Curious to hear other people’s opinions/philosophies on the following:
You’re working on a job and something goes wrong. You make a mistake, damage an existing finish, hit a buried line, something like that. It requires time/wages/materials/subs etc. to make it right.
If you’re working T&M, you’ve set an hourly rate for your time and possibly a markup for materials/subs. You presumably do not have a ‘profit pocket’ or contingency built into the pricing to protect you from unforeseen events (which can actually be foreseen in that they frequently seem to happen!). If something does happen and you pony up for it, presumably it’s coming out of your check.
If you’re working fixed price, you’ve presumably got some contingency built into your number, so that if something goes wrong there’s a little dough as backup. If you avoid any problems you get to keep the money in the company. If your apprentice drills into a pipe in the wall, you hopefully have a few dollars ready to pay the plumber, the rocker, the painter, and so on.
I was in a tire shop not long ago, and the shop owner answers the phone while running my credit card. The conversation immediately turns into a shouting match. It quickly becomes apparent that in the process of changing someone’s tire, a wheel stud somehow snapped off and the car owner wants it fixed at the shop’s expense. The shop owner is screaming into the phone that he has charged $15 for a flat repair, and that if he fixes the stud he’s losing a major amount of money. He proceeds into a very well rehearsed tirade about how he has not budgeted for a stud repair with every flat repair but that if the car owner would like him to do so he will be happy to charge for both every time he sees that particular car.
On a similar topic, I was talking to a sub about their performance on a job where they did quite a bit of work hourly. The foreman called me to say he thought they were working kinda slow on a particular day. Sub’s response to me was ‘sometimes I’m better than other times, but I can’t just sell you my best and most productive hours.’ I’ve been in the same boat when a client called and said they thought Carpenter X was not getting a lot done on a particular day.
Whaddya think?
Replies
You make a mistake, you fix it on your dime.
However mistakes will happen, so you charge 11¢ for your work.
The garage guy should be sued, and you should have left immediately.
When working by myself for a client on a bad day, I may not charge him for 1 or 2 of the hours I worked, But I WILL make sure he knows that I did this and why. Any other case and no deals.
Any contingency/oops fees should accumulate so that you don't have to overcharge outrageously on some jobs and not-so-bad on others. What you are basically doing is self insuring, and you want that fee to be fair to as many as possible.
Of course sometime or another, you will have to bite the bullet.
SamT
T
As far as the broken stud is concerned, how do you tell whose fault it was? If the nut was done up to the correct torque and the stud still broke, then it is the customer's and not the shop's fault. If on the other hand the fitter was careless or the equipment was faulty then the customer was right.
Same thing could happen in a customer's house. For instance, if you were told that there were no pipes in a particular wall, then would it be your fault if you drilled into one?
Seems to me the first thing in each situation is to establish who is at fault. If it is the contractor then he will have to bear the cost. Another reason for not working T&M?
John
As far as the broken stud is concerned, how do you tell whose fault it was?
You can't. So you fix it. If it was the customers "fault" you get goodwill and you know you did the right thing. If it was the shops "fault", you get goodwill and yoou know you did the right thing.
if you were told that there were no pipes in a particular wall
Why did you ask/believe the ignorant customer? Or did you mean that the original "as-built" prints showed no pipe in the wall?
Seems to me the first thing in each situation is to establish who is at fault. If it is the contractor then he will have to bear the cost
The contractor is the expert.
The contractor is in charge.
The contractor pays for oops.
The smart contractor will avoid conflicts with clients so as to keep clients coming.
The smart contractor has charged a little bit of oops overhead to pay for these learning experiences.
Unless, of course, it was the client who drove thru the new framed wall or dropped a hammer on top of the new granite countertop.
SamT
if you were told that there were no pipes in a particular wall
Why did you ask/believe the ignorant customer? Or did you mean that the original "as-built" prints showed no pipe in the wall?
It was meant as an example, I should have chosen a better one. There could be many situations arising where it was not clear who is at fault.
Naturally if a contractor makes a mistake or has an accident during the course of his work then he will have to make good at his own expense. I agree that if he is working T&M then he will need to allow for that possibility when he sets his rates.
John
Oh.
Duh!
Sorry.
SamT
Excellent analysis.
When you bid T&M, your contingency is either built into your rates or it comes out of your pocket.
If you bid fixed price, your contingency is a line item in your budget. Your experience will dictate the appropriate contingency on a job- and customer-specific basis. The key is to make sure you spell out the "scope of work" so the customer knows what that fixed price is buying.
If you bid T&M with a fixed upset limit, you're in the Bart Simpson Paradox: damned if you do, and damned if you don't!
I agree about T&M, fixed price, and especially T&M not to exceed. T&M not to exceed it always bad (no problems - you lose income. problems - you lose profit) and, if bid, must be a higher number than fixed price. At least with fixed price there is a chance of making more than your usual % profit.
