Budget

In the other videos, we talk a lot about important topics, but budgeting and fundraising take up unfortunately the largest part of our time. Here are some real data on the actual costs, to get an idea of the expected budgets. Since 2018, we have carried out several projects in Ghana with similar construction standards and always with construction companies which have taken over the site organization and can thus track the price development over the years.

In 2018, 6 classrooms including the toilet cost about 220 euros per square meter. The project even included drilling a well, so the price would be slightly lower, if you take that part out. In 2020, prices rose slightly, but with this particular project, through the use of wood as the main building material, we were able to reduce the costs. Then the existing fence wall unexpectedly collapsed and had to be repaired, and we ended up back at square one.

The general price was still around 200 euros. Three years later, in 2023, after COVID – as we all know – prices began to rise significantly. For this library project, we are at about 250 euros. A part of the ground floor still needs to be completed in phase 2, so the total price would be slightly higher. Prices continued to rise in 2024, and we are now almost at 300 euros per square meter. In this youth center, there are no new toilets, as they were already present.

If they had been part of the project, the price per square meter would probably be even higher. Especially when looking for funding for the school construction, the rough estimate until 2020 for a long time was the rule of thumb that a classroom costs about 10,000 euros. Nowadays, one can assume that this number is more likely around 15,000 euros. Of course, these are all just estimates, but one can safely assume that prices have risen by about 50 percent.

A simple school complex with 6 classrooms and toilets cost 5 years ago about 60 to 70,000 euros. Today, this amount is often around 100,000 euros. As a general rule, it should be noted that the price for a typical project today, depending on the country, ranges from 250 to 400 euros. Of course, prices are higher when it comes to a more complex project such as hospitals. For all offers that are more expensive or cheaper, one should definitely request further explanations.

Commissioning a construction company to carry out the construction work incurs at least 20 percent additional costs. This means that you have to organize everything and hire workers and specialists. Additionally, accounting becomes much simpler, as there are fewer invoices. There are many advantages, but if the budget is tight and the local partner organization is able to organize itself, it is theoretically possible to save some costs. Preparation. Here are various aspects that affect the construction and should be analyzed or decided to obtain a clear plan for the next steps concerning finances.

Ownership issues. It is very important to be absolutely sure that the ownership questions are clarified, that there are no disputes, that the property in question is the right one, that it has the right size and that it belongs to the partner organization or at least, that they have the right to use it. There are too many examples where this has led to a very unpleasant situation, so caution is advised.

To return to the topic of networking, it can be very useful to ask other organizations, operating in the same country or region, for a quick overview of the current construction prices. These are not secret data and most people are very open to sharing their experiences or even various cost plans from contractors. Infrastructure. It should be checked what is available on site and what is expected from the partners and the community. Additional costs for connecting water or electricity to the respective property can be very high. Additional costs.

there are a lot of additional costs, that are not considered in the initial calculations. Fencing on larger properties can cost as much as the buildings on the property itself. If that is a project requirement, it should be kept in mind or alternative options should be considered, we will discuss those in other videos. Costs for furniture. They may not be that high, but they should be factored in, since a classroom is only a classroom, if it has tables and chairs.

Solar energy is quite trendy these days and it is getting cheaper, but there are still additional costs, especially when purchasing more reliable devices from well-known brands. And it’s not just the purchase, but also the maintenance and safety aspects, that can affect the budget. The costs for building permits are usually not very high. What could be problematic in some cases, is the duration of the approval processes, as it is often expected that these should be submitted along with a final report of the project.

One should inquire in advance, what the situation looks like. Sometimes it’s a formality and a matter of days, sometimes it takes years and can unfortunately also involve demands for bribes. And finally, planting trees and adding vegetation really doesn’t cost much. So just a gentle reminder that we should all do more of this in our projects.

