art. 19.1.a). It is not a cost overrun, but it is a sum that affects cash flow and that the works contract must provide for.

A budget with no price date cannot be compared with anything. Writing "works budget of X euros, excluding VAT, at [month and year] prices" allows the figure to be updated later rather than discovered to have been exceeded.

The contingency must be in plain sight, not spread across the cost items. It covers three distinct things: the uncertainty of the estimate, which falls as the design is defined; construction risks, such as ground conditions or the existing building in a refurbishment; and the changes the client will decide on. No official Spanish source sets a contingency percentage, and this guide does not invent one: the right contingency is justified by identified risks and released as the stages progress.

The appointment is the only place where the budget binds the designer. Law 2/1974 on Professional Associations (Ley sobre Colegios Profesionales) provides that the visado (the professional association's endorsement of the design) "shall in no case cover fees or other contractual conditions", which are left to free agreement between the parties (art. 13), and that the associations may not set fee scales, except for criteria used in assessing legal costs (art. 14). Neither the association nor the visado therefore controls the cost of the works for the client. The texts reviewed for this guide contain no rule requiring the architect to design within a budget: that obligation arises from the contract.

What to write into the appointment: the target budget and its date, what it covers, the agreed tolerance, the obligation to quantify every change to the brief, the cost deliverables at each stage, and redesign at no extra fee if the target is exceeded without a change of brief. These points are developed in the branch on setting the budget before design starts.

The cost figure changes in nature at each design stage. The Technical Building Code (Código Técnico de la Edificación, CTE) provides that the proyecto básico (the basic design submitted for the building permit) "shall define the general characteristics of the works" and is sufficient to apply for the permit but not to build; the proyecto de ejecución (the detailed construction design) "shall develop the basic design" (art. 6). On cost, Annex I of the CTE, as worded by Royal Decree 173/2010, lists among the minimum contents of the basic design a presupuesto aproximado (approximate budget), described as an "approximate valuation of the material execution of the designed works, by trade section", and leaves the detailed budget and the itemised quantities to the construction design.

An approximate budget is not a works price. It values the net construction cost, without fees, taxes, or the contractor's overheads and profit; it serves for the permit, not for procurement or for comparison with a total cost.

A budget is checked by comparison, and comparison requires three constants: the same scope, the same price date and the same cost items. Every variance has a cause and every cause has its counterpart. Causes fall into four families: prices (the market has moved), quantities (the design has grown or been better defined), price date (the comparison is with an old figure) and brief (the client has asked for more). The first three are discussed with the designer; the fourth is a decision of the client that must be quantified in writing.

The cheapest moment to correct is before procurement. If the design estimate exceeds the client's budget at the end of the basic or construction design, the effective levers are, in order: the brief and the floor areas, the technical solutions and the finishes, phasing, the procurement route and, only after that, prices. An independent counter-estimate on the same documents helps to put a disagreement on an objective footing, without replacing the designer's responsibility.

Spanish law has no quantified tolerance threshold. No serious source reviewed for this guide sets a percentage above which the architect is liable for an exceeded budget, and this guide gives none. Published decisions show a tendency, not a rule. According to vLex, the Supreme Court (First Chamber, judgment 750/2012 of 12 December) refused architects fees calculated on an actual cost increased by their own defective work. According to elderecho.com, a Supreme Court judgment of 18 January 2000 criticised the contractor and the architect for failing to inform the client of a 54% price increase, as the specification required.

The practical consequence is the same as at the first moment. The client is better protected the more clearly they have written their budget and tolerance into the appointment, dated their requests and kept a record of warnings and of their own brief decisions. The full analysis is in the article on cost overrun in the design and the architect's liability to the client.

The contracting authority cannot build up its figure as it pleases. Law 9/2017 on Public Sector Contracts (Ley de Contratos del Sector Público, LCSP) requires the design to include a budget "stating the unit prices and, where applicable, their breakdowns, a schedule of quantities and the details needed for its valuation" (art. 233.1.d), and a geotechnical survey unless incompatible with the nature of the works (art. 233.3). Before the design is approved, a supervision report is mandatory when the presupuesto base de licitación (the base tender budget) is "equal to or greater than 500,000 euros, excluding VAT" (art. 235); below that it is optional, unless the works affect stability, safety or watertightness.

The base tender budget must be "suited to market prices". Article 100.2 requires it to be broken down in the pliego de cláusulas administrativas particulares (the specific administrative conditions of the tender), indicating "the direct and indirect costs and any other expenses calculated to determine it". The classic structure is given by article 131 of the General Regulation (Royal Decree 1098/2001): PEM, plus general overheads "of 13 to 17 per cent" to be set by each ministerial department, plus "6 per cent by way of industrial profit", plus VAT. An undervalued base tender budget saves nothing: it exposes the authority to tenders with no admissible bids. These points are developed in the branch on checking the design team's cost estimate.

Private and public works do not offer the same levers at procurement: the private client has freedom and few legal limits; the contracting authority has limits and little freedom. In both cases, the budget is lost in the same place: in what is not compared, defined or capped before signing.

