Fixed-price contract has Contractor's Fee % as well?
Contractor says there is a lot of "unknowns" in the project. When asked what happens if some parts of the work come it at a lower cost, he said that would be his profit and if it's higher, it would be his risk.
However, there is still a % at the estimate I received labeled "Contractor's Fee".
This is my first major remodel project with a GC, so I don't know what is standard. Is it normal to have a % markup on as part of the fixed price contract?
Or is this some kind of trick because I don't know how it works?
There are in fact a lot of unknowns with the project, I just don't understand that is the items are padded already, why is there a % as well.
Is this common?
Commenti (42)
PROJoseph Corlett, LLC
6 anni faHe's not lying and must be paid for his risk. In fact, he's a smarter businessman than most who fail to realize this.
You should be more concerned about his reputation and the value he brings than how he slices the pie.
I just got an offer to bid on an exterior stone job that covers a television that rises and lowers into the stone. I didn't like any of their detail drawings and would not use them were I hired. I told them an hourly rate; I doubt I'll hear from them. Fine by me.
bry911
6 anni faUltima modifica: 6 anni faThis is my first major remodel project with a GC, so I don't know what is standard. Is it normal to have a % markup on as part of the fixed price contract?
I am a bit confused by your post. A fixed price contract is fixed price and there is no % markup. However, a fixed price contract often has allowances as placeholders and may have a % markup on allowance overages. These are really small cost plus contracts that exist outside of the fixed price contract. You should make sure that he uses pooled allowances for these accounts as unpooled allowances are an easy way to pad fees.
So to answer your question - I don't understand why a builder would put a percentage as a line item in a fixed price contract. In fact, I would read the contract very carefully if it contains a percentage line item. However, it is perfectly reasonable to establish the builder's percentage for items not covered in the fixed price.
He's not lying and must be paid for his risk. In fact, he's a smarter businessman than most who fail to realize this.
But he shouldn't be paid twice for it.
- PRO
User
6 anni faUltima modifica: 6 anni faWith many unknowns, a time and materials contract is more common than a fixed fee.
Contracts are all about risk. When you ask the contractor to bear the burden of the risk in a fixed price contract, your costs will be more up front for his ensuring that he doesn't lose his shirt. Doing time and materials shifts the risk to you, rather than him. The project takes however long it takes.
The unknowns are always a risk. The only way that you can lower the cost of the project overall is to make some of those unknowns known. Cut open the soffit that you want to remove. Have a structural engineer examine the sagging support beam in the basement or wall that you want to tear down. Have a plumber open up the drywall in the ceiling on the first floor to expose the second floor plumbing.
Buy an expert's opinion on the front end. If it involves a little destruction, drywall is cheap to repair. Especially if it clarifies the project's parameters.
freeoscar
6 anni faIn my experience, on 2 major remodels using fixed fee contracts there was no line item for the contractor's percentage. The contract outlined the work to be performed, the materials which would be used if contractor supplied, what wasn't supplied by the contractor and would be supplied by the homeowner, allowances if any, and then the price. I'm not sure why he included his % nor why that is relevant. If things were discovered which were outside the scope of the work, or if we wanted to make changes/additions that weren't in the original plans, we discussed those ad-hoc. In both cases (one was a $200k project, the other a $350k project), it worked out very smoothly for us.
- PRO
Joseph Corlett, LLC
6 anni faI think these guys are nuts. How much money I make is nobody's business. Take it or leave it.
bry911
6 anni faI think these guys are nuts. How much money I make is nobody's business. Take it or leave it.
___________________
In a cost plus or time and materials contract the contractor's gross profit has to be disclosed.
veggiegardnr
6 anni faI think homeowners have every right to know the cost of materials and the cost of labor. I certainly wouldn't "take it" if anyone refused to tell me.
If it costs less than expected, it's his profit? Well, I'd make sure that the exact materials to be used are spelled out, and that the price you are being charged for the materials is reasonable...or you could end up with less expensive materials being substituted in, at his profit.
freeoscar
6 anni faOn a fixed price contract there is no need to know the price of the materials or labor. Yes, you need to clearly spell out what materials are being used and the scope of work to be done, but what do I care if he pays $20k or $25k for my windows as long as I get the ones I asked for? If he started the project expecting to make 20% margin and ends up at 15 or 25 I could care less as long as I get work done at the quality I expect using the materials I contracted for. His profit is his business.
- PRO
Joseph Corlett, LLC
6 anni faUltima modifica: 6 anni faveggiegardnr:
I can promise you if something goes wrong on a job that's not the contractor's fault, the very first thing a homeowner will do, before paying more money, is to ask the contractor to sacrifice his profit as if that's something he can do and continue to stay in business.
thatsmuchbetter
6 anni fayou are creating drama in your mind and these forums will only expand that.
Look at the total project cost and get past this or find another. You nor homeowners on hooz that have done A project or 2 dont dictate how this GC writes his contracts. In fact i hope this GC catches wind of you and hi tails it.
veggiegardnr
6 anni faUltima modifica: 6 anni faIf the something that goes wrong on a job is due to something the contractor did wrong, he should not expect to be paid to fix it. If something goes wrong that's not his fault, the homeowner needs to pay.
