The six sections
The note always follows the same order, so that the client can read it in 5 minutes and decide.
| Section | Content | Who provides it |
|---|---|---|
| 1. Overrun | client's budget and design estimate, at the same level (net works cost or contract price), with the price date of each figure; difference in euros | whoever controls cost |
| 2. Causes | the overrun split between scope, brief or specifications, quantities, prices and price date, with the amount of each | whoever controls cost, with the designer |
| 3. Options | two to four options, each with its effect on cost, timescale, quality and redesign fees | designer and whoever controls cost |
| 4. Risks | what each option leaves uncertain and how it affects the contingency reserve | whoever controls cost |
| 5. Recommendation | the proposed option and the reason for it, in two or three sentences | whoever drafts the note |
| 6. Decision | the option chosen, the new reference budget with its date, the instructions to the designer, date and signature | the client |
The last section is the only one that is indispensable. The five before it prepare it, but without a signature the note is merely a report. The decision belongs to the client, whom the Ley de Ordenación de la Edificación (the Building Regulation Act) defines as the person who "decides, drives, plans and finances" the works (art. 9.1, unofficial translation).
Fictitious example
The amounts that follow are fictitious, exclude VAT and only illustrate the method. They are not market references; the variables that explain the cost of a building are reviewed in the article on the factors that determine construction cost.
1. Overrun. A client has set a budget of 2,200,000 euros contract price for a residential building with a car park. That budget was calculated with prices from a year earlier. The estimate for the proyecto de ejecución (detailed design), at the same level and at current prices, comes to 2,480,000 euros. The gross overrun is 280,000 euros; section 2 separates out the part due solely to the price date.
2. Causes. The analysis by trade section splits the overrun as follows:
| Cause | Amount | Comment |
|---|---|---|
| Price date | €40,000 | the client's budget used prices from a year earlier; updated, it came to €2,240,000 |
| Scope | €70,000 | internal site works were not in the client's budget |
| Specifications | €110,000 | ventilated facade instead of the facade provided for in the brief |
| Quantities | €60,000 | measurement counted twice in the structural trade section |
| Total | €280,000 |
3. Options.
| Option | Measures | Resulting contract price | Against €2,200,000 | Timescale | Redesign |
|---|---|---|---|---|---|
| A. Technical adjustment | correct the measurement (€60,000) and adopt an alternative facade of equivalent performance (€80,000) | €2,340,000 | + €140,000 | 6 weeks | €18,000 |
| B. Technical and brief adjustment | option A plus reducing the car park by 12 spaces (€150,000) | €2,190,000 | − €10,000 | 10 weeks | €30,000 |
| C. Financed increase | correct the measurement only | €2,420,000 | + €220,000 | no delay | none |
The figures add up: 2,480,000 − 60,000 − 80,000 = 2,340,000; 2,340,000 − 150,000 = 2,190,000; 2,480,000 − 60,000 = 2,420,000. All three options start from the same design estimate of 2,480,000 euros.
4. Risks. Option B reduces the number of saleable spaces, which affects the development's income. Option A requires checking that the alternative facade meets the requirements of the Código Técnico (the Technical Building Code). In all three, the internal site works are still priced on simplified measurements: the contingency reserve should not be reduced.
5. Recommendation. Option A, with the reference budget raised to 2,340,000 euros, financed with additional equity, because it keeps the commercial brief and limits the delay to 6 weeks. Correcting the duplicated measurement should not give rise to fees, since it is an error in the estimate; the alternative facade is negotiated as provided for in the appointment.
6. Decision. "Option A is approved. Reference budget: 2,340,000 euros contract price, excluding VAT, at prices as of the stated price date. The designer is instructed to correct the measurement and develop the alternative facade within 6 weeks, with a new comparison by trade section before tendering." Date and signature of the client.
What reduces the value of the note
- Mixing levels. Comparing net works cost with contract price, or with total cost, invalidates section 1 and everything after it.
- Options without timescale or fees. An option that saves on the works but costs 10 weeks and additional fees cannot be compared with another if that information is missing.
- Recommending without options. A note with a single route does not allow a decision, only approval. Even when the recommendation is clear, a costed alternative shows what is being ruled out.
- Signing without a reference budget. The decision must end with a figure and a date: it is the basis of the tender and of all subsequent control. Without it, the overrun reappears in the next version of the design and nobody can say whether it is new or old.
- Not filing the note. Filed with the appointment and the versions of the budget, the note is also evidence: it shows what was asked of the designer, when and why, as explained in this branch's article on checking the design team's cost estimate.
This article describes the state of the rules on the date of verification and is intended as professional guidance. The example is fictitious. It does not replace legal advice or an examination of the specific case.