The private client's freedom is only useful if tenders are comparable. The client can negotiate, retender or reduce the scope. One discipline governs everything: comparing on the same quantities, the same cost items, the same options and the same date. A lower tender that omits an item is not cheaper; it moves the cost into the works, where it reappears as extra works.

The form of price and the procurement route weigh as much as the amount. A fixed price, or ajuste alzado in the terminology of the Civil Code, transfers the risk of labour and materials to the contractor; with unit prices, the actual quantity makes the price. A general contractor gives one price, one point of contact and coordination included in its margin; trade-by-trade contracting may give lower prices, but the interfaces, the scope gaps and the coordination fall to the client. The mechanics of each form of price are covered in this series' guide to quantities and budgets.

Two figures, two functions. The base tender budget is "the maximum spending limit that the contracting authority may commit under the contract, including Value Added Tax" (art. 100.1). The estimated value is the total amount excluding VAT, which includes the upward modifications provided for in the tender conditions (art. 101.1.a and 101.2) and which, where there are lots, is calculated on all of them together (art. 101.12). The first limits what can be spent; the second determines the procedure.

When tenders exceed the base tender budget, the room for manoeuvre is narrow. Any tender above the base tender budget exceeds the spending limit. The law does not allow a tender to be declared void (desierta) "where there is any admissible tender or proposal" (art. 150.3). If there are no suitable tenders after an open or restricted procedure, the negotiated procedure without publication is available, but "without in any case being able to increase the base tender budget or change the remuneration system" (art. 168.a.1.º). Before the contract is formalised, the authority may decide not to award it "for duly justified reasons of public interest recorded in the file" or withdraw because of an "irremediable infringement" of the rules on preparation or award, compensating the tenderers' costs (art. 152). If the base tender budget was undervalued, the real way out is a new tender with a corrected budget and, often, a revised design.

An abnormally low tender is a risk to the budget, not an opportunity. Article 149 requires the tenderer to be asked to justify "in a reasoned and detailed manner the low level of the prices or costs", with technical advice from the relevant department, and the tender to be excluded if this is not satisfactorily explained. The full regime of procedures and abnormally low tenders is set out in this series' guide to public works tendering. These points are developed in the branch on procuring the works without losing the budget.

During the works, the only figure that matters is the forecast final cost. The contract price is known; what is not known is what the client will have paid at the end. A useful sheet fits on one page and is updated with each certificación (interim valuation): contract price, approved extra works or modifications, changes under discussion, forecast quantity overruns, price revision, forecast final cost and remaining contingency.

A valuation is not an approval. In public works, monthly valuations are issued "within the first ten days following the month to which they relate" and are payments on account subject to the corrections of the final measurement, "without implying in any way approval and acceptance of the works" (LCSP, art. 240.1). In all building works, the final net construction cost is recorded in the certificate of acceptance (acta de recepción) (LOE, art. 6.2.c).

Article 1593 of the Civil Code is the private client's direct reference. It provides that the architect or contractor who undertakes the construction of a building for a fixed sum (ajuste alzado) "on the basis of a plan agreed with the owner of the land, may not claim an increase in price even if the cost of labour or materials has risen; but may do so when a change has been made to the plan that produces an increase in the works, provided the owner has given authorisation".

The text protects against rises in labour and materials, not against authorised extra works. Nor does it require the authorisation to be in writing or the price to have been agreed beforehand. According to legal scholarship (A. E. Gudín Rodríguez-Magariños, "El ius variandi en las obras con ajuste alzado", Anuario Jurídico y Económico Escurialense, 2011), Supreme Court case law accepts verbal or tacit authorisation, even inferred from knowledge of the works without objection, and treats the article as an interpretative rather than a mandatory rule; the author cites, among others, the judgments of 19 October 1995 and 27 May 2005 and, to the contrary, that of 30 January 2008, which gave effect to a contract clause requiring the quantities and prices of any additional work to be approved beforehand in a written annex. This is a tendency of published decisions, not a rule.

That is why the client's protection can only come from the contract. The works contract should provide for a written procedure: a numbered request, price and time, signed authorisation before execution, a change register and traceability of omissions. Any unauthorised work is disputed in writing as soon as it becomes known. The detail is in the article on extra works under a fixed-price contract and article 1593 of the Civil Code.

Stopping the works has a cost that must be calculated before deciding. Article 1594 allows the owner to withdraw "by their sole will from the construction of the works even if begun, compensating the contractor for all their expenses, work and the profit they could have obtained from it". It is an option to be costed, never a saving.

Modifying the contract is exceptional and strictly circumscribed. It is only possible "for reasons of public interest" in the cases and in the manner provided for by law (LCSP, art. 203.1). There are two routes: the modification provided for in the tender conditions, "up to a maximum of twenty per cent of the initial price", with a "clear, precise and unequivocal" clause and no new unit prices not provided for (art. 204), carried out in the manner specified in the tender documents (art. 207.1); and, exceptionally, the unforeseen modification, limited to the "strictly indispensable" variations (art. 205). Outside those cases, the answer is termination and a new contract (art. 203.2).