But, that has nothing to do with a homeowner knowing what they are paying for materials and what they are paying for labor, and I think they have every right to know that. My dad, who worked in construction, always provided his clients with the cost of both labor and materials.
I realize that it works out better for contractors who can get homeowners to just pay them money without knowing what the materials cost and what they are paying for labor. I mean...what's not to like about this if you're a contractor. You avoid homeowners saying, "hey, you're overcharging me for these materials." Plus, you avoid having homeowners decide what they think your labor is worth, right? That's all very convenient for the contractor.... But, homeowners need to protect themselves and they have every right to do so.
There are plenty of options for getting things done on a home and there are also plenty of options for what exactly is done. There's no need for anyone to just pay money without knowing what they are paying for. I've refused to do business with plenty of people who have refused to tell me the cost of materials and the cost of labor. I've also had people do things like say, "What does it matter what the cabinets are made out of, so long as you like them?" All those sorts of things are a no-go with me. I, personally, won't ever be handing over money to anyone without knowing exactly what I'm paying for.
"His profit is his business." Um, no, it's my business if I'm paying.
"How much money I make is my business." How much money you make per year, or off of other people is your business. I don't expect anyone to tell me how much money they make. BUT, when I'm paying a contractor for a job, I expect to know how much I'm paying that person for labor. It's the same thing when I take my car to the mechanic. I expect to know how much the parts cost and how much I'm paying in labor. They don't just get to say, "I'll fix that rattle for $1000."
I'm sure it works out great for contractors when homeowners allow them to not give bids that include the cost of the materials and labor. But, a homeowner's job is to protect himself.
To the op... There are multiple contractors on these boards who will pretty much tell you that any contact the contractor wants you to sign is appropriate, no price is too much, that you should be grateful that a contractor is even willing to work with you, etc. They will bash you if anything goes wrong on your project, too. It'll be your fault if you ask the contractor to many questions (and he doesn't like it). It'll be your fault if you don't ask enough questions ("you didn't do your homework"). Most everything will be your fault, according to them. My best advice to you is to get multiple bids. So far as these "unknowns," you need to ask what might go wrong that could cost more and have some sort of idea how likely this might be to occur (find out, as was suggested by The Cook's Kitchen). Personally, I would not agree to pay more, overall, because of what might happen ("unknowns"). I'd take the risk on myself that I'd have to pay more if something came up. I'd make sure I had the money to do that, before I started the project. That would involve educating myself about possible things that might happen. The contractor you're dealing with....I'm sure he knows what might happen and how much it would likely cost to fix it, if it did happen. He's not in business because he's got a habit of paying for a bunch of expensive "unknown" things that randomly pop up during his jobs.
JosephCorlett... I do understand how some people can be. I completely understand. Like I said, my dad was in construction. But, you and I are just going to have to disagree about whether or not homeowners should be provided with cost of materials and labor. I do appreciate your responses here to homeowners about their slabs and slab installs. You provide a lot of valuable advice here and I've learned a lot by reading what you write. You're not one of the folks who always blames the homeowner, so please don't think that comment was directed at you.
bry911
6 anni faUltima modifica: 6 anni faLook at the total project cost and get past this or find another. You nor homeowners on hooz that have done A project or 2 dont dictate how this GC writes his contracts.
-------------------
The same person will be on here claiming you should have done more homework when things go bad.
Like it or not, there is a tremendous amount of construction fraud, in fact, it is the highest on a per capita basis. Trust but verify is a great standard to help protect your interests. Furthermore, most contractors who would quit over this question, aren't on the up and up.
Generally, people with integrity don't have any problem demonstrating their integrity. The only people who begrudge client assurance are those who are likely to fail. Also contractors with integrity want you to fully understand the contract, when your business depends on proper estimates for quality work the last thing you want is a customer upset because they didn't fully understand the agreed upon work or fees.
- PRO
User
6 anni faA fixed price contract does not disclose either material or labor costs. It does disclose the materials, and the Scope of Work that you get for the bottom line price. But the individual costs are not disclosed. If there are optional elements to the job, like stone instead of brick on a fireplace, then a price for that upgrade may be given. But, not the price of the stone, or the labor to install the stone.
If you want 100% clarity on costs and markup, then a cost plus contract is what you want. Not a fixed price. That also puts the risk of the cost control directly onto the consumer. Lumber goes up 40% before the addition starts? You pay that, plus the contractor's 25%. Entry level cabinets aren't what you want? 40K worth of custom cabinets can be yours, plus the contractor's 25%.
Risk cannot be eliminated from a project. It's all about managing it.
PROR J Hoppe Inc
6 anni faA contract is simply a legally binding agreement. As simple as I'll give you $5 to cut my lawn or as complicated as you like from there. If you'd like to stipulate an exact amount of blades of grass to be cut then go for it. If you'd like to give an allowance for the amount of gas to be used is not to exceed ... then go for that as well. But there is only a contract when two people agree. My experience is that no matter how specific a contract is it can always be more specific if one chooses to make it so. If a person wants to know the amount of screws used on a project does that person also care about the thread count on the screws the tensile strength of the steel the rust inhibiting qualities where they were made what forge where on the planet the iron was dug. Or is it all about the money???? If its all about the money then love is a two way street.
