Is there any average percentages for the “plus” part of cost plus renovation estimates? Im in Georgia.
edited from the dumb mistake before!
Edited 6/29/2006 10:41 am ET by rogerdodger
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Edited 6/29/2006 10:41 am ET by rogerdodger
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Replies
no one got an answer for this?
Nope - to question/ Post #1.
It is a component of the total. If you are making lots/ hr then MAYBE your plus is less. If you are making zero/ hr then plus is high because that determines ALL of your compensation.
F
Exasperate your vegetables until exhausted; disturb your chestnuts in milk until queasy, then disappoint.
Arabella Weir as Minty Marchmont - Posh Nosh
Thats a difficult paragragh to understand. If contrator is making lots/hr then the plus part would be even higher, not less. In the second part I can see that if you are not billing anything for your time then the "plus" part would have to be a higher percentage of the total cost of job to compensate you.OH I think what your saying is in the first part its less, as in less of a percentage because you have already taken a large part of the pie in your hourly wage.
Are you the contractor or the homeowner?
contractor
Walt Stoeppelworth (ggogle him; he just retired from a job at JLC) says small contractors who don't charge direct costs associated with the specific job (includes your labor) + 67%, WILL FAIL.
I've followed his advice since 1999; never wanted for work.
I'm also in GA
Forrest
Ok thats a good start. Is there a break down of the 67% anywhere? I'll do as you say and go google him and see if I can find an answer.
Forrest
I don't dispute what you say but for someone as dumb as I regarding the business end of things could you give that to me in an example, Please!
Doug
Here's the section lifted directly from my cost plus contract - hope this helps
Forrest
Costs: Given the several and potential unknowns associated with old houses, a fixed price bid on this relatively small and partially specified project is a liability.
Consequently, I propose to approach this project with a transparent cost structure - your price equals my direct costs (my receipts) + 67%. The 67% is a business-specific target for light construction, and covers my design time and O&P. My personal labor hours are a direct cost of $30.00 / hr.
Example: I present material and subcontractor receipts in the amount of $700.00, and 10 hours of billable personal labor at $30.00 / hr. ($300.00). My total invoice to my client would be $1670.00
Thanks Forrest, some of us "not so bright" guys need to see it in B & W!
And I'm going to use it!
Doug
Example: I present material and subcontractor receipts in the amount of $700.00, and 10 hours of billable personal labor at $30.00 / hr. ($300.00). My total invoice to my client would be $1670.00
If you are making $30.00 an hour and you are doing a cost plus job, how do you represent yourself to the customer? When do you add the 67%? Do you say hey, I work for $30.00 an hour plus material then I attach 67% to the total and that is the bill, or do you give a bid and the 67% covers your azz........Hey I'm a former Marine and need a little help. Sounds like a good plan, just want to learn all the angles to understand. If someone was going to do some work for me as a contractor and he said they would do the job for cost plus at $30.00 an hour, then at the end the bill was 67% more than anticipated I would not be happy..... Follow what I am asking. Thanks.
Semper Fi
jar.... here's mcdesign's example again....<<<<
Costs: Given the several and potential unknowns associated with old houses, a fixed price bid on this relatively small and partially specified project is a liability.
Consequently, I propose to approach this project with a transparent cost structure - your price equals my direct costs (my receipts) + 67%. The 67% is a business-specific target for light construction, and covers my design time and O&P. My personal labor hours are a direct cost of $30.00 / hr.
