Once the Bids come in, the picture gets pretty clear pretty quick as to what the Project Cost is versus Project Budget. Expressed in percentages, less than 10% over budget is usually considered acceptable in that the project can be adjusted ("Value-Engineered" as we call it) to meet the budget w/o whoelsale design changes. This means using Pella windows vs. Marvin, Formica countertops vs. granite, etc.) Some of the owner's contingency can also be applied to this 10%, but is not always recommended (need a great owner and a great GC to do this). More than 10% over budget, and then value-engineering gets more difficult (for both owner and architect). At some point, VEing the project ceases to get the project back on budget, and so cutting SF is the next step. And depending on the amount of square footage cuts, you're into a major redesign of the project. From my experience, 20% over budget is considered, for lack of a better word, failure. Failure of the design team (owner, architect and engineers at minimum) to produce a project that meets the budget.
For comparison purposes, the New Yankee Stadium was supposed to cost $1.3 Billion (of which I believe $965 million is being covered by both tax-exempt and taxable bonds). They have recently asked for another $370 million in additional bonds. This represents approximately an increase in Project Cost of 28.5% (granted, over a two year period). Call it what you want.............
Here's where it gets interesting (to me anyway). "Project Creep" is when the Project Cost, over a period of time, rises. Now, there are many factors that can contribute to Project Creep. In my experience, it usually can be traced back to poor decision making on the part of the owner. Typically what happens is you have an owner with a project way over budget. You tell them how may dollars need to be cut from the project with a list of options for getting them there (cut X amount of SF, vinyl windows instead of wood-clad, etc., etc.). The owner then does any of the following:
- fails to agree with any of the proposed changes/cuts
- agrees to some of the changes/cuts, but the others are too painful "we NEED those executive washrooms" etc.
- agrees to changes/cuts, but not at same value/size (i.e., they'll go from granite countertops to Corian, instead of granite to plastic laminate)
- agrees to changes/cuts, but then adds back value/size somewhere else in the project ("ok, we'll reduce Staff Lounge by 300 SF, but we need another 600 SF conference room")
It's easy to see why this happens. You get an owner committed to spending X dollars, and then design a project based on what they want/need. When the realization hits that they don't have the funds for the design they like and want, it becomes hard for them to accept something less (and yes, this all assumes a diligent architect keeping the owner informed and on task, otherwise they too, share the fault).
In my opinion, this is likely part of the cause with the budget overruns on the new Stadium. I would find it too hard, though not impossible to believe an experienced firm like HOK dropped the ball this badly. Or that the contractor(s) estimated so poorly. The extensive use of Indiana Limestone and granite on the exterior facades indicates an expensive, well finished building. Hard not to have the inside of the stadium not follow the precedent set on the outside, as evidenced by the replica frieze (upside down picket-fence) below the upper decks made out of copper. (As an aside, the fact that they're essentially replicating the original Yankee Stadium exterior prior to the 1970's renovations is a great indicator of potential cost. A complete cop-out from a design standpoint, but that's another post).
I have zero problems with the Yankees sinking hundreds of millions into their team. The system is broke, and the rules suck - but they play within the system and it's rules. That they're holding their hat in their hand asking NYC for more money while they shell out $420-whatever million this off-season - while the global economy is in the shitter - that's a serious problem. It seems to indicate a disconnect between team/roster-related expenditures and organization-related expenses. I think it's comical that guys like Buster Olney and Steve Phillips get on ESPN and talk about how the Yankees haven't done anything wrong by signing CC, AJ and Tex, yet gloss over or ignore broader issues like the current economy or the cost overruns on the new Stadium.
I'd be curious to hear/know if anybody has any inside knowledge of the new Stadium project (that they could share) relating to the cost overruns. My post is based entirely on personal experience and knowledge. I'd love to have someone clarify or expand on parts of my post.