For myself 90% of the work we do or bid are fixed sum contracts. I'm not telling you what my material costs are nor what my labor rates are nor what I ate for breakfast.veggiegardnr
6 anni faUltima modifica: 6 anni fa"I'm not telling you what my material costs are or what my labor rates are..."
Exactly. The more homeowners can be kept in the dark, the more the contractor can profit, at the homeowners' expense. Because, homeowners won't/can't object to what they don't know. They can't, for example, do the math and figure out that the contractor (after all is said and done) is doing something like taking in $200/hr for himself. They can't decide that's too much, if they don't know that's what they're paying. They can't object to being charged outrageous prices for materials, either, because they don't know what they're being charged for things.
bry911
6 anni faI should have been more detailed in my earlier post so I am going to correct that now.
In reality the words "fixed price contract" are descriptors for the terms of the contract but in no way establish the legal limits of the contract. Really there is no such thing as a "fixed price contract" there is just a contract. I could title a contract "Fixed Price Remodeling Contract," present a fixed price in the contract and then immediately disclaim all fixed prices for the contract, just by saying that the fixed price is based on estimates for materials and material overages will be borne by the homeowner at cost plus a disclosed percentage.
The only thing that the law generally establishes is the definition of the word "cost" for materials, and that definition gets ignored quite often. Cost of materials is established as the actual amount paid by the contractor less any rebates and late payment penalties. In other words, contractors are generally prohibited from selling customers things at retail and must pass along all trade and credit discounts to customers if their contract establishes terms that are separate or derived from cost of materials (in other words cost plus and time and materials). Even these definitions can be disclaimed by the contract but contractors must use specific language to do so.
Little else in a construction contract is prescribed. Which brings us to the OP's question. Just because the contract says "fixed price" doesn't mean it is really a fixed price contract, and a builder's percentage line in your contract is a big blinking warning sign. While it may be nothing, it certainly establishes a cost plus component to the contract, and signing the contract acknowledges it. If he is just disclosing for transparency's sake, then great. However, it is time to go over the contract carefully and ensure that you are actually getting a fixed price rather than a minimum price.
bry911
6 anni faThe more homeowners can be kept in the dark, the more the contractor can profit, at the homeowners' expense. Because, homeowners won't/can't object to what they don't know. They can't, for example, do the math and figure out that the contractor (after all is said and done) is doing something like taking in $200/hr for himself. They can't decide that's too much, if they don't know that's what they're paying.
With respect, none of that matters. Why does the contractor's profitability have any relevance to you at all? Whether he makes $100,000 or $80 on your house really doesn't matter to you at all.
Let's use an example - Suppose two equally skilled contractors bid on your home, they use the same subs and both will build the same home using the same materials in the same amount of time. One of them gets better deals from his subcontractors and makes almost twice as much profit as the other. Which one should you choose?
Obviously the cheaper one, and which contractor that is does not matter to you. There is no situation that paying more for the same result is a benefit to you so there is no situation where knowing the profit they make will benefit you.
veggiegardnr
6 anni faUltima modifica: 6 anni faYeah, bry911, it does matter. It matters because I'm paying for it. If I decide that people I'm interested in hiring want to make what I consider to be too much money off a job, I can decide not to do the job at all, to do something different, or I can decide to do it myself. If it's beyond my ability to do myself, I can decide if there's something that I can do myself that I will find suitable and do that instead. If I ever do decide to pay someone $200+/hr, they'd better do an excellent job or they will get fired. Oh, wait, that already happened...I did fire someone for doing a lousy job. He thought he was worth somewhere around $230/hr. He wasn't. He wasn't even worth $50/hr. I finished the job myself and the quality of the work is much better than what he was doing. If I'm paying $50/hr, I might accept a few imperfections. $200+/hr and it had better be near perfect. It's absolutely relevant what someone is making on a job, when it's my money that's paying them. By the way, I know how much a lot of contractors are making per hour and I've seen the lousy quality work many of these people are doing. It's appalling.
bry911
6 anni faUltima modifica: 6 anni faYeah, bry911, it does matter. It matters because I'm paying for it. If I decide that people I'm interested in hiring want to make what I consider to be too much money off a job,
The problem is that you are not hiring someone to do it. THAT IS THE ENTIRE POINT OF A FIXED PRICE CONTRACT! You are placing a special order for a product, just because it is a house it is no different than any other product purchase. A house with these specs, a car with these specs, a door with these specs, etc. The entire idea behind a fixed price contract is that they are used for ordering a product rather than hiring anyone.
If you want to control the work, etc. then don't use a fixed price contract. There is nothing wrong with you wanting to have more input into the home you build. Personally I prefer cost plus contracts for a similar reason, but that is why we have multiple kinds of contracts. It is really a very simple concept. A fixed price contract offshores all the risk to the contractor but also limits his responsibility to supplying a home as ordered.
