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The Economy of Scale

   

The Economy Of Scale and Space Efficiency

As an example of how peripheral costs can skew the cost of building, let's say you owned a building site with a fairly significant of slope across it. The site next door is relatively flat. It might work out that because of the slope, your site would require $25,000 in additional grading and excavating costs over what your neighbor will spend. Perhaps there is another $15,000 in additional foundation costs and, for the same reason, an additional $20,000 to build the driveway. If you and your neighbor were each to build the same 600 square foot cabin on your respective sites, in the end yours would have cost $100 per square more than your neighbor's ($60,000 / 600 sq ft). Conversely, if you each built the same 6,000 square foot home on the two sites, those fixed site-specific peripheral costs would only amount to an extra $10 per square foot. This is obviously oversimplified, but illustrates the concept of the economy of scale in building. Hopefully you get the idea. Sometimes this logarithmic scaling effect can help you justify certain expenses, such as if, for example, the flat site next door is simply not large enough to accommodate your 6,000 square foot house, or perhaps that site only has a view of the local water tower, while your site has a view of El Capitán.

Another simple example would involve a basic 10'x10'x10' building. Four 10' long x 10' tall walls -- 100 square feet of floor area, no frills. The foundation subcontractor has 40 linear feet of foundation walls to dig footings, set forms and pour. The framing subcontractor has 100 square feet of floor area to frame, and the same 40' of walls to build, etc. You could rearrange this same 40' of walls to a long, narrow rectangle 17'x3', and you'd have roughly half the floor area, only 51 square feet, but still about the same cost to build. If you decided that you wanted to double the size of the building, you would only need to add ~4'-2" to the length of each wall (~14'-2"x14'-2"=200). By adding ~42% more material in the walls and foundation (with very little more work, as those workers are already set up on the job), only the floor and roof increased by the full 100%, yet you have 100% more space for maybe 50%-60% more expense. So what happens if you decide this design is just too boring -- you put a jog in it, a notch in one corner, 4'x4'. You still have the same amount of wall, hence virtually the same labor/material cost, but now have 16 square feet less space. Think of the irregular shoreline of a mountain lake -- the lake, like your home, has a finite surface area, yet if you measured the length of the shoreline, all the ins and outs etc. it will tend to be extremely disproportionate to the amount of area it encloses. Mathematicians call this a "pathological curve". Again, this is over-simplified, but a good way of defining basic structural space efficiency.

Now, convert these simplified examples to a real world scale and you can see why adding more space will typically translate to a lower per-square-foot cost (though generally still adding cost overall). You can also see how actual costs can vary so much. The two 6,000 square foot houses built side by side, on identical lots, with identical finishes, countertops, cabinets, windows, etc. could be many tens of thousands of dollars apart in cost, based simply on the efficiency of the structure's design. There can potentially be a much greater mass, volume and complexity to a structure, while still defining the same amount of floor space. The various peripheral costs from things like covered outdoor patios and living areas, decks, large garages, retaining walls, etc. are all typically lumped into the cost of construction, and therefore into the per-square-foot cost, based on the square footage of the living area alone, without regard to shape or complexity. This illustrates the designer's challenge -- to balance your needs and wants efficiently with your budget and the constraints of your site. Often there are important aesthetic goals and considerations that will outweigh the more practical aspect of overall space efficiency and these must be clearly identified in the initial phases in order to find this balance in the completed design.

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