The Call is Coming from Inside the Budget

Ask almost anyone in the AEC industry—architects, owners, contractors—to share their project horror stories, and you’ll hear the same themes again and again:

• A budget and scope that was never reconciled early on

• Changing design expectations that evolved into scope creep

• Late-stage redesigns and “value engineering” (which often means quality and scope reduction)

  
  

These scenarios scare us too. But the good news? They’re avoidable by placing cost at the center of early design decisions.

Budget First, Design Second

Instead of designing first and pricing later, Target Value Design (TVD) ideally begins while the program is being developed and the target construction budget has been established. Palacio can initiate a successful TVD process with Cost Modeling completed during programming or predesign, often using our proprietary tool Genesys®. 

These cost models are the most important estimates of the project life cycle. The least expensive and time-consuming, they establish a solid foundation for everything that follows.  

Cost collaboration at the outset might feel constraining, even a hindrance to keeping design options on the table. But early reconciliation of the program and agreed-upon parameters/guardrails with the construction budget is liberating, allowing the project team to preserve more of their best ideas instead of losing them to late-stage cost cutting.

Foundation for Creativity

Bring cost to the table early! (AI generated )

The earlier cost is brought to the table, the more likely you will avoid eliminating your best ideas, redesigning the project, and risking a slip in the schedule.  

Let’s say the development of an early, reconciled cost model was skipped and the first estimate provided for the project was at schematic design. You go to your boss with an estimate that shows a major budget gap (too much building, not enough funding). And it’s highly unlikely the owner is willing or able to add funding to make up the shortfall.

Though an early phase, schematic design is far enough along in the process for you to have made major programmatic, aesthetic, quality, and systems decisions—as well as leadership-level commitments. Being just 10% over the construction budget can trigger significant redesign efforts, force concessions from user groups, and require damage control with the owner’s leadership.

If we had provided a reconciled cost model during the programming or predesign stage, it’s very likely we could have avoided the budget overrun at the end of schematic design. 

Engaging in a TVD-based Cost Modeling exercise early is only half the battle to keep budget gaps from growing into project-wide scares. To see the benefits, teams must stay aligned with the parameters and guardrails the cost model establishes. Straying from that successful roadmap often results in the same schematic design phase budget bust the cost model was supposed to help avoid.

To be fair, even with a reconciled cost model in hand, the design team strives to maximize aesthetics and quality for their client. So being slightly over budget at schematic design isn’t uncommon. However, the gap is often modest and requires only minor design modifications to reach budget compliance. The key is to keep that variance visible and manageable.

Vanquish the Horror Stories

You can stop scope creep, redesigns, and value engineering cuts from haunting your projects. Use proactive cost modeling and TVD to confront the scariest surprises before they emerge. 

When you start with cost and stay aligned, you empower your team—and your project—to succeed without becoming the next cautionary tale.

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