Your example doesn't even work. If you signed a fixed price contract with a contractor doing work that you judged wasn't acceptable you couldn't just fire him because he wasn't worth it. So long as his work meets the standard outlined in the contract then you are just out of luck...
Again, I am not saying that what you are trying to achieve is wrong. But I am saying you are absolutely wrong about the vehicle you chose to do it with. Many people don't want to control the work, they do their due diligence, pick a contractor that they believe with deliver them the best possible house, and order that house built.
dan1888
6 anni faUltima modifica: 6 anni faKnowledge is power. . . . The more you understand, explore, spec out, and are willing to do on your project the better it will go. .. . .And the less likely you'll be overcharged or receive subpar materials and labor. Even if you decide to go totally with a pro you'll avoid many problems with knowledge. You'll better know who to avoid. If it turns out that the only quality people are currently busy enough that supply and demand makes them charge more than you want you'll be better able to break up the work, get the materials, do some yourself and know what a sub should be doing for a good job. More work for you but this isn't rocket science. Everything is actually stuff people with ordinary intelligence are capable of learning. Use Youtube and google for background and move forward.
veggiegardnr
6 anni faUltima modifica: 6 anni fa"If you want to control the work, etc. then don't use a fixed price contract."
Exactly. I won't sign something like that.
"Your example doesn't even work. If you signed a fixed price contract with a contractor doing work that you judged wasn't acceptable you couldn't just fire him because he wasn't worth it. So long as his work meets the standard outlined in the contract then you are just out of luck..."
If his work was acceptable, he wouldn't need to be fired in the first place. But, I still wouldn't sign one of those contracts.
SophieWheeler, when my roof is leaking, I'll fix it myself. My FIL is a roofer. He taught us to put on a roof. We did one a couple of years ago, on a family member's house, with his input. It was our first roof. I'm sure it won't be the last. It wasn't even that difficult. It didn't require a bunch of special equipment. The roof hasn't leaked since we put it on, which is the first time that roof hasn't leaked in known history (because all the roofers who were hired over the years either put on a roof that leaks or didn't/couldn't fix the leaking). We didn't need a bunch of special, expensive, equipment. We didn't need to hire anyone for $300/hr, and if any roofer is charging that and getting away with it, he has fools for clients. We did hire an actual roofer (one with a license, which most of them don't even have) to tear off the roof. We paid a flat fee for the tear-off, upon completion of the job. There was no contact involved, just a handshake and agreement to pay what we all felt was a reasonable amount of money for a hard job. License costs for contractors aren't that expensive and neither is their insurance.
I've never hired a handyman.
"Petty envy of someone's ability to earn a more lucrative living..." I'm not at all envious of what anyone earns. But, I'm not going to pay a contractor as much as a doctor earns. It's not warranted, which is something most would agree with me about. Most homeowners just don't realize what's going on these days, but they'll figure it out eventually (despite many contractors trying to hide it with these contracts we've been discussing and "I'm not telling anyone what I make").
"You don't like what someone earns, don't pay it. Suffer the consequences of hiring idjuts and hacks." I fire idjuts and hacks, like the licensed floor guy who thought he was worth $230/hr, who I hired because I didn't want to do it myself. Unfortunately, we did end up doing it ourselves and the floor we produced is far, far superior to what that idjut produced and tried to pass off as acceptable. Now, I won't hesitate to do another floor. Paying someone a lot of money doesn't mean you're going to get a good job or even that you have increased odds of getting a better job.
Things are cyclical, SophieWheeler. No, it's not 1959, but homeowners will eventually wake up again, like we have ourselves, and start saying no to what's going on now. Then, quality of work will have to increase and prices will decrease.
I agree with you, dan1888. I agree with everything you wrote.
bry911
6 anni faTwo pieces of advice for everyone reading this now or in the future:
1.) Relevant costs are the only costs you need to consider - Relevant costs are often considered avoidable costs, they are actually FUTURE costs that differ between alternatives. We have a natural tendency to focus on fairness, but it is useless. How much money someone else makes is only important when it affects how much money you make.
In construction, the value of someone's work is not determined by the amount they make an hour or a year. It is determined by the amount you would have to pay other contractors for the same work, quality and time. Regardless of how much profit a contractor makes if he charges you $5 less that someone else for the same job, then you are $5 richer for hiring him than you would have been hiring someone else.
2.) Opportunity costs are too often forgotten - Simply put a DIY job isn't always a net savings, even with knowledge the time and materials premium for DIY jobs is often so significant that it makes it a bad decision. Hiring a pro isn't just about knowledge, is also about practice and efficiency.
I just removed a textured ceiling and skim coated ceiling and walls in a smallish bedroom. I did it myself because I wanted to give it a shot. I got it to a level 4 finish and it looks great but what a drywall pro would have done in a few trips of a few hours took me many long days to complete. There is no way I really saved money. I could have done some consulting work and spent that time making 10 times what I would have paid a pro. For that matter I could have spent that time driving for Uber and still come out ahead. I knew going into it that it was a bad decision, but I was bored and interested.
bry911
6 anni faUltima modifica: 6 anni faExactly. I won't sign something like that.
But the OP did, and honestly, many many people prefer that. So your posts don't have a lot to do with this particular situation.