Dividing projects into different phases. This topic is extremely important when designing a project, especially when it comes to applying for funding. These are AI-generated images, but they resemble various examples from real life, where NGOs present their visions, of what different social projects should look like. There’s nothing wrong with planning and dreaming for the future, but if one is not realistic, often nothing gets realized. One can say that the sum of 100,000 euros is a reasonable amount for a construction project, when it comes to applying for funding from private or public foundations.

This amount is already extremely difficult to obtain, but with today’s prices, it is realistic. So a building like this, for example, would be closer to this amount. A pretty big difference compared to the photos shown earlier. This is also a rough budget for six classrooms and a toilet, which can be the first phase of a school complex. One must always think in the direction of how to finance the individual phases of the project while also having an idea of what it should look like in the end.

And the project should be designed in such a way, that it can easily be divided into phases. So we can start with one element for one classroom, then add another, to form a block with two classrooms. And then use these elements to create a small complex with six classrooms, which then becomes phase 1. At the same time, one should always consider, how the project can grow in the future and how further additions can be made.

Yes, one must have a long-term vision. That is something that helps to develop the project and allow it to grow. The knowledge of how to break it down into smaller parts, is crucial for obtaining financing. That is why it is very helpful to have people on board, architects or engineers, who know how development cooperation works and who can design it in a way that makes it feasible.

Sustainability is the buzzword nowadays and it should be that way. But often that does not mean that the construction is cheaper: often it is quite the opposite. If alternative materials are to be used, the construction must be carefully planned. Local experts must be involved, people who have experience in, for example, clay- or bamboo construction. Also, relying on external or let’s say imported knowledge is complicated and often very expensive.

For example, if you want to build with bamboo, there must be a local team or company, that can implement it and hopefully has carried out similar projects in the past. The maintenance aspect must always be taken into account, because when planning with sustainable materials, it is always more present. Raw clay or bamboo require more maintenance than concrete, that will never change. If the work is done correctly, it can be great. If not, parts of the building can be destroyed very quickly, like this wall made of clay blocks, next to which there is obviously a leaking water tank.

In case problems arise during project execution and the use of alternative materials suddenly becomes out of the question, it is helpful to always have a backup option available. It is always good, for example, to plan the project in such a way, as if it would be done in the usual way with cement blocks. One should try to not to make it too complicated and focus the project only on materials. There are many other important sustainability aspects, that one can focus on. And if it is actually possible to use alternative construction methods, that can be a big bonus. Prioritization of certain building parts.

It is not very common, since the usual funding applications are not processed this way, but it can be worth considering for projects that are funded in a slower process. One could consider a part of the project, for example the ground slab and all foundations, as something that should be built permanently. Once the foundation is finished, one could think about building a cheaper temporary structure. It can be used for several years and should be made of materials that can be reused later, when more funds are available and a permanent building is affordable.

There are many local examples of cheap and lightweight constructions. If one takes this house in the photo as an example, almost everything from it could be later reused in the new construction. One should do this and one should do that, can sometimes seem very complicated and overwhelming. Here is an example of a kindergarten, which was built simply and effectively on a quite low budget and very quickly within a few months, to show that things do not always have to be complicated.

The steel frame construction, where steel is the main material for the load-bearing structure, allows for very quick erection. By the fourth week, the main structures of the building and the roof were completed. The walls were built in a simple manner with clay bricks, without windows, only with simple openings between the bricks and large sliding doors. There are roof openings for better ventilation and instead of a ceiling, textile is used to visually complete the roof space. And here is the finished classroom, very simple, with plenty of light and good ventilation. That’s all you need.

The overall budget can only be known when a fairly detailed bill of quantities is created on the basis of architectural drawings. This empty document is then filled with prices during the bidding process. Ideally, this should be done independently of an engineer or an architect. It can also be created by the contractors themselves, but in these cases, some form of compensation is often expected, especially if they are not then selected for the contract. A bill of quantities is absolutely necessary, if one wants to obtain comparable offers from different construction companies.

