Who is Responsible for Tracking Costs on a Building Project?

There are many expenses to track on a building project. From labor costs to legal fees, the list can feel overwhelming for even the most experienced building owner. 

To further complicate matters, it is not always clear who is responsible for tracking costs. Does the responsibility fall on the architect, the contractor, or the building owner? 

In our experience, the most successful projects involve transparent conversations about budgets and expectations. Everyone should be aware of their responsibilities and the costs they should track. 

In this article, you will learn about the two categories of building project costs: construction and project costs. You will also learn about the responsibilities of the architect, contractor, and building owner when it comes to cost-tracking—preparing you to manage your budget throughout the design and construction process. 

Types of Costs on a Building Project 

Before diving into cost-tracking, let’s discuss the costs you’ll encounter on a building project. Every building project has two categories of cost. 

Construction costs, also known as “hard costs,” are those associated with labor and materials, including:

• Contractor fees 
• Subcontractor fees 
• Exterior shell materials 
• Interior buildout and finish 
• Electrical, mechanical, and telecommunications system

Project costs, also known as “soft costs,” are those associated with financing, permitting, furnishings, and hiring professional services. These costs can include: 

• Legal fees 
• Real estate and land acquisition fees 
• Building permit review fees 
• Furniture, Fixtures, and Equipment (FF&E)  
• Builder’s risk insurance 
• Moving costs 
• Contingencies 

In short, construction costs are the costs associated with constructing the building, while project costs are the expenses needed to make construction happen. For a more comprehensive list, read our overview of construction and project costs.  

When establishing a budget, you should consider each category and coordinate with your architect and contractor. 

Who is Responsible for Tracking Costs? 

Cost tracking differs on each project, but typically, architects and contractors track construction costs while building owners track project costs. 

However, some individual costs, like change orders and contingencies, can be tracked by multiple parties. At the same time, your architect may track some project costs, depending on your needs. 

Below we’ll discuss the cost-tracking responsibilities outlined in a typical American Institute of Architects (AIA) contract. 

Architect’s Responsibilities 

On a typical AIA contract, the architect is responsible for estimating construction costs throughout the design process and reviewing contractor payments throughout construction. 

At the start of a project, it helps to think about project and construction costs holistically to establish an accurate budget. Your architect should work with you to ensure you understand all the individual costs and can budget accordingly. 

After you accept a price or bid, cost-tracking responsibilities shift to the contractor. The architect will stay involved by reviewing contractor payments and tracking any changes to the contract price initiated by change orders. An ongoing change order record helps keep everyone on the same page if the contractor adjusts the payment amount. 

Contractor’s Responsibilities 

During construction, the contractor is responsible for cost-tracking. They will send payment requests to the architect based on the amount of completed work or the number of materials purchased.

Your architect will then meet with you to review the payment requests and discuss any changes. Your architect should also visit the construction site regularly to ensure the payment requests match the completed work. If they notice a discrepancy, they can ask for an adjusted payment. 

For example, if the contractor requests payment for 50% drywall completion but they haven’t started work, the architect can advocate for an adjusted price. These situations are rare, but an additional set of eyes assures you are charged accurately. 

Building Owner’s Responsibilities 

Throughout the architectural process, building owners are responsible for tracking project costs. 

Often, project costs include contingencies, a portion of the budget set aside for unforeseen circumstances. On most projects, contingencies are equal to 5% of the construction cost, but more complex projects may require a greater amount.   

Contingencies are usually held by the owner, meaning you will set aside the sum and track its use. However, the contractor can also build the contingency into the construction cost. If you go down this route, the contractor will track the contingency, and you will receive the leftover amount after the project is complete. 

Although architects are not usually responsible for tracking project costs, they are there to help. At the start of your project, you should discuss project costs with your architect so they can better understand the scope and help you establish a construction budget. 

You should also let your architect know if you need any assistance with cost-tracking. An honest dialogue about expenses helps your architect provide the best level of service. 

Learn More About Building Project Costs 

No matter your experience level, budgets and costs are top priorities during a building project. Although the number of costs can seem daunting, it helps to know everyone’s responsibilities for tracking them. 

While your architect will estimate construction costs during the design process, the contractor will keep track of expenses during construction and issue payment requests based on completed work. Your architect will review these payment requests and track any changes to the contract amount. 

Building owners are responsible for tracking project costs or “soft costs,” which usually include contingencies. Remember, your architect is there to guide you through the process. Transparent conversations lead to the best partnerships and the most successful outcomes. 

Staying on top of necessary expenses can help you keep your project within budget. Learn more by reading about four strategies for preventing cost overruns.