There is no need for profit to be disclosed in a fixed price contract, furthermore I am not even sure it could be reliably disclosed. Product costing just isn't that simple. No house is going to come out exactly as predicted, even if you have built the same house before, they all have unique situations that change the cost of a specific house, but a decent contractor will spread that risk out over multiple houses.
While you are quick to note the disadvantages of a fixed price contract, don't forget the big advantage, which is spread risk. Fixed price contracts offer the same protection as car insurance. Even if there is only be a 10% chance of a major unforeseen expense on your build, many people would prefer to pay a bit more to be protected from having to pay a lot more.
If his work was acceptable, he wouldn't need to be fired in the first place. But, I still wouldn't sign one of those contracts.
Again, I am going to make this very simple. The situation you described would not hold up in and of itself in a court of law. I don't care if he needs to be fired because he was charging $200/hr for $50/hr work. That just means he is better at making deals than you are. Courts never look at the amount of consideration given when judging these cases, if his work meets the minimum standard of due care, then you would find out his profit pretty fast when you write him a check for it. To fire a contractor in a fixed price contract he actually has to be violating the standard of care prescribed in the contract or the minimum industry standard, and for construction that is a very broad standard of acceptability.
In the end, you are really advising people to avoid fixed price contracts because you don't like them. That is fine. But realize that fixed price contracts have a lot of advantages, aside from the one mentioned earlier, they also happen to come in on budget and on time a lot more often.
- PRO
Joseph Corlett, LLC
6 anni faMy father-in-law tells the story of a guy who called a mechanic to fix his truck that wouldn't start. The mechanic smacked the hood of the truck and it started immediately.
"That'll be $50.00, please."
"What? You want $50.00 for smacking my truck?"
"Yes. You've got to know where to hit it."
I charged $3,000.00 for 6 hours work once and everyone was delighted with the deal. You gotta know where to hit it. 
roof35
6 anni faWe did hire an actual
roofer (one with a license, which most of them don't even have) to tear
off the roof. We paid a flat fee for the tear-off, upon completion of
the job. There was no contact involved, just a handshake and agreement
to pay what we all felt was a reasonable amount of money for a hard job.
License costs for contractors aren't that expensive and neither is
their insurance.This is the typical reaction when paying a person under the table.
To make such a statement shows lack of good judgement, knowledge, and disregard for consequences from poor decisions on both sides of the handshake. An injury could've cost you losing your home. You may have gotten away with one this time.
To say insurance isn't expensive is an uneducated remark. Back before I sold our company, a 2 million policy wasn't that expensive running approx. $2K per year. However, worker's compensation insurance ran $20 per $100 of wages. The amount paid per year was staggering. Never once did we do business without a contract. The risks were and still are too great to be foolish about a job.
It appears you're attempting to compare under the table dealings with legitimate businesses. Not going to happen in this lifetime no matter how much you type.
veggiegardnr
6 anni faUltima modifica: 6 anni faRoof35, it wasn't an under the table deal. We hired the guy legitimately. We checked his insurance and license. Yes, he provided actual proof that he was insured and licensed. We made an oral agreement before the job (he gave us a written estimate before the job and I believe we signed, stating that we'd received the copy of the estimate, but the oral agreement was that we agreed to go ahead with the work), as to how much we would pay, and we were provided with an invoice after it was done. We paid by check. You do not actually need a signed contract to hire someone, though they are advisable (when they protect both sides). Oh, and yes, we got a permit for the roof. We always get a permit, if it's required. $2k per year for insurance is not expensive. That's actually pretty inexpensive. Paying Workers Comp is part of having a business.
Bry911, I think we are possibly more in agreement over most things than either of us realize.
"But the OP did, and honestly, many many people prefer that."
I'm not so sure the op signed already.
"Product costing just isn't that simple. No house is going to come out exactly as predicted, even if you have built the same house before, they all have unique situations that change the cost of a specific house, but a decent contractor will spread that risk out over multiple houses."
I agree with you. I've watched people who have had (custom, etc.) houses built and it always seems to end up being a stressful, expensive, ordeal that ends up costing them more than expected or ends with them unhappy with the quality of work done. So, I just buy pre-owned houses. I don't need the stress of a build and I don't want to pay the premium for it.
"While you are quick to note the disadvantages of a fixed price contract, don't forget the big advantage, which is spread risk." True, but homeowners should realize that they going going to pay more for it, and successful contractors aren't in business because they have a habit of losing money when unknown stuff pops up.
"The situation you described would not hold up in and of itself in a court of law." If you don't sign a one-sided contact, you can fire these guys when they produce unacceptable quality work. I'm not talking about firing anyone who has convinced you to sign such a contract. I advise avoiding these contracts, one reason being so that you can more easily fire people when they start doing a bad job.
"In the end, you are really advising people to avoid fixed price contracts because you don't like them." I'm just advising people to think about the potential pitfalls of such contracts. You're right that I don't like them. It's not the fixed price that I object to so much as the fact that they are geared towards hiding what things really cost and hiding how much you're actually paying people (which I feel is dishonest) and they are typically one-sided, favoring the contractor. I actually understand why contractors like them. But, I think homeowners need to watch out for themselves, too. The construction industry has, unfortunately, attracted a lot of dishonest people.
