Church Construction 101: Best Practices for Expanding Your Ministry Space By Shawn M. Fink, Construction and Facilities www.foundationcapitalresources.com | 888.829.6672 Church Construction 101 Your facilities are an important tool. Proper planning for your project will enable you to reap the benefits of your facilities and grow your ministry without compromising the stability of your organization. “Unless the Lord builds the house, its builders labor in vain.” Psalm 127:1 www.foundationcapitalresources.com | 888.829.6672 Laying the Foundation | 3 A ministry that has outgrown its space can be both exciting and daunting. Should you build or expand? How do you know should be designed, built, arranged, and equipped where to start? How much will it cost? It may to be the best tool and resource to fulfill God’s seem that there are too many options and no unique vision for your church. options at the same time. Regardless of the scope of your project, expanding your ministry space can As you consider these factors and define the be intimidating. The following best practices are big picture for your ministry, keep all options designed to help ease uncertainty and guide you open. Do not close doors based on assumptions towards a smooth and successful end. or preconceived notions. Instead, think of your church facilities as a machine working for the WHERE TO BEGIN Kingdom. Machines have many purposes The place to begin your project may not be where including increasing productivity, efficiency, and you’d expect. It has nothing to do with designing effectiveness. Let the Lord build the machine and a building, or setting a budget, and it definitely define its purpose. With His divine direction and has nothing to do with what another church has your obedience as a leader, He will orchestrate the done. Your church is unique. The way you minister right options in the right time. Psalm 127 is very is unique. God has given your church an exclusive clear in this, “Unless the Lord builds the house, its DNA shaped by its people, history, culture, and builders labor in vain.” location, among many other factors. Although every church shares the Great Commission, the In summary, identify your DNA, translate it to methods of fulfilling it are as varied in number as your ministries, and translate that into what your our churches. Before you do anything else, gain facilities should be and do and look like. Once you clarity as to who you are as a church and what reach this point and are beginning to implement a makes you unique. Once that’s defined, make building program of some sort, your next step is to every decision through that lens. define the details. Now it is time to think about what God has called BUDGETING AND PROJECT PLANNING you to do as a church. How does your unique It is important to go through careful cost planning calling play out in your ministries? How does that so you can stay within your construction budget translate into what your facilities look like? Think as much as possible. Jesus spoke to this in Luke beyond a single area of your ministry needing 14:28 when He said, “Which of you, desiring to more space and look at the big picture. Be build a tower, does not first sit down and count the proactive and consider all aspects of the church’s cost, whether he has enough to complete it?” facilities. Consider how the building(s) and rooms Church Construction 101 Evaluating Source and Use referred to as a contingency factor. The more Count the cost by planning your budget around vague the numbers, the larger the contingency the money you have and comparing it to what factor should be. A contingency of 15-20% is you’re planning on spending for your project. This recommended during the initial stages of your is often referred to as a source and use calculation project. That number can be reduced as costs and where the source is your available funding other details become more defined. and the use is how much you intend to spend. Churches often exceed their budget because Budgeting Scenario they over-design, over-build, and/or over-commit Consider the following scenario. A church has themselves. Once you’re in the middle of a project, a source total of $1,000,000. If they take the these mistakes can be very difficult to correct. entire source and design a $1,000,000 building, Planning ahead by calculating your source and use the project will go over budget because only will help you stay within your financial boundaries. the hard costs were considered. Provided that the estimated soft and FFE costs totaled Source $205,000, the project would cost $1,205,000 There are typically three types of building funds and thus be at least $205,000 over budget. that make up your total source of funds: money If, however, the church had followed the best you have, money you raise, and money you practice of determining the soft and FFE costs borrow. It is essential to the continuity of your first ($205,000), added a 20% contingency ministry that you keep your project within the factor ($159,000), the remaining hard costs confines of your source funds. for their building would be $636,000. A local architect or contractor should be able to give you Use approximate construction cost per square foot The use side of the equation also has three parts: so you can determine how large your facilities hard costs (construction labor and material), soft can be within the confines of your hard costs. costs (professional services, fees, permits, etc.), For instance, if local costs are running around and FFE (furniture, fixtures, and equipment). $100 per square foot, it is feasible to plan for a Building projects often exceed the construction roughly 6,000 square foot building. Keep in mind budget because the soft and FFE costs are not that a cost per square foot factor is only a guide. considered in the equation. As a best practice, There are many factors that can quickly affect estimate the soft and FFE costs first, and then that number. Monitor the costs by continually design the project around the remaining budgeted estimating the project as it is being designed. hard cost amount. Master Planning and Phasing Contingency Factor It is not uncommon for the final goal of the It is difficult, if not impossible, to foresee every facilities to exceed your available funding. This cost in a building project. That is why it is can be resolved through master planning and important to plan for unexpected costs. This is phasing. Your master plan can be defined as the www.foundationcapitalresources.com | 888.829.6672 Budgeting | 5 Sample Source and Use Calculation Total Sources of Funding $150,000 Cash $250,000 Campaign Proceeds $600,000 Loan Amount/Debt Capacity $1,000,000 Total Source Use - Soft & FFE Costs Estimate ($70,000) Architectural/Engineering ($10,000) Permitting/Fees ($100,000) Audio/Video/Lighting vision God has given your church translated into what facilities you will need to best accomplish that vision. Because this is a long-term, flexible plan, it can be done without financial consideration. After you determine your master plan, break it down into phases or attainable steps. Each step should be somewhat self-contained so that you have small accomplishments as you work towards completing your master plan. Your greatest need and current funding should determine the priority and order of your building phases. Working towards your master plan through phasing will not only enable you to meet your greatest needs first, but will also make ($25,000) Chairs your project easier to fund and manage throughout ($205,000) Total Soft & FFE Costs Estimate the process. Contingency Equation Re-evaluating Your Contingency Factor $1,000,000 Total Source Your master plan and phases function as your ($205,000) Total Soft & FFE Costs Estimate project outline. Now you can begin the design $795,000 x 20% = phase. As you enter this phase, continue to $159,000 Contingency Factor precisely evaluate and estimate costs while also adding a contingency amount. As discussed earlier, Use – Hard Costs Equation a larger contingency (15-20%) is recommended $1,000,000 Total Source early in the process. However, that number can ($205,000) Total Soft & FFE Costs Estimate be reduced as your project and associated costs ($159,000) 20% Contingency Factor becomes more defined. Your final contingency $636,000 Preliminary Hard Cost Budget factor should be 10% of the sum of all your final bids and contracts. This additional amount in your Balanced Budget budget will allow you to account for unexpected or $1,000,000 Total Source unforeseen expenses. Make sure that your final bids ($205,000) Total Soft & FFE Costs Estimate clearly define all work, cost, and timeframes. Don’t ($636,000) Preliminary Hard Costs start a project on assumed cost factors. Get firm ($159,000) 20% Contingency Factor bids or quotes on everything you plan to do. $0 Balanced Budget Exceeding Your Budget The larger or more complex the project, the less likely it is that you will be able to foresee every cost. As a result, it is not uncommon to spend more than Church Construction 101 your projected budget. That is why you plan for should be the set that is approved by the local unexpected costs. Try to minimize them and have building authority. Often, projects are bid and a a plan in place for how you will handle those you contractor is secured prior to the city review of the can’t avoid. This is why the 10% contingency factor architect’s plans. The reviewing entity may (and is imperative. Cost overruns typically originate from almost always does) have additional requirements, three sources: owner, contractor, and local building which would lead to a change to the contractor’s authority. They come in the form of change orders contract. In cases where there is not a general (changes to the plans or agreed upon work or contractor, but the church is directly hiring trade or material), cost overruns (spending more on an item subcontractors, the principle is the same – confirm than budgeted), or a failure to count the cost of the scope and the contract amount. certain components of the project. City-Driven Owner-Driven City-driven overruns are the most common and Owner-driven overruns stem from you and your unavoidable, and often the most expensive. The church. Owner change orders are caused when local building authority, local utility, or other the church requests a change to the plans, scope governmental agency may enforce additional of work, or material that changes the cost. This work or requirements that were not part of the can be avoided by simply not making changes. plans or contract, but will be required to complete Do your due diligence in the design and planning the project. Again, the best you can do is pre- phase of the project to ensure that what you want construction due diligence and count the cost. The is reflected in the plans and contracts. Also make contingency factor is there to provide for these sure that project decisions do not cost more than types of surprises. what is allowed in the budget for that item. A final owner-driven expense occurs when a costly item CONTRACTING is overlooked altogether. Be aware throughout the Church projects are completed in different ways. planning process so you can minimize these costly This is referred to as the project delivery method. owner-driven mistakes. Each method has a unique set of advantages and challenges. Contractor-Driven Contractor-driven change orders or overruns Project Delivery Methods originate with the contractor. These overruns can be avoided by having a clear, fixed-price contract Design-Bid-Build in place that is based on the plans and intentions The most traditional arrangement is referred of the church. Contracts that are “cost-plus” or to as design-bid-build. Using this method an “time and material” in nature are not advised as architect is hired to design a project to the they do not require the contractor to commit to a owner’s specifications. The architect then puts fixed cost. When the contractor bids a set of plans that design out to bid among multiple contractors. and arrives at a contract number, those plans The advantage of this method is that it allows for www.foundationcapitalresources.com | 888.829.6672 Contracting | 7 competitive bidding. However, it can be somewhat Contractor Options cumbersome to keep a project in budget as the In addition to delivery methods, there are also architect is designing the project without knowing options as to who builds the project. whether or not it meets the budget criteria. Consequently, the architect must revise the General Contractor design if the bids come in higher than the owner’s A General Contractor (GC) is probably the most prescribed budget. While this method can take common arrangement. While they may use some extra time, it allows for more competitive bids. of their own employees to perform limited work This approach can also be modified by including on a job, they will mostly hire subcontractors to cost analysis during the design process to keep complete the project from start to finish. One of the project in check with the budget. the biggest advantages to using a GC is that their contract will be a fixed price, “turnkey” agreement. Design-Build This means that you will be guaranteed a certain With a design-build approach, the designer and price and schedule for the job. This agreement contractor are a single entity or at least work should be based on a set of plans that have closely together as one entity. It may be a firm been reviewed and revised according to the with a portfolio of services that includes both local building authority so