Example: I present material and subcontractor receipts in the amount of $700.00, and 10 hours of billable personal labor at $30.00 / hr. ($300.00). My total invoice to my client would be $1670.00>>>
or.... ( labor + costs ) x 1.67 = billeable amount
or.... (300 + 700 ) x 1.67 = $1670
good way to do it...
another way is to boost your hourly wage to say $50/hr and change the percentage added to the materials , subs , & equipment. i use 25%
so : labor ( $50 x 10 hrs ) = $500
plus matls & subs = ($700 x 1.25 ) = $875, so the total bill is ( $500 + $875 ) = $1375
this is a smaller amount , if it gives you what you need to make to cover your overhead and pay you the wage you need to make, it is easier to sell than the 1.67
you should analyze your previous years , or previous jobs , and see how both formulas would have affected the billing
Mike Smith Rhode Island : Design / Build / Repair / Restore
Hey Mike, I see now how the formula works as ya'll had written. I was more curious as to how to approach the customer with the notion that on top of materials and the labor I am to tack on a 67% increase. Believe me, I am not argueing with the amount. As a contractor this is a good system. As I said I wonder what the customer is to say. I have in the past just increased the hourly amount or have had a tendacy to bid on the high side. People that I have dealt with IMO would balk at the way this senerio would play out with the 67% increase. If I had worked with clientel like mcdesign does this may or may not be an issue. People with money that wants something done and knows the product will be top notch and professionally complete or installed will not balk at matters as these.
Semper Fi
jar.. Happy Fourth !
first.. i already said.... i don't use 1.67.. i use a higher labor rate and only mark up materials, subs , & equipment rentals
2d.. i really try to avoid T&M work.. it sucks, it's too hard to make money,
the customers are uncomfortable..
i like to do bid work and mark up everything so i can make a profit
but if you do T&M.. you have to find the rate that ACTUALLY does cover your O&P.. anything short of that is just slow death..
you're better off working for minimum wage than working at a loss.. and MOST people working T&M are really working at a loss... but they never find out until the end of the yearMike Smith Rhode Island : Design / Build / Repair / Restore
first.. i already said.... i don't use 1.67.. i use a higher labor rate and only mark up materials, subs , & equipment rentals
I understand what you are saying now, My bust, makes a lot more sense......... I didn't catch or see where you didn't use the 1.67. Happy 4th back to you!
Semper Fi
Hey Jar!
I am watching this subject very closely myself. I am currently finishing a job that is gonna be real close to makin any money. But here is my take. I understand the concept pretty well. The execution is more difficult. Mike is right about liabilities. I am thinkin that exclusions may be just as important in a bid as anything. You don't want to get into a bath remod and find the joists bad and you did not anticipate that in your bid. (Experience perhaps?) And he also covered "O & P", overhead and profit. This is very important. The only thing I am thinkin right now and I hope Mike responds is; Do you ever show the client your reciepts? I would think it would be not right. But perhaps that is how "Cost Plus" works. IDK. But I am very interested in the boards comments. I have found them all very helpful. Good luck.
KD
When I do a cost plus like I've described, the client gets a copy of all receipts, also a spreadsheet of all the charges by date.
I don't do all jobs this way; only when the project is relatively "open" and I'd like to discourage the customer from adding unless they really want it.
If, for example, they get something themselves they want me to install or use, that's fine, but I explain I have no responsibility for it after I've installed or used it, unless they then pay for a service call and any rework.
Then I explain that's one of the things my markup covers - after-sale service.
Seems to work.
Bigger jobs with clear cut objectives, or when I can foresee most things that might occur, get bid at a fixed cost.
Forrest
Hi Forrest!