The limits on unforeseen modifications are read differently depending on the case. Additional works and unforeseeable circumstances may not exceed, separately or together, 50% of the initial price, excluding VAT (art. 205.2.a and b). For non-substantial modifications under article 205.2.c, the 15% is not an authorised margin: it is the threshold above which a modification is in any event considered substantial in a works contract, as is one that introduces new units for more than 50% of the initial budget. And only for modifications under article 205, the contractor is obliged to accept them if they do not exceed 20% of the initial price, excluding VAT; above that, its written consent is needed (art. 206).

Some growth is not a modification, and it must be budgeted all the same. Article 242.4 does not treat as modifications the excesos de medición (quantity overruns) that "overall do not represent an increase in expenditure of more than 10 per cent of the initial contract price", which are recorded in the final valuation, nor the new agreed prices that do not increase the overall price and do not affect units exceeding "3 per cent of the original budget". The final valuation is approved within the 3 months following acceptance (art. 243). That 10% therefore arrives at the end of the works: it should be in the contingency from the start, not discovered at final account.

Fictitious example. A town council awards a works contract for 2,000,000 euros, excluding VAT, with tender conditions that provide for a modification of up to 10%. Its table of possible growth looks like this:

The table does not add up entitlements: it shows different ceilings for different cases. Whatever the authority wants to be able to modify must be provided for in the tender conditions and included in the estimated value (art. 101.2). The analysis of the limits is in the article on how far a public works price can grow and the limits on modifications.

A budget only makes sense with a price date, and price revision is the way that date moves. In public works, article 103 of the LCSP only allows "periodic and predetermined" revision, where the tender conditions provide for it with a formula that does not change during the contract. It applies when the contract "has been performed to at least 20 per cent of its amount and one year has elapsed since its formalisation"; the first 20% performed and the work performed in the first year are excluded. Depreciation, finance costs, general or structural overheads and industrial profit are never revisable. The one-year period comes from Law 11/2023; before that, 2 years were required.

In private works there is no statutory revision. For a fixed-sum contract, article 1593 of the Civil Code excludes a price increase because of rises in labour or materials; only a contract clause can organise a revision, with its index, its reference date and its initial exclusion. This is developed in the article on price revision and the date of the budget. These points are developed in the branch on tracking the final cost during the works.

Controlling cost is not a single function. The client decides, the designer designs, the dirección facultativa (the site direction team) directs and records, and the budget tends to drift between those functions when each believes another is watching it.

The LOE organises the recording of cost, not its control. The director de obra (works director) prepares, "at the client's request or with their agreement, any modifications to the design" and must "approve the interim valuations and the final account of the units of work carried out" (art. 12.3.d and e). The director de la ejecución de la obra (director of works execution) controls "the construction qualitatively and quantitatively" and must "prepare and sign the interim valuations and the final account" (art. 13.1 and 13.2.e). Neither is given the client's budget by law. Control of the forecast cost is therefore an assignment to be given by contract, to the architect, to the arquitecto técnico (building engineer), to a cost consultant or to a project manager.

Three roles, three principals. The project manager, or dirección integrada de proyecto (integrated project management) in the academic terminology, works for the client with scope, cost, time and quality objectives; according to a classic study published in Informes de la Construcción (R. de Heredia, 1995), the role complements the site direction team without replacing it and should not reduce cost control to checking valuations. Project monitoring, or monitorización de obras, is commissioned mainly by the lender under a development loan: initial review, periodic reports, usually monthly, control of loan drawdowns and financial close-out. It works for whoever finances, not for whoever develops.

Taking on technical functions can turn the manager into a building agent. According to iberley, the Supreme Court (First Chamber, judgment 529/2020 of 15 October) classed as a building agent "in its own right" a project management company that took on technical direction, design management and the checking of valuations, and held it liable under the LOE. This is a tendency, not a rule, but it is a reminder that the manager's contract should set out its mandate, its decision-making power (none without written delegation) and its cost deliverables.

The allocation rule fits in one sentence: one function, one contract, one person answerable. These points are developed in the branch on who controls cost on the client's behalf.

The six rules follow the order of the five moments. The first two apply before design starts, the next two while the design is being prepared and up to procurement, and the last two from procurement to the final account.

1. Write the budget down before design starts, dated, with its scope (PEM, contract price or total cost) and with a visible contingency, in the architect's appointment.
2. Separate what is certain from what is estimated in the total development cost, and know who sets each item and when.
3. Check the design estimate at every stage, on the same scope, the same price date and the same cost items, and classify each variance as prices, quantities, date or brief.
4. Correct before procurement, starting with the brief and the floor areas, and do not tender or request prices on a design that already exceeds the budget.
5. Allow no change to be carried out without written authorisation, a price and a time, because the Civil Code does not require it and only the contract can; in public works, provide in the tender conditions for whatever you want to be able to modify.
6. Keep the forecast final cost up to date at every valuation, with quantity overruns, price revision and the remaining contingency in view, and appoint a specific person by contract to do it.