The typical way to buy or procure construction is create a set of drawings, put them out for tender to people who can build what is shown, select the lowest/best bidder, and then proceed with construction. This is commonly referred to as "design-bid-build." There are, of course, others ways to procure construction, but this is the traditional method. And in an idealized world, it would always work out very well for owners and developers. But in reality, it's a lot more complicated.

The important prerequisite for this method is a great set of drawings (more broadly, great contract documents). Because that is effectively the thing you are buying. Unfortunately, great drawing sets don't always happen and there are generally a few reasons for this. One possible scenario might be that you just don't have enough time to produce them. Maybe the market is hot and you want to start construction yesterday, or maybe you have some deadline to meet. Whatever the case, you're in a rush.

But the most likely scenario is that the drawings aren't great simply because the people doing them aren't good or because, hey, we are all only human. Things were missed, there are mistakes, and the drawings weren't fully coordinated across the various disciplines. There's no such thing as 100% perfect drawings. And that results in construction risk, because you've now bought things that are wrong and that will need to be corrected later.

Changes are costly. Later is also a suboptimal time for the simple fact that the price of construction depends on the current situation you happen to be in. Early on before a contract is awarded, buyers of construction have the most, or least some, leverage. The bid process is designed to be competitive and so bidders generally need to sharpen their pencils if they want to win the work. But once a job has been awarded and construction starts, that leverage flips.

Scope gaps and change orders become that much more expensive because, well, they can be. Switching costs are prohibitively high at this point. And it doesn't just work with scope additions. You will also be penalized for going in the opposite direction and removing scope items (i.e. credits). In these situations, you should expect to receive cents on the dollar back. This is one of the great asymmetries of construction pricing.

My point with this post is simply that the price of construction depends -- it depends on how and when you are buying it. It's a very opaque market and it's important to keep that in mind.