You're right that diy can cost more and take more time than hiring someone. But, sometimes, the extra time or a little extra expense is worth it, simply because it's worth it to gain a new skill/learn to do something. When we diy, I've also found that we usually end up doing a better job than people we hire, simply because we care more than a lot of people out there. One humorous disadvantage is that you see every single one of your mistakes, no matter how small, because you know where they are. You're right, though, you've got to know when it makes more sense to hire.
JosephCorlett... You're SO right. You have got to know where to hit it! Good job with the $3000 for 6 hours of work. It sounds like you knew where to hit it! I suspect that you saved your clients more than they paid, and it was a good deal for everyone involved.
PROLinda
6 anni fa@veggiegardnr - Usually a contractor isn't going to earn what a doctor earns but if the contractor's $300/hr is the best option for the project, I will pay it. if a contractor has the knowledge and equipment to do a $300 job in half an hour, why shouldn't he receive $300 for the work?
Some clients insist that the contractor who charges $500 for some task and takes three days is a good person who is fair and reasonably priced. Why should paying $500 to someone who accomplishes the same objective in two hours be tagged as greedy? In the second case, the client gets their problem fixed in hours, not days...isn't that a good outcome? Consider the contractor who charges $`100 for labor and $400 for equipment rental - is he being fair if he owns the equipment instead of paying someone else for the tool rental? In reality, none of those factors should even be a concern for a client.
Contractors are entitled to use whatever pricing and accounting method works for them. Some guys charge a low charge for labor and throw on a high percentage for overhead while others cover more costs in the labor rates and use a smaller overhead percentage. Some guys charge a percentage on materials while others don't. The important point is not how the line items are distributed but the final tally
veggiegardnr
6 anni faUltima modifica: 6 anni faLinda, you can hire whoever you want, for however much you want to pay them. As a pro, what you want to be important to homeowners seems to be what most benefits contractors. But, I'm not buying what you're trying to sell me. If other people buy it, that's their decision. I think homeowners will eventually wake up and see what's going on and start saying no, simply because it's gotten so out of hand, at least around here. There was a thread the other day where someone on a flat urban lot had paid $20,000 for a short fence to be put up in their relatively small front yard (on both sides, between them and the neighbors). It was made from regular wood, not the gold plated stuff. The op there said he'd learned something from that mistake. He could have done it himself for very little money.
"Contractors are entitled to use whatever pricing and accounting method works for them."
And homeowners are entitled to say no. Personally, I think they should say "no" more often to what's going on these days. I do, and I will continue to say no when I think the price is too high, when there are one-sided contracts that try to cover up profits, etc. Homeowners need to educate themselves and maybe learn how to do some stuff around their own homes, so they aren't so helpless. It's ridiculous how helpless some people allow themselves to be.
bry911
6 anni faI'm just advising people to think about the potential pitfalls of such contracts. You're right that I don't like them. It's not the fixed price that I object to so much as the fact that they are geared towards hiding what things really cost and hiding how much you're actually paying people (which I feel is dishonest) and they are typically one-sided, favoring the contractor.
YOU ARE ABSOLUTELY AND COMPLETELY WRONG! You are just giving people terrible advise! I spent many years in capital project consulting, drafting and signing construction contracts was just part of my job. Now as a professor I teach this as part of my class and the things you are saying are literally what I tell my students never to do! I could find almost word for word rebuttals for your position in every cost accounting, managerial accounting, and managerial finance textbook. You are simply wrong in almost every meaningful way.
The only contracts that accurately predict contractor costs at the beginning of a contract are fixed price. Neither time and materials or cost plus accurately predict contractor pay. As a matter of fact, the reason that cost plus even exists is that you want the job to cost more! They largely came about so contractors would be incentivized to use the highest quality materials and overbuild space ship parts. I believe the standards are between 15% and 25% for cost plus construction contracts, that actually means for every extra dollar of your money the contractor spends, he makes between .15 and .25 dollars extra. So the only time that you know what a contractor makes in a cost plus contract, is when the work is done and you will never know when you sign the contract.
Time and materials is just as bad. The entire point of a time and materials contract is the contractor will not predict costs or hours at the beginning. He could spend 1,000 hours doing a job he told you would take 100 hours. Not to mention that you are actually incentivizing inefficiency.
We should note that both "cost plus" and "time and materials" are considered so bad that some states have outlawed them. For example, neither are allowed for home improvement or remodeling in California, because they so often lead to abuse.
It says something that you are six or seven times more likely to end up in court with a time and materials or cost plus contract than with a fixed cost contract. You are simply advocating bad decisions in pursuit of fairness.
veggiegardnr
6 anni faUltima modifica: 6 anni faBry911, I never advised anyone to get a time and materials contract. What I have advised is: 1) do not sign a contract that is one-sided and exists solely to protect the contractor. Contacts should protect and benefit both parties. 2) don't just let someone tell you a project is going to be x dollars. Find out how much they want to charge you (or overcharge) for materials and find out what they want to charge you for labor. They should at least be able to give a general idea about the cost of materials, and 3) do your homework and find out what the unknowns in a project are and, if they occur, how much it'll cost to fix. Don't just think a contractor is going to take on a bunch of risk out of the goodness of his heart. He has a good idea what these unknowns are, he probably knows how likely they are to occur and he has a good idea what it'll cost if these things happen. I wouldn't pay someone more because something might happen. I would be prepared to pay more if the unexpected did occur, though.
