The design estimate exceeds the client's budget: what to do before tendering

An overrun only exists if the two figures measure the same thing. Before any conversation with the designer, the client checks that its budget and the design estimate have the same scope, the same price date and the same level (net works cost, contract price or total cost). The three checks are described in this branch's article on checking the design team's cost estimate.

The overrun is expressed in euros and by trade section, not as an overall percentage. A percentage tells you how much, but not where. A table setting the client's budget against the design estimate, section by section, shows within minutes that most of the difference is almost always concentrated in three or four trade sections. That is where the work is done; the rest is noise. The method for tracking deviations is covered in the article on cost control and deviations.

If the design is still at the proyecto básico (basic design) stage, the comparison is made with the approximate budget completed with what it lacks, as explained in the article on the approximate budget of the proyecto básico. The earlier the overrun is detected, the cheaper it is to correct.

Almost every overrun has one of five causes, and each calls for a different response. Confusing them leads to cutting specifications when the problem was a measurement, or to redesigning when updating prices would have been enough.

Cause	How to detect it	Appropriate response
Scope	the design includes works the client's budget did not provide for, or the reverse	align the scope and decide item by item
Brief or specifications	floor area, number of units or level of finish above what was requested	return to the brief in the appointment or accept the change with its cost
Quantities	measurements that do not match the drawings, items duplicated or forgotten	correct the measurements
Prices	unit prices far from market prices or from a recognised price database	cross-check against another source and adjust
Price date	budgets using prices from different months	update to a single date before comparing

The last two causes are not a design problem, but a calculation problem. They are resolved by cross-checking the figures; the price databases used in Spain and how they are used are explained in the article on price databases. Only when scope, quantities, prices and date are aligned does the remaining difference reveal a design that costs more than the budget.

Once the cause is identified, five levers remain. They can be combined, and almost always are. For each one, the client needs three pieces of information: how much it saves, how long it takes and what is lost.

1. Reduce the brief. Less floor area, fewer units, one basement level fewer, an area left unfinished for a later phase. It is the most effective lever in terms of amount and the most painful in terms of the value of the development, because it also reduces what is sold or used.

2. Change the technical solutions. A different structural system, a different envelope, simpler installations, finishes from another range. It keeps the brief, but requires redesign and, if it affects performance required by the CTE (the Technical Building Code), a compliance check. Its effect depends heavily on the stage: at the proyecto básico it is cheap; on a finished proyecto de ejecución (detailed design) it costs design hours and time.

3. Phase the works. Build one part now and leave the rest for later. It reduces the immediate commitment, but usually increases the total cost (two site set-ups, interfaces, price revisions) and requires the design to provide for the second phase.

4. Accept a financed increase. If the design is the right one and the budget was insufficient, the honest response is to raise the budget, with its financing and its effect on returns. It is a legitimate decision, provided it is taken before contracting and not discovered on site.

5. Ask for a redesign. A redesign by the designer at its own cost is only possible if the appointment sets a target budget, its date and a tolerance, and provides for revision of the design without additional fees when the overrun does not stem from a change of brief. Without that clause, the rework is negotiated, and normally paid for.

Lever	Potential saving	Timescale	What is lost
Reduce the brief	high	short to medium	floor area or units
Change technical solutions	medium	medium	performance or appearance, redesign hours
Phase the works	high immediately, low or negative overall	long	total cost, complexity
Financed increase	none	short	returns, borrowing capacity
Rework at the designer's cost	case by case	medium	time, relationship with the designer

Tender knowingly. In private works, hoping that competition will bring prices down to the budget is a gamble: if the bids come in high, the tender period has been lost and negotiation starts from a weak position. In public works the margin is even narrower: the presupuesto base de licitación (base tender budget) must be "appropriate to market prices" (Law 9/2017 on Public Sector Contracts, art. 100.2, unofficial translation), and if no suitable bids are received, the negotiated procedure without publication that may follow does not in any case allow the contracting authority to "increase the base tender budget" (art. 168.a.1.º).

Cut without redesigning. Removing items from the budget without changing the design produces a budget that balances and a design that does not. The deleted items reappear on site as additional works, at prices no longer negotiated in competition.

Turn what is undefined into provisional sums. A provisional sum lowers the budget on paper and shifts the uncertainty to the works. If it is unavoidable, it should have a description, an amount and a basis for final settlement.

Leave the decision until the works. Once the works have started, changes to the design are prepared by the director de obra (works director) "at the request of the promotor or with its agreement" (Law 38/1999 on Building Regulation, art. 12.3.d): they are possible, but they arrive with the contractor already appointed and without competition on price.

The architect's fees are freely agreed and governed by the contract. Law 2/1974 on Professional Associations prohibits the colegios (professional associations) from setting indicative fee scales (art. 14), and the visado (the association's endorsement of the design) does not cover "the fees or the other contractual conditions" (art. 13). Neither the colegio nor the visado, therefore, controls the cost of the works for the client.

If the overrun comes from a change of brief requested by the client, the redesign is new work. If it comes from a calculation error or from a design that departed from the brief commissioned, the question is one of performance of the contract. The trend in published decisions on the architect's liability is summarised in the article on cost overruns in the design and the architect's liability. In practice, the client's position depends on what it can prove: the budget communicated, its date, the warnings received or not received.

The decision is documented before tendering. A short note, with the overrun measured, its causes, the options with their cost and timescale, the recommendation and the decision signed by the client, protects the budget in two ways: it forces the discussion to close, and it records what was asked of the designer. Its content and an annotated model are in the article on the decision note when the design exceeds the budget.

After the decision, the budget is recalculated in full. Revised brief, new solutions, a new price date and a contingency reserve consistent with what remains to be defined. Only then are bids requested.