At ASQUARED, we believe that guiding clients through the full project budget is one of the most valuable contributions architects can make. Successful projects depend on more than good design; they rely on realistic budgeting and informed financial decisions. Our role is to help clients understand that a project budget is more than a contractor’s estimate — it is a roadmap that includes both the visible and behind-the-scenes costs required to deliver a complete and fully functioning building.

A successful project relies on a well-planned and realistic budget.

Understanding the differences between hard costs, soft costs, and how they make up the total project budget is essential for clients and architects alike.

Proper budgeting helps set expectations, avoid surprises, and make informed financial decisions throughout the design and construction process.

The cards in Part 05, outline the key components of project budgets and strategies for effective cost management.

A Holistic Look At Project Costs + Budgets

Hard Costs

• Tangible, physical expenses of construction

Soft Costs

• Indirect costs such as design fees, permits, legal services, financing, and insurance

Site Costs

• Costs associated with purchasing or preparing the site, including land acquisition, demolition, and environmental studies

Contingency

• A reserved percentage of the budget (typically 5–15%) to cover unforeseen changes, market fluctuations, or project risks

Furnishings, Fixtures + Equipment (FF&E)

• Non-permanent elements like furniture, appliances, and equipment required for the building’s function

Hard Costs

Hard costs are the tangible, physical expenses of construction, including:

• Labor and materials (e.g., lumber, concrete, roofing, doors + windows)
• Site work and foundation preparation
• Installation of plumbing, electrical, and mechanical systems
• Interior finishes like flooring, cabinetry, and paint
• Landscaping and site improvements

Hard costs often make up the largest portion of a construction budget

Soft Costs

Soft costs are necessary to plan and legally execute your project, including:

• Architectural and design fees
• Structural and engineering reports and design services
• Permitting and zoning fees
• Project management costs
• Temporary housing or relocation expenses during the rebuild

Tip: Many policies cover soft costs, but you must explicitly request them during negotiations

Contingency

A financial buffer included in the budget to address unexpected events or changes

Common Uses

• Unforeseen site conditions, design modifications, material price fluctuations, and schedule delays

Recommended Range

• Typically 5% to 20% of the construction costs, adjusted based on project complexity and risk

Management

• Should be treated as a controlled reserve, not automatically spent; any use should be reviewed and documented

Benefits

• Helps maintain financial stability and project momentum when surprises occur

Fixtures, Furnishings + Equipment

Items that are not part of the building structure but are essential for the building's use and functionality, also known as FF+E

Examples

• Furniture, appliances, lighting fixtures, window treatments, signage, and specialty equipment

Budget Consideration

• FF+E is typically a separate budget line item but must be coordinated with the overall project budget to avoid last-minute surprises

Installation Timing

• Usually purchased and installed near project completion, often by the owner or tenant with architect guidance

Importance

• FF+E can significantly affect the look, functionality, and user experience of the completed space

Balancing Hard Costs + Soft Costs

Both hard and soft costs are essential for delivering a successful project

Budget Proportions

• Hard costs usually account for 65–85% of the total project budget, while soft costs typically range from 15–35%

Balanced Planning

• Underestimating soft costs can jeopardize project delivery, while over-allocating to hard costs may limit quality or flexibility

Architect's Role

• Help clients distribute the budget appropriately based on project type, priorities, and available funding

Flexibility

• Some projects may require adjusting these proportions depending on design complexity, permitting requirements, or unique site conditions

The Architect’s Role in Budgeting

Architects help clients understand the full scope of project costs, including both hard and soft costs

Preliminary Budgeting

• Architects are not estimators.  But Architects can offer a feasibiilty study as part of their services to assist in soliciting early budget numbers based on preliminary drawings, project goals, site conditions, and market trends

Value Management

• Offer design alternatives and value engineering strategies to balance quality and cost

Coordination

• Work with consultants, contractors, and clients to ensure all project elements align with the budget

Budget Monitoring

• Track costs through design development and into construction, helping to manage changes proactively

Budget Overruns

Underestimating costs can be devastating to a budget, but that is not the only factor that can influence project budgets

Scope Creep + Design Changes

• Gradual or uncontrolled additions to the project scope without adjusting the budget, as well as late-stage changes to design, materials, or systems

Unforeseen Site Conditions

• Hidden conditions such as poor soil, contamination, or unknown utilities

Market Fluctuations

• Changes in labor, material, or equipment prices due to inflation or supply chain issues

Poor Communication

• Misunderstandings between the client, architect, and contractor can cause costly errors

Permit or Approval Delays

• Regulatory hurdles causing schedule extensions and added costs

Tips For Managing Costs + Budgets

It is important to set a realistic budget early, avoid design changes, and avoid scope creep by sticking to project goals. Focus on essential needs first

Include a Contingency

• Always reserve funds for the unexpected

Regularly Review and Update the Budget

• Track costs throughout design and construction phases

Communicate Openly

• Maintain clear communication between the client, architect, and contractor

Engage in Value Engineering

• Explore cost-saving opportunities without sacrificing quality

Plan for Life Cycle Costs

• Consider long-term operational and maintenance expenses, not just initial construction costs