Understanding Fixed Limit of Construction Cost

SUMMARY
Fixed limit of construction cost (FLCC) is a project management tool which all parties work together to complete a project within a predetermined budget. The FLCC defines the budget for each member of the project team: architect, owner, and contractor. Using the FLCC can ensure a collaborative working relationship.

FLCC in Practice
The FLCC works best in a collaborative team setting. It is best applied to design-build and construction management at risk delivery methods.

Include an explanation of the FLCC process in the RFQ or RFP. Once the FLCC has been discussed and agreed upon have the architect and contractor sign to indicate they understand the parameters of, and are willing to enter, an FLCC arrangement.

The owner should be cautious when establishing the budget for an FLCC. If it is set too low it’s difficult to meet the project goal and scope. The owner wants to set a price and project program that meets all project requirements. Project Definition, a tool that utilizes design guidelines and imperatives to identify all aspects of the project including program, square footage, aesthetic needs, and building materials, is ideal in this situation.

Using the FLCC
When using the FLCC, the owner should require budget and scope reviews with the architect and the contractor. Reviews should be held at the end of schematic design, design development, and toward the end of construction documents phases. Once construction begins the owner, contractor, and architect should attend all meetings where the budget is discussed.
The contract amount can be equal to or less than the FLCC but can not exceed it unless the owner approves the change in writing. If the owner decides to make a change to the project’s scope the budget and FLCC should adjust accordingly. At that time, the FLCC is retired and the contract is adjusted to reflect the new budget.

The owner shall
· Review recommendations and suggestions from the architect and the contractor
· Work with the architect and the contractor to reduce the scope as required to conform to the FLCC or, if necessary, increase the FLCC to maintain the scope

The contractor shall
· As required by the owner, prepare estimates and analysis based on the budget
· Provide constructability reviews and provide information to the architect on ways to accomplish the same design or concept using different materials, construction techniques, and methods
· Perform estimates as needed by the architect and provide information to the architect in a format that is understandable
· Provide all above said services until the owner defines the program in compliance with the FLCC

The architect shall
· Design based on the program and imperatives so the FLCC can be met
· Work with the owner and the contractor to create a project that is within the FLCC