What the LOE says, and does not say, about construction cost

The LOE defines the agentes (parties) by their involvement and their technical duties. The parties are all the persons "who take part in the building process" (art. 8; unofficial translation). The promotor is the one who "decides, drives, programmes and funds" the works, with its own or borrowed resources (art. 9.1); the designer acts "on the commission of the promotor" (art. 10.1) and the contractor is bound "contractually to the promotor" (art. 11).

Cost is implicit in the definition of the promotor. Programming and funding means setting an envelope and taking it on; the law does not say so in these words, and nor does it give any other party the duty of keeping within that envelope. The division of functions between the director de obra (works director) and the director de la ejecución (works execution director) is described in the article on site direction and works execution direction; here only what those functions contribute to cost matters.

Except in three specific passages, cost does not appear. The law deals with the basic requirements for buildings, the duties of each party and the system of liability and guarantees. None of its articles requires the designer to design within a budget, the works director to warn of a deviation or the contractor to keep to a price: all of that depends on the contracts.

The acta de recepción (handover record) must state "the final cost of the net works" (art. 6.2.c). It is the only total works cost figure that the LOE requires to be entered in a document.

The figure has consequences beyond the record. It is a net works (ejecución material) figure: it does not include fees, permits, finance or the rest of the total development cost. And it is the base on which several of the guarantees in art. 19 are expressed (see below). A final cost wrongly set in the record has a knock-on effect on those guarantees.

For the promotor, handover closes off a figure. It is advisable to reach handover with the final account of the units carried out reconciled with the contract, the approved changes and the authorised extra works, so that the final cost in the record is the one that follows from those documents and not a figure negotiated on the spot. The formalities of handover and the final certificate are covered in the article on works handover and the final certificate.

The LOE gives the works execution director the task of "preparing and signing the interim certificates and the final account of the work units carried out" (art. 13.2.e). Its general function is to direct the physical execution of the works and to control "qualitatively and quantitatively the construction and the quality of what is built" (art. 13.1).

The works director approves them. It falls to the works director to "approve the interim certificates and the final account of the work units carried out" and to sign the setting-out record and the final completion certificate (art. 12.3.e).

This is a quantitative check of what has been done, not a forecast of what remains. The certificate answers the question "how much has been built and how much is owed?". It does not answer "how much will the works cost at completion?" or "does it still fit within the budget?". Those two questions, which are the promotor's, require a forecast of final cost that the LOE imposes on nobody.

Document	Who prepares it	Who approves it	What it says about cost	What it does not say
Interim certificate	Works execution director (art. 13.2.e)	Works director (art. 12.3.e)	Units carried out in the period and their amount	Cost still to come, changes under discussion, forecast final cost
Final account	Works execution director (art. 13.2.e)	Works director (art. 12.3.e)	Total of units carried out	Total development cost
Handover record	Formalised at handover (art. 6)	Parties to the handover	Final cost of the net works (art. 6.2.c)	Comparison with the initial budget

The practical consequence is frequency. Since certificates arrive at the pace set by the works contract, they are the natural moment to update the final cost forecast: what has been certified goes in as data, and whoever has the cost assignment projects the rest. Who can take on that assignment is analysed in the article on project manager, integrated project direction and project monitoring.

The final cost of the net works serves as the base for the LOE guarantees. The one-year guarantee can be replaced by the promotor retaining "5 per cent of the amount of the net works" (art. 19.1.a). The minimum sums insured under the guarantees are also expressed as a percentage of the final cost of the net works, including professional fees: 5% in art. 19.5.a and 100% for the ten-year guarantee (art. 19.5.c).

For the budget, the guarantees are line items, not footnotes. Their cost, or the retention that replaces them, must be included in the total development cost from the outset, and their base is only known with certainty when the handover record is signed. The full system of guarantees and liability is covered in the article on guarantees and liability under the LOE.

The works director prepares "at the request of the promotor or with its agreement, any changes to the design" (art. 12.3.d). The law does not mention their cost: it does not require the change to be priced before it is agreed, nor does it lay down a procedure for incorporating it into the price of the works contract.

The financial effect is governed by another law. Under a fixed-price contract, article 1593 of the Civil Code allows the contractor to ask for a price increase when a change to the plans results in additional work, "provided the owner has given his authorisation"; the mechanics and their risks are analysed in the article on extra works under a fixed-price contract. The agreement required by the LOE and the authorisation mentioned in the Civil Code can be confused in practice: agreeing to a technical change without a price can be read as authorising its cost. Hence a management rule, not a legal one: no agreement by the promotor to a change without a prior written pricing, even though the law does not require it.

The law's silence matters as much to the promotor as its text.

The client's question	Answer in the LOE?	Where it is settled
Who sets the development budget?	Implicitly the promotor (art. 9.1)	Its own decision, documented
Must the designer design within the budget?	No	Architect's appointment
Who forecasts the final cost during the works?	No	Contracted assignment (architect, arquitecto técnico, project manager)
Must a change be priced before it is approved?	No	Site direction contract and works contract
Can the contractor raise the fixed price?	No	Civil Code, art. 1593, and works contract
Can the promotor stop the works?	No	Civil Code, art. 1594
What is the final cost of the net works?	Yes, in the handover record (art. 6.2.c)	Record, supported by the final account

For stopping the works, the answer is not in the LOE either. Article 1594 of the Civil Code allows the owner to withdraw "at his sole will" even after the works have started, compensating the contractor "for all his expenses, work and the profit he could have obtained from it": it is an option with a cost, which is quantified before deciding.

For public works, the financial framework is different. For the órgano de contratación (contracting authority), the presupuesto base de licitación (base tender budget), changes and price revision are governed by Ley 9/2017 on Public Sector Contracts; the LOE adds nothing on cost.

If the law only records, control is built into the contracts. Four points cover most of the gap.

• In the design appointment, the target budget with its price date and its scope, and the obligation to warn about and price every change to the brief.
• In the site direction contract or an additional appointment, the final cost forecast with each certificate and the prior pricing of every change, if the site direction is to take on that function on top of its statutory ones.
• In the works contract, a written change procedure: numbered request, price and time, authorisation signed before the work is carried out.
• In the project manager's contract, if there is one, the mandate, the cost deliverables and decision-making authority limited to what the promotor delegates in writing.