It is a means of negotiation and is basically almost the most important part of the construction documents. In the case of some typical projects, which are always executed in a similar manner, such as clinics or schools, one could also argue that it is more necessary than the drawings themselves. All these numbers and descriptions can be overwhelming and for people not connected to the construction industry in any way, they can be difficult to understand. After all, this document is nothing more than a decomposition of the building into its individual parts.

It specifies the walls, the roof, the windows, and everything else that is to be built. And all these parts together then form a building. Let’s see which parts anyone can check, even without specialized knowledge in construction. This is what a typical page of the document looks like, and it always has a summary at the end. This is the part that should be checked first. In this analysis of a past project, one can see, how much each part costs approximately. Of course, every project is different, but something like this is a good starting point.

If one knows that the total amount roughly breaks down to 30% for the foundations and the ground slab, 30% for the walls and the load-bearing structure, and about 30% can be divided for the roof structure and covering, that’s already something. Here is an example of a project, where it was immediately clear that something was wrong, as a certain part accounted for almost 60% of the budget. Upon closer inspection, it turned out that there was an error in the Excel file, where incorrect numbers had been entered.

This type of misunderstanding due to simple mistakes that anyone can make, can sometimes change the course of a project, if they are not noticed in time. Another example concerns the plywood, but it can also be applied to many other materials as well. A total quantity of the material is specified, there are prices, but the thickness is not specified. One side thinks that it must be at least 8mm thick, the contractor supplies the thinnest material, namely 3mm, because that is what he actually budgeted.

The general idea is, to always check the largest quantities and sums, as specified in the bill of quantities. And this certainly applies to everything, that has to do with concrete and steel, which are almost always used. Some of the easiest work to check, since you can easily calculate the quantity yourself, are the walls, the ground slab, or the roof. This is also a good sampling method to ensure that the current bill of quantities is actually based on a current project and not simply copied from a previous one – which happens very frequently.

Here are some estimates, that are based on our experiences. They can be used as a basis, but depend on so many factors that it is impossible to know them exactly. In general, it holds that if the prices are outside these values – that is, cheaper or more expensive- it is probably worth asking more precisely. And as a warning, offers that are too cheap, should attract even more attention than the expensive ones. Concrete prices per cubic meter. The usual range is between 200 and 300 euros.

Where complex elements that require more formwork and precise work, such as columns and beams, of course fall in the higher range. Simple concrete without reinforcement is of course much cheaper. These prices are easiest to verify, as both cement and steel are available on every construction site and the prices depend heavily on the global market, as they are almost always imported.

Another imported material, that depends on the world market. One should be very careful, what thicknesses are specified in the bill of quantities and what is actually delivered. In general, a thickness of 0.4 to 0.6 mm is used, which should be sufficient for most purposes. The prices for bricks vary greatly and there are many different options. From cement blocks to fired bricks to clay blocks, which are of course the cheapest and also the most sustainable option.

They are almost always produced on-site or, in the case of fired bricks, in the nearby area, to reduce transportation costs. As discussed in previous videos, there is a lot of wood in some countries, used for construction, while in others there is none at all. Quality and availability fluctuate and are very region-specific. These are some prices for the most commonly used Timber. Plywood is always imported, so the prices in different countries are likely to be more comparable. Some countries, like in this example Kenya, regularly creates cost manuals, used to verify the most important prices and to get a better overview of the market situation.

There are some options, that can be used after the project begins, to control the budget and ensure that costs do not spiral out of control. Construction projects take a long time, from contract signing to completion often more than a year passes and many things can happen in between. The first issue is always the fight against inflation. General price increases in construction materials can neither be controlled nor predicted.

They are either related to the global market or to the specific situation in a particular country, which arises from supply shortages or similar issues. What can be mitigated is the inflation itself. Contracts with local partners or the construction companies should not be in local currency, but in stable currencies like dollars or euros instead. This way, it is fair for both parties. No matter what happens regarding inflation, whether the local currency becomes weaker or stronger, the overall price remains unchanged.

