Finishing up a custom and I am now faced with a financial decision. The job is cost -plus fixed fee with a cap.( Newbie time with the cost plus)The allowances I have set are well under the budget. However, they have made thousands of dollars worth of changes. That are not allowance items.
The changes are significant. Do I combine the allowances with the changes and they either pay the difference or I pay the difference?
Example: Allowances = $2000.00
Change orders= $1000.00
Credit= $1000.00
Replies
Explain, please.
Did you establish the GMC (guaranteed maximum cost) by using the allowances?
Did the client then greatly underspend against the allowances?
Will the job close out, less change orders, at less than the GMC?
If the answers are all yes to the above, it would seem that you simply have, as you said, a deal at cost plus your fixed fee. The client has less cost, you get the same fee.
I would treat the changes as completely separate business. They weren't in the original scope, and should be billed by you at cost plus some kind of a fee percentage. It is only fair.
Here is an example. Client wants a simple room addition. You do it the way you have described. Along the way, they add a very elaborate bow window with copper roof and window seat, greatly adding to the $ scope and increasing your efforts and time. You are simply due more fee for that kind of a change.
Ditto Stinger ... you can't mix the dollars. Apply the allowance budgets to the actual money spent for those items, and give/take the difference. Charge for the change orders as agrred. Tyhe bottom line to the HO will be the same, but how you get there is important ... keep it clean.
"When asked if you can do something, tell'em "Why certainly I can", then get busy and find a way to do it." T. Roosevelt