Thanks! I see your thought process. Makes sense to me. I sure see your experience shining through. I generally shy away from this kind of work (remods) but I am finding that, around here anyway, guys that can do "good" work are hard to find and guys that don't show up at all a dime a dozen. So I get asked to do small jobs I would not normally do. (Its keeping me from my own building job). But I am learning that bidding is certainly a learned skill. Thanks. I am gonna keep my one good eye on this subject! ;-)
KD
Ok so your saying you only do cost plus for smaller jobs. That is relative to the builder. What are you calling smaller and why wouldnt you do a cost plus on a larger job? The job Im currently bidding on is a kitchen renovation with a 1000 sq ft addition including two bathrooms. The client has a bunch of other bits and pieces to add in and I just think this might be better to do on a cost plus. From previous experience and from the level of finishes this client wants, my ballpark for this job is in the region of 150k of costs. I dont think I could justify 67% tacked on that. But maybe I'm outa touch with current costs. Which is why I started this thread in the begining! :)
One of the problems of cost plus is clearly defining the cost. For materials and subs that it clear.But what about your own labor, does that include design and research time, pricing, time getting materials, permits, etc. Or does it only include "clock time" on the jobsite.McDesign said that his 67% markup was to cover design time. One of the problems of not having a fixed price on a big job is that the job can spiral out of control with addons and changes. Both end up costing the client much more than they expected and also run into scheduling problmes for you.Something to think about for this project is to have a fixed price/scope for the addition/kitchen.Then depending on what other addons come along treat them as a change order with fixed price/schedule or for minor repair work cost plus.Just a warning - don't believe anything that I say. I just do part time "handyman work". So most of my projects are 1/2 - 2 days. And about 50% of the time prices does not come up until the work is finished.But I do bid some. I did a large deck clean and stain last month. Did not realy have any idea of the time that it would take, but tried to estimate each step and multiple by the size. The client accepted the total price without any question. Ended about 50% short of the time, but $100 under on materials. Ended up with about $38 and hour.But I also had to make some repairs to the deck first. That was done time and material and could only get $20/hr for that work (but it does include time from leaving home to getting back).
"You don't want to get into a bath remod and find the joists bad and you did not anticipate that in your bid. (Experience perhaps?)"That should not be a problem for a fixed bid.The bid just needs to make it clear what is included and that any hidden damage is not included and a CO would be needed for that work.
Indeed. Any contract should have a hidden conditions clause that is broadly worded. If you cannot see it then it's not included. Any contract should also have a list of exclusions that includes concealed damage, inadequate structural conditions, inadequate existing plumbing, electrical, or mechanical work, etc. etc. etc.
It's more about what's NOT included than what is.
Lets look at two sample bathroom projects.One would be in 30 yo home. That from all appearances is in good shape and well maintained. The only problem is that the bathroom is outdated and worn.No indications that of any structural/mold/utility problems. Most likely only needs new fixtures and finishes.That would be a good candidate for a fixed price. But both detailing what work is included and a hidden conditions clause.The other job is in a 50 yo house that had been a rental and there are signs of remuddling over the years. The only receptacle is the one in the base of the single light over the basin. The floor is spongy and the wall tiles are pealing off the remainds of the DW that was used in the show.You know that it will take extensive repairs and upgrades. Just have no idea of how much until you demo it.That would be more appropriate for a cost plus contract.
It would be equally possible to write a fixed price contract for the 50 year old house. In fact if I did it there would be no differences in the language for the two jobs. The contract would state what was assumed to be behind the walls (proper electrical wiring, drains/vents/supplies that can be connected to reliably, no structural damage, etc.), and state that if it wasn't then corrections would be made via a change order.
Careful listing of assumptions and exlusions, along with a detailed scope of work, will cover you a long way. If my contract does not say that I'm going to replace the drains all the way down to the basement, then I'm not going to. If it says that dealing with hazmat is not included, then asbestos in your walls is an extra cost. If it says that electrical wiring within the bathroom walls is assumed to be reusable per current code, then it needs to be, otherwise I break out plaster all the way back to your panel on your nickel.
"You don't want to get into a bath remod and find the joists bad and you did not anticipate that in your bid.
I copied this out of one of the magazines, and use it as a last page on my contracts
Forrest
ADDENDUM
DO NOT ACCEPT THE CONTRACT ABOVE UNTIL YOU HAVE READ, UNDERSTOOD, AND AGREED TO THE FOLLOWING TERMS. THEY ARE PART OF THE CONTRACT.
Federal law provides three business days for you, THE HOMEOWNER, to change your mind after signing any contract in your home. if you wish to cancel this Contract, do so by midnight of the third business day after signing AND notify Contractor in writing.