But in any of these, presumably you have caveats about undisclosed/unknowable conditions. Dry rot, previous work not to code, unexploded ordinance found, etc.
Guaranteed Fixed Price is fun (at least on toxic waste cleanups). You are essentially selling insurance along with your services (and charging more for it). Find something unexpected? - it's on the contractors ticket. But so many project go so far over budget (and often don't even meet their goals) that experienced clients want the peace-of-mind. It also can help the bank approve the loan if the task has a definitive cost (albeit higher) than a pie-in-the-sky estimate.
David Thomas Overlooking Cook Inlet in Kenai, Alaska
Fixed price is for a fixed scope of work- otherwise you're in the insurance business. It should include re-work that is necessary to fix screw-ups you made- not to correct for someone else's bad design or direction.
There's the rub- you have to tell 'em what's included and what's not, and be thorough about it, otherwise expect to waste a lot of time fighting over change orders and having to give in on some legitimate ones. Experience shows that, just like "good fences make good neighbours", a good work-scope definition and contract make for less friction dealing with customers. If you don't spell out some examples of what can go wrong, the customer can sometimes feel cheated because they made bad assumptions about what your bid entailed. A contingency for minor setbacks and changes is helpful too, otherwise the customer can feel like you're "nickel and diming" them with change orders to cover a low up-front bid. Some people make an artform of the nickel and dime approach, but it seldom leads to repeat business or good references from customers.
Here's a problem I've run into with fixed price work: you give a fixed price bid with a really good scope of work definition- describing in detail the clever way you've figured out to do the job for less, or to give a better result given tricky circumstances. The unethical customer, who doesn't own your bid because they didn't pay you to produce it, then takes your work scope description, gives it to the guy who bid the lowest hourly rates but doesn't know his @$$ from a hole in the ground, and tells him, "Here's what I want you to do"! I don't know how many competitors I've educated that way...
This thing is all a little confusing.
Are we arguing the merits of running a business so marginal that it requires us to debate who pays for what screw-up?
Grown up and charge so you can absorb anything. Insurance with take care of the catastrophic events. Quit working for cheapskates that want you to work for wages and also assume risk for the outcome. Risk = profit motive.
And risk is just that. Sometimes you lose. And a class act sucks it up and wins on the next job. After all, you've earned it. Profit. Never be ashamed to earn a hefty profit. Experience teaches you the odds and you caculate the risks and when Murphy shows up on 2% of the jobs, you are there, with funds, to solve the problem.
BTW, the tire guy is a low-life.
The tire guy was being a jerk. The studs are very easy to break IF someone has left a lug-nut off for a few wintry seasons and then someone tries to install a new lug nut later. BTDT.
The replacement stud costs less than $5 (probably more like $2, since he'll stock them from a distributer) and seriously takes about 5 minutes to replace (including walking over to the tool chest for the part and tools): pop the old piece out with a hammer and drift, pop the new one in with a tap of the hammer and torque the nut down to seat it fully. The ONLY thing that I could figure would be if the car had one of those dumb disc brake designs that requires re-packing the front wheel bearing to remove and replace the rotor (there were a few like that over the years). Most disc brake wheel studs are accessable from behind without even removing the rotor, in my experience.
Norm "broken stud" Kerr
Murphy is lurking on every job. I don't like to leave an empty chair out for him to settle in and make himself to home..
Excellence is its own reward!
Oh, well I never leave a chair on the job anyway.
Idiots will use it for a ladder, goldbrickers will take endless breaks on it and Inspectors will move right in..........
I would have gladly paid any of you $200 to replace one broken stud on a front wheel of a chrysler I had, which I broke myself removing with a lug wrench.
But that is beside the point. T & M is T & M. If an owner wants a fixed price he should get one. He's the one taking a gamble by consentiing to T&M, and he's the one who thinks it will be cheaper. If he's wrong - too bad.
Clampman
"But that is beside the point. T & M is T & M. If an owner wants a fixed price he should get one. He's the one taking a gamble by consentiing to T&M, and he's the one who thinks it will be cheaper. If he's wrong - too bad."
Yes, BUT!
Take some examples. Concrete truck breaks down and does not show and you have a full crew waiting. Fixed price that comes out of the contractors contingency that he put in the bid. T&M the owner pays for the wait time.
Remodeling and find pipes hidden in the wall that no plans or clue shows that they exsists. In either case the owner pays, if there was a "reasonable contract". A change order for the fixed price or more T&M for the T&M job.
Where the question comes in is for the contractor "screwup". For example the plan clearly calls out an 8ft header and the space clearly requires the 8ft header, but he orders a 6ft header and then job sets.