A schedule that refers to the individual construction phases is very useful. It can be simple or more detailed, it can even just be a rough estimate, but it should provide a clear agreement on when a specific phase should be completed. This is related to how the payments are to be made and it conveys a general picture of the deadlines and what to expect. Purchasing materials in advance. From an economic perspective, this is a good idea. Nothing gets cheaper over time, so why not buy in advance.

This is especially true for the most commonly used materials, of which large quantities are needed, mostly cement, steel, and wood. Here, the first question arises, whether there is enough storage space and whether these can be sufficiently secured against theft. This is often not the case and therefore not easy to realize. An additional amount for other materials, that need to be purchased in advance, can lead to having less influence over the contractors.

They often tend to delay and provide various real or fabricated excuses, and this situation becomes even worse when they receive almost all the money in advance. The risk is obvious, and ways must be found to reduce it. This only makes sense in special situations, where there are secure storage options and a high level of trust on all sides. To ensure that things go as planned and there are no surprises, a high level of construction supervision is crucial. Since the projects are often managed remotely, constant, even daily, photo reports should be requested.

This gives a clear idea of what is happening and if something is wrong, one can react in time. Delays, mistakes, misunderstandings, and so on. Things happen very quickly on a construction site and one must react immediately, before it is too late. Our experience has shown that we live in a time where the majority own a smartphone with some kind of camera and we constantly look at our phones, getting photos from a construction site often feels like pulling teeth.

It works for a few days, then the next ones come in a week, then in a month and then there is a photo of a finished building and no changes are possible anymore. This lack of information may be good for the contractors, who just want to do their job and then move on to another project, but it is not in the interest of all the others project participants. So try to find someone who takes photos every day and sends them to a WhatsApp group.

A child from the neighborhood can do that too. It will be a great help. Having a Plan B ready in advance is a good approach in order to anticipate potential budgeting issues. The main goal of the project is its function. No one will complain, if certain parts of the building are slightly changed.

This could mean, that the fired bricks are replaced with simple, cheaper clay blocks or that a rammed earth wall becomes a wall of cement blocks, that thicker and more expensive roof slabs are replaced with some thinner ones that still fulfill the function, that glazed windows are replaced with simple and cheap wooden windows, that the original idea of a soundproof ceiling is abandoned and the roof is left as it is, or that a redesigned toilet facility with water flushing is initially implemented as a cheaper dry toilet instead.

Some of these changes are not ideal, others can only be temporary, but they all allow for the project to be completed while still fulfilling the purpose of the project. So it is not bad to consider all of this in advance. In extreme cases, where funds are suddenly cut or not available, it is important to complete the main work and leave the rest for later. This usually means that the foundation and the roof structure must be completed first. In this way, the building is protected and the walls and windows can be installed later. The unfinished building may even be used for a while as it is.

Money transfers can incur additional costs, which are not planned, and the situation varies greatly from country to country. It is worth researching in advance and ensuring that money transfers are even possible. If the money transfer is too complicated, it may simply be that the projects are not feasible at all. Generally, bank transfers are the first option, and there are many different banks, which offer different conditions. As a general rule for most countries, a transfer of about 10,000 euros can be made with about 30 euros in fees, which is quite inexpensive.

However, it is important to note the actual exchange rate, at which the local bank exchanges these 10,000 euros, when they are deposited into the local account. This is also difficult to know in advance, and the best way to ensure is always a test transfer of a smaller amount. Another option for transferring money is remittance services. They are generally suitable for transferring smaller amounts of money, as the money is not traditionally transferred from bank to bank, but the service providers receive the money in an account in one country and then transfer it directly from their own account in the destination country to the recipient.