that the plans the architectural and/or engineering capabilities as well GC is building from match city building codes as construction services. This method allows the and requirements. Assuming that you have a desires of the owner to be communicated directly solid contract with well-defined parameters that to the builder/designer, theoretically allowing for are based on an approved set of plans, using design that meets both the budget and the vision a General Contractor is typically the least risky for the project. The main criticism of this method is arrangement for a church. One of its greatest that the advantage of competitive bids can be lost. advantages is that it places the burden of the The design/build approach can also be modified to project on the contractor and minimizes the allow for other bidding opportunities. church’s liability. Integrated Project Delivery (IPD) Limited Scope General Contractor IPD allows for collaboration with the architect A limited scope GC is a general contractor and builder and also brings representation to the whose contract is limited to a certain level of design process of almost every other trade or completion or portion of the building rather than discipline involved in the construction, outfitting, the entire project. The contract looks much the and operation of the building (acoustical, HVAC, same, but the contractor is only responsible for controls, lighting, video, production, etc.). While a portion of the building rather than the entire this method may not be the most cost-effective thing. Many churches find success with this type approach, it can be very beneficial for larger and/or of arrangement. They may have a GC handle the more complex projects as it allows for more varied up-front site development, concrete, shell building expertise throughout the process. and MPE (mechanical, plumbing, electrical) Church Construction 101 work and then use volunteers or directly hired benefits and check with your lending institution if finish contractors to complete the project. With you are considering this option. this approach, the church is liable for any work completed outside of the GC’s contract including, Volunteer Labor but not limited to, scheduling, oversight, cost Volunteers play a crucial role in church construction. control, warranty, etc. However, the pros and cons of volunteer labor should be weighed like any other decision in your Design-Build Contractor building project. As you plan for volunteer labor, A design-build contractor is the builder or general keep the following factors in mind. First of all, a contractor in a design-build project delivery volunteer workforce makes it very difficult to have method. Many churches find this arrangement firm numbers for cost, schedule, etc. The cost of very beneficial and successful as it creates a your materials will typically be higher. Contractors partnership, collaboration, and direct connection may be able to purchase materials at a discounted between the provider (builder) and the user price and will also have more experience (church). Most design-build church projects result estimating how much and what materials are in a project that satisfies ministry needs and stays needed. As you make decisions about what areas within budget. your volunteers will complete, remember that you will have to arrange work around their schedule, Construction Manager not yours. Your volunteer base will also have A construction manager (CM) is a builder who strengths and weaknesses. Determine what your simply organizes the project and oversees the volunteers are truly capable of accomplishing, and subcontractors and the work. The subcontractors then plan on hiring specialists for the remaining are hired by the owner but managed by the CM. work. Be mindful that there may be a difference Typically, a CM provides no warranty as to the in the quality of work between a professional and price or timeframe on a project. The church carries a volunteer. This option has potential for both all risk and liability. great rewards (ownership, team building, etc.) and great risks (liability, damaged relationships, etc.). Self-Contracting Keep both in mind as you define what areas your Some churches choose to act as their own volunteers will complete. contractor. Through this method the church, rather than a GC or CM, hires all subcontractors directly Choosing the Right Method and oversees the workers and the work. Self- There is no single answer as to what method is contracting can be a very risky approach as there right for a church. The most important factor is are no assurances as to the final construction to make sure you count the cost as you weigh costs or timeframe. Once again, all liability and your options. A guaranteed maximum price for a responsibility is on the church. Because of the risk turnkey job always carries the least risk. Place the involved, your lending institution may not allow responsibility to deliver a certain scope of work for self-contracting. Be sure to weigh the risk versus a fixed price on others whenever possible. www.foundationcapitalresources.com | 888.829.6672 Conclusion | 9 As you go through the process of hiring a contractor, try to check references beyond the ones listed on their reference list. Ask who their last three or four clients were and how to contact them. Check with the local building official’s office. Does the contractor have a good reputation with the local inspectors for quality work? Does their work pass inspections? Follow these steps whether you are hiring a general contractor or a subcontractor directly. Another key to avoiding and managing contractor issues is in the contract. All expectations on the part of the church should be clearly articulated in the contract. If it is not in the contract, do not expect the contractor to do it. CLOSING THOUGHTS As you begin the exciting process of building your church, keep in mind that your facilities are an important tool for you to accomplish what God has called you to do. Proper planning for your project will enable you to reap the benefits and grow your ministry without compromising the stability of your organization. About Foundation Capital Resources Foundation Capital Resources was created with a unique purpose—to help build the Kingdom by providing mortgage financing to churches and ministries. Since 2000, we have provided more than 900 loans with $1.4 billion in financing. As one of the nation’s largest ministry lenders, we partner with you in the financial growth of your ministry. Our support of ministry doesn’t stop with lending. A portion of each interest payment is directed towards planting new churches and growing faith-based community programs. 888.829.6672 [email protected] www.foundationcapitalresources.com
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