I the later case I guess it also get down to the point where you question keeping in on the job.
"Take some examples. Concrete truck breaks down and does not show and you have a full crew waiting. Fixed price that comes out of the contractors contingency that he put in the bid. T&M the owner pays for the wait time. "
I'll pick on that one. Naturally, the owner is sitting on the porch or looking out the upstairs window as your 7-man crew sits around waiting for the concrete truck. It becomes evident that the truck is not coming, and the finishers all leave. Before you leave, the owner comes out and says, "Well, that was a wash, do I have to pay for that?". S/he continues on about how the concrete plant should pay for it or you should pay for it since you chose the unreliable concrete plant with the lousy trucks. Not a single productive thing happened on the job that day, so it's going to be hard for them to accept a bill for it. Those of us with brass cojones might do it, but I bet a lot of others would back down and eat it.
"Remodeling and find pipes hidden in the wall that no plans or clue shows that they exsists. In either case the owner pays, if there was a "reasonable contract". A change order for the fixed price or more T&M for the T&M job."
Sure, unless your fixed price contract says something like "furnish and install X" and makes no mention of your assumption that there's nothing in the wall. In order to adequately detail all of the assumptions and exclusions, you often have to present a ten-page contract that will scare most owners away. Most of us don't do that, I bet. We leave it until something happens and then hope that some careful discussion with our client will result in them paying some or all of it. And lots of owners will.
"Where the question comes in is for the contractor "screwup". For example the plan clearly calls out an 8ft header and the space clearly requires the 8ft header, but he orders a 6ft header and then job sets."
So if you're working T&M and end up with a short header by mistake, do you eat it? Are you only able to sell the owner your most productive and accurate hours of work and you eat the rest?
I'm definitely not saying I have answers to any of these questions. I ponder stuff like this continually in my work and posted the thread because I wanted to hear what others think. Thanks to all contributors so far--it's been very interesting and this is a first-rate forum.
"he continues on about how the concrete plant should pay for it or you should pay for it since you chose the unreliable concrete plant with the lousy trucks. Not a single productive thing happened on the job that day, so it's going to be hard for them to accept a bill for it. Those of us with brass cojones might do it, but I bet a lot of others would back down and eat it. "
I would still charge for that.
To be completely honest, I would not have a crew standing non-productive for tha tlong eeither. I ALWAYS have busy work that can be tackled, but I can also explain to the owner how often things can and do go wrong and how crete can take differing times according to mix and weather to set enough for finishing, and that he had agreed to T&M based on the 'possibility' of saving money while fully knowing that it could cost more..
Excellence is its own reward!
This has been a good discussion but I think many have missed one basic point. The only one with money is the customer -- at the end of the day he pays for it all. Good work or bad, nice job or screw up the customer is the only one with money so he is the one that pays. It might not be this customer, or this time, but some customer at some point will pay.
That is why as an industrial customer, or as a private customer building a house it is so important that I hire the best supplier / contractor I can because they will make fewer screw ups that I will have to pay for.
Again as an industrial customer or a private customer I like buying T & M assuming I have deep enough pockets to assume the risk of screw ups that I am going to pay for over time. It is also why I have to stay close to the job -- and know my contractors.
Now your real question is which customer do I charge for my screw up at which time. If you don't charge at some point you are going out of business.
deblacksmith
Best answer yet.
SamT
Now your real question is which customer do I charge for my screw up at which time. If you don't charge at some point you are going out of business.
Although I agree with what you say I would like to add something- Sometimes the difference between a mistake and a fully productive session won't necessarily add up to a profit or loss situation (depending on whether the customer is charged or not). There will be plenty of times when the contractor does not charge a customer for a screw-up and the cumulative result is that he doesn't make as much money as he could have, not necessarily go out of business but have to make his truck last another year, etc
John
"Where the question comes in is for the contractor "screwup". For example the plan clearly calls out an 8ft header and the space clearly requires the 8ft header, but he orders a 6ft header and then job sets. "
LOL
You had to go and remind me of the time i ordered a pair of french doors. I needed them to be 24" wide and misread my own notes. Got some doors 2'4"
They ar still on my books and in my shop..
Excellence is its own reward!
Bill,
I re-iterate. T&M the customer pays. If his gamble turns sour, and he thinks he's getting a raw deal, he can use his big gun - FIRE EVERYONE AT ANY TIME. The T&M contractor has no recourse.
He does not have this option in most "fixed price" jobs, wihout a court ruling.
As for keeping a customer happy (by paying for the numerous screwups on jobs), I don't want any more customers like that one - nor do I want any recommendations from him.
Very rarely do I do anything T&M, though last winter I did do a portion of one job T&M. I built some cabinets for a fixed price. I was paid exactly what the contract called for. The installation of those cabinets was at an hourly rate. The time I spent running around, he was billed for, and the time I spent scratching my head, he was billed for. I didn't like how long it took any more than he did. I don't like working on jobsites where people are living period.