There are many different providers, such as Wise, Instarem, Remitly, Xoom, Western Union, and many many others. Depending on the season, country, and amount, the actual rates can vary significantly. In our experience, the time when using various remittance services was significantly cheaper seems to be coming to an end. Meanwhile, the costs for transferring larger amounts are comparable to those of banks. It is also not a 100% reliable service, as sometimes the amounts are limited or certain countries are not available.

Sometimes it is also required that the partner organization has an account with a specific local bank. The more traditional, but far less transparent and secure options are to pick up the money directly at an ATM or simply bring the legally permissible cash amounts and exchange them upon arrival in a local currency. As for the exchange rates, we have seen the best options, but they may not be acceptable for security reasons and compatible obligations. Certain financing agreements, especially government ones, specify very precisely how the remittances must be documented and often the only acceptable way is through a bank. Just a brief overview of the topic of financing.

It is something that all organizations struggle with, whether large or small. There is no recipe, but here are some general information, that may help those, who are not experienced in this area. It is very difficult, to obtain money for financing construction projects, especially today, where construction prices have risen. What should be considered and what can help? It is always easier, when the issue is understandable. Like in this example in Colombia, where a school in a small village community had to be demolished due to poor construction quality.

The children had no school to go to anymore. Much more does not need to be explained. However, if a project is a public building near five other objects with the same function, then it is more difficult, to explain it to potential funders, no matter how urgently the project is theoretically needed. A nice presentation showing how the building is to be constructed, is very good and makes it very clear for all parties involved.

It makes clear, which materials will be used and if the use of alternative construction methods is a focus of a specific project, then it is also important to show that to potential funders. However, it is also not advisable, to exaggerate and make it too beautiful. There have been examples of projects that were rejected, because they looked too luxurious, just because the presentations were very well done. Some basic differences between private and public funding.

Private money is usually donated one-to-one. That means, everything that comes in, must flow directly into the project. There are no administrative costs or similar. This type of funding is usually more flexible and has more understanding of the typical daily challenges, price increases, deadline extensions, and many other things, that can happen during the course of the project. It is also important that there is a greater interest in funding buildings with private funding. Because once they are built, it is clear what the money was used for.

Government funding in the case of German organizations either through the BMZ or in some cases through EU funds is very different. Here there are many more formalities, the application process takes a long time and there are stricter deadlines and reporting obligations. In terms of the high workload, that the application offices of the organization must handle, administrative costs are a possibility. The biggest difference that has become more apparent over the years, is the way construction projects are evaluated.

There has been a complete change and pure construction projects are now rarely funded. Nowadays, they almost always have to be part of a larger project. This is a bigger problem, such as addressing the improvement of education, health, or sanitation facilities, where individual buildings are just an addition. Regardless of the funding and regardless of how difficult it is to set the budget, 5-10% more should always be planned, to cover unexpected costs and price increases.

This happens very often and the original budget is rarely sufficient. If a small amount should still remain, it can be returned in government funding or used in private funding for optional parts of the project, such as the outdoor facilities or furniture. When it comes to making some decisions during the planning and construction process to generate revenue, there are a few debatable options. One of them would be how the sanitation concept is implemented.

There are various options for income generation, all based on ecological wastewater disposal and the recycling of urine and feces, as well as the way in which the wastewater system is operated. One option is the construction of an underground biogas tank, where gas can be used for cooking and gray water for watering plants can be used. This can lead to significant savings in energy consumption. Another option is collecting urine or compost, which can later be used as fertilizer or resold to other people in the community.

All these options depend heavily on the type of each project and can only be implemented if they fit into the project. Rural environments with agriculture and dry toilets offer many more opportunities than urban environments, where flush toilets are preferred. Another simple option is the use of solar energy. If solar energy makes sense in an off-grid project, where electricity is not so common – let’s take a school or a library, for example – then it is worth considering how these buildings can also be used in other ways.

Perhaps they can be used in the evenings as meeting places for the community to socialize, to read, use computers, charge phones, and so on. All of this can be made available for very low fees, and the revenue can then be used later for the maintenance of the building and the solar systems.