Understanding Costs

Depending on one’s experience with projects, a member of your faith community could easily assume that the construction budget is the total budget for your new expansion and/or renovation project. This type of misunderstanding can cause a significant problem or strain a relationship.

Plan comprehensively and communicate clearly about your expenses. Think of the project budget as a total budget; your construction budget is only one element of the project.

If you are seeking bank financing, the bank will generally look at financing the construction part of your project—sometimes referred to as the "hard costs." Obviously you will want to discuss this component with your finance committee and lending institution.

The following list provides sample categories of a complete project budget. Remember that other items may be added due to your unique requirements.

• Appraisals
  
• Architect
  
• Audiovisual equipment
  
• Bonds for public improvements from the county and state—The funds will be returned after construction BUT you must follow up regarding the bonds
  
• Capital campaign/stewardship appeal
  
• Computer systems
  
• Construction—The construction contract, change orders, construction contingency, exterior signage, internal signage, and anything that is a part of your construction specifications
  
• Contingency (for other concerns)
  
• Financing costs (loan, loan interests)
  
• Fixture fees/sanitary sewer tap fees
  
• Furnishings
  
• Insurance
  
  A: Your house of worship’s insurance agent must be consulted for two reasons: (1) to be informed of the upcoming construction activities and, (2) to alert them of the size and scope of your facility once construction is completed. (Owner's expense.)
  
  B. Builder’s Risk provides coverage for damage should a fire or a collapse occurs during construction. The general contractor may have a policy that names your house of worship as an additional insured, or your house of worship may take a policy with the general contractor named as the additional insured. (Owner's expense.)
  
  C: A payment and performance bond (optional.) If required, must be in place by the contractor to insure that the project will be completed even if the contractor fails to finish the work. (Owner's expense.)
  
  
• Legal fees
  
• Miscellaneous—Everything from copying, overnight shipping, communications, etc.
  
• Other professionals—Note the section on "Roles, Authority, Accountability."
  
• Permits/fees
  
• Pipe organ
  
• Project manager
  
• Reimbursable expenses—From the professional team
  
• Security system
  
• Telephone systems
  
• Temporary facilities—To include utilities, water, trash, phones, and trailers
  
• Third party inspections
  
• Traffic studies
  
• Utility fees—Water meter, electric, gas, communication

Prompt Pay. It’s important that your house of worship promptly pay invoices. During a construction project, the general contractor will issue an "application for payment" generally on a monthly basis. This application is reviewed by your construction manager (if a manager has been retained for your project) along with the architect to ensure the document is complete. The application for payment combines all of the expenses from sub-contractors, vendors, etc. Since the sub-contractors, vendors, and others do not receive payment until the general contractor is paid from the application for payment, it is essential that your house of worship establishes a prompt protocol for issuing checks—our recommendation is 15 days—and certainly no longer than 30 days. Delays in payments can negatively impact working relationships and, in some cases, delay the work schedule.