I never advocated paying people by the hour, though in retrospect, I can see how it might have seemed that way. Anyone you hire should be able to give you a range for how long a project will take them and tell you how much they will charge you for labor for that job. You can figure out, yourself, how much this is per hour and then decide if it's reasonable or not. If they have had to buy a lot of expensive equipment for that job, you have to take that into account when you decide what's reasonable. Of course, sometimes it's perfectly fine to hire by the hour (but I wouldn't do it for a big job).
If you find out what they want to charge for materials, you can also decide if that's reasonable. Knowledge is power. When people refuse to break stuff down, they are generally trying to keep you from knowing exactlywhat you're paying for and how much they are profiting. It's like the guy who asked me why it mattered what the kitchen cabinets he used were made out of, so long as I liked them. He was trying to keep me from knowing they were garbage and he wanted to make a huge profit by selling me garbage for an inflated price. If I didn't know what they were made out of, how could I compare them to anything else?
The floor guy who thought he was worth $230/hr...I didn't hire him by the hour. I hired him for a specific price per square foot, with us supplying the materials. He came to work at 10:30 or thereabouts, took at least an hour for lunch, then left by 4:30, each day. He told me it would take 10 days. It didn't take me long to realize that his $11,500 for labor (at 5 hrs per day for 10 days,) was $230/hr. He didn't hire anyone to help him, either. It was just him. I might have been okay with that, because he did have equipment that wasn't too inexpensive, except he did a terrible job on the part of the floor he did finish. We gave him the opportunity to fix it and it was barely acceptable. We did pay him for that. Then, he started in doing the same unacceptable stuff as he had done before and he got fired. He was lazy and didn't want to put in the hours it takes to do a good job. He thought he should get $230/hr for garbage.
Anyway, I think maybe you aren't clear on what I meant. That's probably because I could have been more clear with what I wrote. It's not a fixed price for a job that I have a problem with. It's the desire of some contractors to not break things down so that people can understand what they're paying for. It's the whole "I'm not telling what I'm making off of the job" thing that I really object to.
And, yes, it does matter to me when people pad materials costs, pretend they're not doing that, and act like they're charging less for labor. That's a way to try and pretend you're not making that much off of a job vs the guy who is honest about materials costs and labor. My Dad never marked up materials. They cost what they cost and that's what the clients paid. Then, they paid for his labor. They knew how much they were paying for his labor. He didn't hide it by upcharging for materials. If you want to mark up materials and are honest about how much you're marking up stuff, I'm fine with that.
bry911
6 anni faUltima modifica: 6 anni faThe floor guy who thought he was worth $230/hr...I didn't hire him by the hour. I hired him for a specific price per square foot, with us supplying the materials. He came to work at 10:30 or thereabouts, took at least an hour for lunch, then left by 4:30, each day. He told me it would take 10 days. It didn't take me long to realize that his $11,500 for labor (at 5 hrs per day for 10 days,) was $230/hr.
Please just answer one question for me. Just this one... Would you have been better off if the guy was taking 20 days at 15 hours per day?
Here is my response to your answer, no matter what it is. Whether the floor guy makes $8 per hour or $230 per hour doesn't make a difference! NONE AT ALL! N. O. N. E!
You wouldn't get better results if the guy worked a lot slower. All that matters to you is the work performed, the completion date and what you pay in total for it. Then you compare that to what other people would charge you for the same job.
And, yes, it does matter to me when people pad materials costs and act like they're charging less for labor. That's a way to try and pretend you're not making that much off of a job vs the guy who is honest about materials costs and labor.
That is illegal in any contract that requires a materials breakdown...
A contractor may underestimate materials at the start of a contract but he can't inflate their cost.
thatsmuchbetter
6 anni faUltima modifica: 6 anni faIts a question of entitlement in an age of entitled and of a contractor being to open book.
Problem cancels itself out , but i wouldnt work for you entiltled one, you dont get my blood and sweat
freeoscar
6 anni faveggie, you are looking at things this way: materials (of a certain quality) + building techniques (of a certain quality) = House (of a certain quality at a certain price). That requires you to have expert knowledge of the inputs - both materials and techniques to get your desired output. Perhaps you do, but for the vast majority homeowners (self included) that isn't the case. For the rest of it, it works this way:
House (of a certain quality at a certain price) = Materials (of a certain quality) + building techniques (of a certain quality).
In other words, I do my diligence on the contractor - his reputation w/clients, architects and suppliers, examining as best I can the work he has done and that it is consistent with the standard I am looking for in my house. I trust that he has a reputation of delivering that house at a quality I am looking for with a price that is reasonable BECAUSE he is using the proper materials and techniques.
