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How Much Will It Cost?
Courtesy of the Nonprofit Finance Fund

This simple question "How much will the 'project' cost?" is the cause of much anguish. Some of the reasons why are:

  1. The "project" often goes undefined, or is assumed to mean the construction cost. Everyone answering the question brings his/her own definition of what is included, unless you are very specific.

  2. Everyone answering the question has a narrower definition of "cost" and the "project" than the person asking the question. This necessitates probing their responses to understand exactly what they mean.

  3. The true cost is usually much different - and higher - than the cost of the facility itself. This is something most managers don't really want to hear.

    When a facilities project is one part of organizational growth, the "project" cost arguably means any cost the organization incurs from the moment planning begins to the time "normal" operations resume in the new space - often years later. Costs includes any expenses in excess of normal operations, plus any operating revenues foregone as a result of the expansion.

  4. The natural motivation of both sides involved in most "How much will the 'project' cost?" dialogues is to want a low answer. The arts manager, who wants a new facility, wants to hear how little it will cost. The bias of construction people is to underestimate costs, both because they want to get the business and because they are naturally optimistic. Thus there can be an unspoken conspiracy to underestimate costs.

  5. The experts don't have the answer. Most of the specialists that managers turn to see only part of the equation. This is especially true with those in the building industry, but it is also true of others - including fundraisers and board members.

  6. The answer is difficult to calculate, and can only be arrived at by knitting together the input from many different perspectives. This is the task of the arts manager.

 

© 2000 by the NONPROFIT FINANCE FUND

 

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