For you custom home builders out there. How do you work out what you end up getting paid on a cost plus contract. % for the plus and then your hours on the job.What if you’re the framer also and spend 40 hrs a week framing. I’m just interested in seeing how different people handle this………………..RTC
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I have only done up to large additions, but ~2000 sq. ft. ones. Cost Plus equals: all my hours, at a fixed rate no matter what I'm doing, ('cept for staring at the ceiling and designing) + all my reciepts and sub costs, totalled, and a blanket O&P markup on that.
My fixed price contracts are calculated the same way - I just can predict all the costs involved with good accuracy before the fact.
Forrest - pricing this way since 1999.
I know pricing is different from here to there; but what would your hourly charge be and what would your O&P % be?
You wouldn't charge for design time if changes were made?.....................RTC
as a buyer I would never enter a cost plus contract where profit was a % of the contract. I would want a fixed fee for profit.
bobl Volo, non valeo
Baloney detecter WFR
no matter what the "fixed price" it still a percent of the total house cost. .....do ya get my jist............RTC
"do ya get my jist"nope.
bobl Volo, non valeo
Baloney detecter WFR
I go with what Walt Stoepplewerth preaches; 50-67% minimum O&P markup on all direct costs for small construction firms.
I feel like the O&P covers my design time.
Forrest
C'mon, Forrest, the OP was about a custom home job, not a remodel or addition.
Direct costs can run to $200 and up on a 3500 sf custom home, built from the dirt on up. No GC can remain in business charging two-thirds over direct when projects have scopes and numbers that big.
Nope, O & P % is based purely on the size (yearly billing) of a company. Under about 2 Million/year, 50-67%.
So says Walt.
When it costs me jobs, I'll lower it. ;-)
Forrest
The max we can get in our neck of the woods for 4000sf and up homes is 14-18% for O&P that does not include a charged labor rate or supervision.
Most of the homes are a Million plus and that's the going rate here. In my opinion no where near enough to cover million dollar homes but that's what has been set and that's about the max you can get.
Howie
Do it lump sum fixed price. Everyone will be happier.
You can write your agreement to include allowances for not-yet-selected materials, and it will include language for change orders to cover scope additions and deletions.
does Mike Smith have anything to add to this?
custom home, cost plus,???????????
..............................RTC ................please
i prefer not to do T&M ( or Cost Plus )... but every once in a while we have to.. usually it comes into play in Change Orders that would be better as T&M than if i estimate, add my risk factor & come up with a PRICE
anyways..... you can set up your T&M anyway you want
i learned early on that Insurance companies in our region will automatically allow O & P of 15% + 10% for a total of 25%
so , that makes the number easy to justify
BUT.... you will go broke at 25%.. so you have to make up your shortfall with your labor rate
in our case our labor rate is $50/hr
so... a T&M job will be set up as Labor at the rate of $50 / hr PLUS Materials & Subs & Equip. at the invoice amount plus 25%
i try to get as close as possible to Walt Stoeppleworth's magic number, but it is a daunting figure to SELLMike Smith Rhode Island : Design / Build / Repair / Restore
Thanks for the info, that clears a lot up.
Check out my house in the photo gallery...............RTC
I consider myself a builder as opposed to a GC. The only subs on any project I do are cement finishers and the painter. For the last 20 years all my jobs have been cost plus. They have a budget and a total cost goal but with the chnages that show up during the construction of EVERY custom home a fixed price bid has to have so much padding built into it that there is now way it can come out cheaper than a cost plus contract.
The other road of GC's using only subs can get very expensive in a cost plus arrangement because all the subs are covering O & P in their prices and to add a second layer on top pushes the price way up.
I guess a well managed business should be able to survive using either approach. Business here is just fine with no shortage of clients.
I just believe that the easiest way for a person to get their custom home done on time and budget with any resemblance of quality is cost plus.
As for numbers, I use 25-30% for overhead depending on what equipment I need to use and profit has been 15% for the last 5 years. I don't do much design work but bill for every hour I'm on the project, swinging a hammer, pulling wire, running duct work or standing at the counter of the lumber yard.
what is that 25% and 30% a % of. I do all the structural work myself and sub out plm., elec., drywall, flooring......................RTC