YOU, THE HOMEOWNER, CANNOT CANCEL THE CONTRACT AFTER THE THREE DAY RECISSION PERIOD EXPIRES - DOING SO MAY RESULT IN A MECHANIC’S LIEN BEING FILED AGAINST YOUR PROPERTY.
YOU, the HOMEOWNER, are responsible for securing valuables and breakables. Anything that can be damaged by the work proposed must be removed or secured. THE CONTRACTOR IS NOT RESPONSIBLE for any damage occurring during performance of this Proposal. You, the HOMEOWNER are also responsible for keeping pets and children away from the work area.
Homeowner is responsible for providing Contractor with access to the site where work is to be done. Access must be available at any time from 8:00 A.M. to 5:00 P.M. weekdays. Contractor may RESCIND this Contract at CONTRACTOR’S sole discretion if access to work site is delayed or denied.
MATERIALS provided by HOMEOWNER are not guaranteed in any way by Contractor; should Homeowner provide materials for Contract, Homeowner is solely responsible for their performance. Homeowner-supplied material must be provided in accordance with Contractor’s schedule; Contractor may RESCIND this Contract at Contractor’s sole discretion if material are not so provided, OR he may elect to charge a standing fee of $60 per hour (non pro-rata) for such delays.
UNFORESEEN CIRCUMSTANCES are a possibility with any project. You, the Homeowner, need to be aware that hidden damage and/or deficiencies (including, but not limited to: insect damage, dry rot, rust/corrosion, unsafe or inadequate installation by previous workers, wear and decay, hazardous materials) may exist, that these problems may not be revealed until significant demolition has taken place. YOU, the Homeowner, need to be aware that these problems may cause delays and additional expense for which you, the Homeowner, are responsible. Should such hidden damage become apparent, Contractor, at his sole discretion, may elect not to proceed with Contract until corrective measures have been taken.
Homeowner may choose not to take such corrective action, in which case Contractor reserves the right to charge a pro-rata portion of total Contract price, from 22% to 55%, at Contractor’s discretion. IN NO CASE SHALL CONTRACTOR BE RESPONSIBLE FOR RESTORING ANY PART OF THE WORK SITE TO ITS PRIOR CONDITION.
The schedule for beginning this Contract is TENTATIVE and APPROXIMATE - NO START OR COMPLETION DATE IS GUARANTEED. Unanticipated events (including but not limited to: mechanical failures, illness, delays in prior projects, or other causes) may result in unintentional delays in the START or COMPLETION of this Contract for You, the Homeowner. Contractor’s sole responsibility in such event is to proceed with due diligence.
Contractor may revoke this Contract at any time prior to its acceptance in writing by You, the Homeowner.
Contractor shall complete this Contract in a good and workmanlike manner. Should the Homeowner deem the resulting effort unsatisfactory, Contractor may elect to waive all or part of Contract price at his discretion. In no event shall Contractor be liable for incidental or consequential damages.
The Homeowner must provide water, electricity, and restroom facilities for the duration of any work to be done at the work site. You, the Homeowner, must also provide a safe and appropriate work site in which the Contract may be conducted. Should the Contractor, for any reason and in his sole discretion, deem the work site unsuited for starting or continuing the Contract, Contractor may elect to suspend or rescind this Proposal.
Should this Contract be rescinded by Contractor for any cause listed above, then Contractor is relieved of all obligations set forth in that Contract.
"By signing below, I confirm that I have read, understood, and agreed to these terms."
