I just received the plans to build my first house for a client. I’m excited and overwhelmed at the same time. I realize there is a learning curve, and my goal is to not bankrupt my family.
I am looking for suggestions for a good cost plus contract and possibly estimating software. Any additional suggestions are welcome. Thanks, Joel Barto
Built from locally sawn hemlock, this functional outdoor feature uses structural screws and metal connectors for fast, sturdy construction.
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Replies
curious
has your client already agreed to a cost plus contract? and does the client realize they are paying to train you?
bobl Volo, non valeo
Baloney detecter
Yes they have agreed to cost plus. I've had my own remodeling business for 3 years now, and have done additions and tearout put back remodels. I'm simply looking suggestions on software. They all say that they have the best and easiest to use program.
i like GC-Works by Synapse SoftwareMike Smith Rhode Island : Design / Build / Repair / Restore
You need a contract done by an attorney, hopefully someone who has done a lot of construction contracts. One of the most important parts will be defining what's billable cost and what's not. I avoid cost plus because that's so hard.
Could you give an example of a grey area? I'm not sure what wouldn't be billable pertaining to the construction of a house.Can you suggest another, reasonably safe alternative?
Send me an email and I'll reply with my list of what's billable and what's not. It's not hard to define most of it, but there are always areas that owners will question.
Suppose they tell you they feel that a certain phase of work went too slowly? "He's been out there all day and only put trim on two windows". Do you believe that your clients know how long things take?
Suppose you build something wrong and need to take it apart and do it again with new material. Who pays for that? Do you get to charge for only your most productive hours of work?
Suppose they call and say that so-and-so actually didn't work 40 hours last week. What is your process for documenting who did what when and for how long? They say he was there at 8:30 and then went outside to talk on the phone and have a smoke. You say he was there at 8 and ready to work.
Suppose they can't believe that it took 275 sheets of plywood to build the house, and they thought they saw you take some away on your truck?
I'm not saying you shouldn't do cost plus, because you should unless you are capable of estimating the whole house very accurately. If there is a high degree of trust it can work well, but it can also create a lot of uncertainty.
David, your post seems to be focused on guys doing the job hourly. I would agree; that could create a lot of ill will.
It's probably better that every phase of the building process is done with a firm subcontract price. This eliminates all the ill will that your posts suggest.
The lumber disappearing is certainly a topic that needs to be discussed. If a load of 100 sheets dissappears overnight, who pays?
blue
Cost plus is pretty much the same as T&M, working by the hour. There are a number of reasons that the OP could be going this route. I've had much better luck with fixed price work, not always in terms of money but always in terms of making clear deals and avoiding conflicts with customers. How many millions of stories have we heard here about how it was estimated to cost X but he just gave me the bill and it's a lot more than he said it would be?As far as material getting stolen, it belongs to the owner once delivered to his premises and the contract should say so, unless the contractor feels absolutely sure he can control what happens at the site 24/7.
Can you suggest another, reasonably safe alternative?
Cost plus fixed fee.
blue
Doing a house cost-plus would drive me nuts, drive my client nuts, and cause ill will between us. I prefer lump-sum fixed price contracts, that spell out allowances for finish items not chosen at contract time.
Your client is telling you he wants the job done at cost plus some fee or margin, but he likely wants to know what it will cost now, rather than at the end. He is probably asking you for some kind of "estimate." Believe me, once given that number, it will be baked into his brain, and it can and will be used against you down the road.
He probably thinks that if you lump-sum the quote, he'll be paying for your contingency factor on everything from chalk for the chalkboxes up to finish trim and paint. Many cost-plus clients turn into raging maniacs once they start getting the bills and put on the green eyeshades.
Spending the time up front to estimate and price the structure, finish, trim, etc., is a worthwhile experience, and the time you will spend doing it is less that the time you will spend detailing out cost invoices, keeping track of all your hours and expenses, and most importantly, arguing with the client about overruns.
But if your client absolutely insists on cost-plus, you had better still estimate the job, in all the detail you would use if estimating for a fixed price deal. But this time, double or even triple your "waste" or "contingency" factors, so that the bottom line number you give as your "estimate" is safely higher than what the total might turn out to be.
Another thing, and this is most important. Never, ever, tell your subs what your contract deal is with your client. Insist that they all quote lump sum firm price, no matter how much contingency they have to put in their quotes.
Well I just plain have to disagree with most of what's been said here, but we've all had these discussions many times through the years. I believe working hourly, or on some type of "cost-plus" basis creates a cooperative relationship instead of an adversarial one. It requires parties work TOGETHER to accomplish the intended task.
Here are the first two paragraphs of my t+m contract. There are other paragraphs later on describing other issues, but this sets the tone and if they read through this without batting an eye, the rest is just details.
This is a Time and Materials agreement between A Small Woodworking Company (ASW Co.) and ______________ (buyer) to build _____________. <!----><!----><!---->
ASW Co will not provide a firm bid for this job. ASW Co will provide an estimate based on a site inspection, conversations with buyer, and price quotes from various suppliers. ASW Co will provide buyer with budget for each portion of job - cabinets, or floor coverings for example - and buyer will have freedom to spend more or less on any part of the project. Buyer assumes responsibility for cost of project. ASW Co agrees to act as buyer’s agent in all matters and supply carpentry labor. Tipi, Tipi, Tipi!
http://www.asmallwoodworkingcompany.com
Jim, I went to your website, and I cannot tell if you are doing ground-up residential new construction or not.
Cost plus likely suits you well doing the smaller scopes you execute, but we are talking about whole-house new construction here. It is still my solid conviction that "t&m" or "cost plus" when used to build a client a whole house, causes more problems than it solves.