Just like I don't need to go to Honda factory and see how they are built or exactly what materials they use - I know that at the price offered they sell a car of the quality I am satisfied with, because they use the appropriate materials and techniques to build (and quality check) them.
veggiegardnr
6 anni faUltima modifica: 6 anni fa"All that matters to you is the work performed, the completion date and what you pay in total for it." No, that's not al that matters to me. Things like quality of the work, the convenience or inconvenience to me, the quality of the materials and paying what I consider to be a REASONABLE price matter as well. Just because the going rate for something is $X doesn't mean that I think the going rate is reasonable. In those cases, I will diy, do something different, or not do it at all. You and I both know there's a lot of dishonesty in construction and I think we both know that, in general, there are a lot of contracts written with dubious/illegal/unenforceable things in them.
Thatsmuchbetter...lol, I would never hire you.
Freeoscar-they're not building a house. It's a remodeling project, and we don't know what kind. I realize how it works for most homeowners, but I think that many homeowners need to do more research into things before signing on the dotted line. Too many people end up regretting not doing that. This website is filled with stories of that. Trust...to me that's got to be earned and I proceed very cautiously with people I don't know very well.
veggiegardnr
6 anni fa"Would you have been better off if the guy was taking 20 days at 15 hours per day? Lol, yes, because I would have had more of an opportunity to see the quality of his work before he "finished" so much, so I would have fired him sooner, at less cost to myself. As a side note, it also would have meant that he wasn't lazy if he were working so many hours, just that he wasn't really good at his job. That would have been much less irritating to me, for sure.
bry911
6 anni faUltima modifica: 6 anni faGood luck in your future endeavors. I suspect you haven't seen the last of substandard contractors and substandard work.
When everyone around you disagrees with you, you are usually the one who is wrong, no matter how how hard you believe you are the one who is right.
I suspect that the OP and others can make up their own mind, so I am going to step off this particular descent.
engrgirl
6 anni faVegiegardnr- Did you talk to you flooring person about thier hours? Not that it really should need to be any of your concern what it takes to run their business as long as you get the finished product that you are paying for (and of a reasonable quality), but there probably is a lot more to it than you seem to assume. You saw work from 10:30 -4:30 and decided that was lazy. There could have been other work that is necessary to their job that was happening during those "lazy off hours": Meeting other potential clients for quoting work, billing and paperwork for jobs done, billing and paperwork to pay supplier accounts, getting quotes or filling out forms for insurance and/or licensing, filling out forms for employees or past employees that need employment verifications for loans/apartment renting/new jobs, picking up materials for jobs or tool expendables, servicing of their truck or equipment that they use to do the work, researching and/or buying a new piece of equipment, going to a class about a new floor surfacing product, etc..
Based on how you present yourself here it seems you don't view contractors as human beings that "just might" be working hard to try to do good work. There are bad guys out there in all fields of work, but most contractors do not deserve the assumption that they are all just trying to find ways to overcharge and be lazy. Or maybe in your experience those are the only ones you've worked with - because as others have pointed out, contractors look at their potential clients in terms of risk of loss/stress/hassle/not getting paid/not getting sued, and the good self respecting contractors who have a good reputation and referral base don't need to take on risky/unpleasant work and probably steer clear of working with someone with those attitudes.
Maybe next time - still protect yourself with reasonable due diligence, but treat the contractor as a human, ask (a reasonable amount) of polite and non judgemental questions if you don't understand where charges come from or why things cost what they do. Maybe then you'll have a better experience with your next contractor and start to shift your views away from assuming they're all bad.
veggiegardnr
6 anni faYeah, lol, I DO feel entitled to know where my money is going, and for what and to decide how I want to spend it, or not spend it at all.
roarah
6 anni faContractors should have the equivalence of Angie's list to protect them from bad clients....
veggiegardnr
6 anni faUltima modifica: 6 anni fa"Did you talk to you flooring person about thier hours?"
Yes. He said he didn't like to get up early and he liked to go home early. He wasn't doing any other jobs at the time. He said he didn't like too work that hard. He had no other employees, which came as a surprise to me. I know what it takes to run a business.
"Based on how you present yourself here it seems you don't view contractors as human beings that "just might" be working hard to try to do good work."
My Dad was a contractor. He owned his own business and he worked hard, in all sorts of weather, and I never once heard him complain about it. My FIL is a roofer. We have a good family friend who is a GC. I have worked with good and bad contractors. I have only once had someone refuse to do a job for me and it was because I asked to know the names of the people who would be working in my house. Just their names, and a quick introduction on the first day of the job, so I'd know who they were and who was supposed to be there. He didn't want to tell me, probably because he was planning to sub the job out and they wouldn't be his guys, or possibly for some other reason. I don't stand over guys that work for me, I'm pleasant with them, I often buy lunch or cold drinks on a hot day. In return for that and my money, I expect a decent quality of work. I also expect honesty. Unfortunately, around here at least, there are many bad contractors. Many of them are dishonest and many do an awful quality of work (we've had multiple friends who have fallen prey to these types of people).
That being said, I'm ready to be done with this discussion. I hope the op has a successful remodel and is happy with the results.
Ricarica la pagina per non vedere più questo specifico annuncio
User