___________________________________________
Homeowner’s Signature
___________________________________________
Date
___________________________________________Contractor’s Signature
___________________________________________
Date
caution to everybody -When you just cut and paste parts into your contract like that, you e3xpose yourself to potential problems.For instance, if a contract here in Maine contains provisions that are outside the state laws, it is possible for the entire contract to be invalidated.Or you could inadvertantly have conflicting language in two parts of your contract that would lead to a decision in favour of the customer....Have your language written or at least reviewed by a competant, experience atty in your own state.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I think the general consensus is that is it better to do bid work than time or material or cost plus. This way you stand to make the most money and avoid most pitfalls. The client doesn't know what you make per hour or what your business profits from the job. It is none of their business.Unforeseen items or changes are handled by a change order that is a fixed price. Use a higher mark up on those to compensate for the additional time it impacts your schedule, not just the time it takes to do the new work.If it is a complicated job, ie old kitchen remodel, then price it as a total tear out. If you find you can do it without totally tearing it out, fine, you came out ahead and that is part of the benefit of being in business for yourself. If you find that it is going to run long, then you loose and that is part of the risk of being in business for yourself.In Calif., T&M is outlawed, but not fully enforced yet.There is a preconceived value that people put on things. If you are a tradesman, they don't think you should earn more per hour than a professional degreed person. On the other hand, if you can change a hot water heater, it is worth it to them to pay you $300 plus materials. If you can do it in 1/2 hour, you are making bunches of money. So don't show them your hourly, just quote the job. Be prepared to get some and lose some. Sell your self, the job and your price and get better at that, rather than take the easy road and do the T&M or Cost+.
How does that effect what I said? Whether it is a T&M, C+ or fixed price, the contract should be one that is valid in the state you are working in, right?For instance, I would bet that you need to be a licensed contractor in CA for your contract to stand up in court.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Piffin, you are absolutley correct. my post wasn't really directed at your post, just a general thought on the subject at hand. I still can't seem to find the switch to make it to all.
I see - sorry I bit your head of, LOLWhen you have your reply dialouge box up look in th egreyed line above it where it hasa drop-down list. If you are replying to this post, my name will automaticly be there, but buy clicking on the drop-down arrow, you can chose ALL or any of the other names contributing to this thread
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
No worries Pifffen(note I included the "f" you forgot in "off" :-) ),I think it is a browser incompatability as I don't see the drop down list, just your name and when I hit your name it just give me info about you.
You must be in basic view.At the bottom of each thread is an option to switch to advanced view.
I just switched to basic view to see what I lose. you are right, no way to select a recipient notice - just your name up there
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
And Especially to David Hartman, who found the solution to my problem.Thanks to all who tried to help this terminally(that is a pun) challenged poster.Kirk
"In Calif., T&M is outlawed, but not fully enforced yet."Where did you learn this? Can you point us Californians to the code?-Allon
Yes, go to CSLB.CA.gov and read the new rules and especially those directed at the contracts that must be used. Of course this only applies to licensed contractors who wish to work legally. If not a contractor, you are already illegal, so do what you want.
i couldn't find any reference to that at the cslb. Could you point us directly to the reference or code?Thanks-Allon
I checked this out recently (have a CA license but no longer live or work there). The guidelines are a lot more specific than they used to be. One is that there must be a contract and it must have the price on it. Now, what's to say that has to be a fixed price? I didn't find anywhere that said specifically that cost plus or T&M are not allowed. It sounds like they are discouraged, and I would not want to be a CA contractor with a client complaining to the board about a T&M job, because they would probably spank you.
A good attorney can incorporate a clause (I think it's called a survival or savings clause) that prevents the whole contract from being tossed just because a part of it is not proper. It's not worth the effort if a good attorney wrote your contract in the first place.
My friend and neighbor that reviewed that for me is too expensive an attorney for me - he's a partner at $500 per.
My attorney only costs $175!
Forrest
Piffin's right on both points. Gotta be real careful.
Here's a clause I put in mine. It's called a severability clause:
Each provision of this contract shall he interpreted under Illinois law, and if any provision of this contract shall be prohibited by or invalidated by applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without such invalidating the remainder of this contract.Pete Duffy, Handyman
That's it. If you are using a contract that your lawyer wrote--and also reviews periodically--then it shouldn't come to that. I go in every 2 years with a couple of contracts written for different jobs, and a couple of different proposals, and have it reviewed. Usually takes less than 1 hour.