But he either paid the bill in full, or I walked. The reasons I split that job are explained in full at the following link.
http://www.miterclamp.com/radius/pages/Radiuscabinetphotoessay.htm
Does your auto mechanic refund you labor and materials when he installs an antiknock sensor, and that doesn't fix the problem? Or install the right part, say a throttle position sensor, afterwards for free?
Clampman
"Here's a problem I've run into with fixed price work: . . . The unethical customer,. . . .takes your work scope . . . to a competitor"
Yeah, that happens. Frustrating as heck. We've learned to take out the specifics that would be a blueprint for the other guy and beef up the guarantee / end point discussions.
The upside is that (with toxic waste work that has such huge unknowns) the client is often so impressed with a guaranteed price (no one else ever giave them one) that they give us the job on T&M. They are impressed that we trust our plan and capabilities that much, but don't want to the pay the "insurance premium" portion of the bid. They'd like to have the smart guys working for them but pocket the savings.
Which is fine with us. It's an easy way to steal a client from fat and dumb incumbant.
David Thomas Overlooking Cook Inlet in Kenai, Alaska
David,
Love the line about finding unexploded ordnance. If I were still doing fixed price bids, I'd throw that in as a contingent line item, just to see if anyone was paying attention.
The great thing about T&M is that you don't have to put in a line item for:
"Time wasted: Driving back to the yard for tool/materials stupidly forgotten."
To address the actual point of this thread, some oops's are bigger than others, (i.e. burning down the clients home), "Hello, claims department?". Some are "business development opportunities", which you eat, in order to keep your good name. And some are "client selection opportunities", where you thank your lucky stars that you paid a shark attorney to revise your contract, so that you have a perfect right to bag the client, because it was their friggin' dog who pulled the dropcloth, spilled the paint, and ruined the carpet, and you ain't gonna pay for it.
Airtightly Contracted,
skipj
"If you're working T&M, you've set an hourly rate for your time and possibly a markup for materials/subs. You presumably do not have a 'profit pocket' or contingency built into the pricing to protect you from unforeseen events...
I don't agree. The reason you put a markup on materials is BECAUSE you might damage something. It's inevitable that you will sooner or later break something, cut an expensive piece too short, or whatever.
Same with your labor. Since mistakes are inevitable, you have to factor that into the labor rate.
I wonder how much deeper would the ocean be without sponges.
T and M ... Fixed Price?
What's the difference?
Shouldn't be one here ... didn't ya actually sit down one day and figure out what "T" to charge so you could afford the occasional call back?
The added % on the "M" should be figured to replace the occasional faulty "M" too.
This shouldn't be this hard.
Jeff
Buck Construction Pittsburgh,PA
Artistry in Carpentry
Wow, you openned a lot of veins with this thread!
Charging for oops - That depends on the situation with me.
If I remind a painter that he needs a drop clothe over that carpet when he does his touch up and he ignores me, the new carpet will come out of his bill, but if he lays a drop down and the owners dog grabs it to play tug-o-war with and knocks the can over in the process, the owner gets to pay for that one.
Oops is a four letter word - so is OHNO!
;)
I had Dig safe check out the area for me to set piers for a porch. I found a buried wire that they missed. Or the backhoe did. Digsafe did not charge me. The customer paid for the electrician to splice it again. Had I not used digsafe, that would have constituted negligence on my part. Most of my customers understand that oops happns sometimes and pay what it takes when I ask for it. But they consider my rep as one of the more consciencious guys around and don't seem to mind. I also hear them complain about other contractors around who do idiotic stuff and then expect the owner to pay for their lunacy.
I remember one time, that I was cutting into a wood floor for the HVAC guy to install his vents. It was a nice floor and the owner wanted me to do it because he didn't trust the HVAC to do it withour ruining his good floor. I masked the surronding space, etched the cut line with a sharp knife, hooked up to a vacumn, and made sawdust.
Then a circ saw that had never before given me any trouble, chose that moment to have the gaurd stick as I was setting it down.
I took care of that one on my own time.
As for productivity charges - I'm charging for an average rate, if I charged less for guys having a bad day, it stands to reason that I could charge more when I'm have a spectacular day too! But I doubt many customers would stand for that one. I did see once when I was working for a company where the customer watched a couple older guys work for a while on some rot repair and the next day, he called the office and said that he couldn't stand to see the slow pace, to send out someone else. They did.
I don't know that much about wheel studs, but it seems to me that one could have been snapped or fractured by the previous installer, or that there could have been a manufacturing defect. Technically, the shop owner was right, but to do that in front of you was way wrong as a businessman and do not end up with a satisfyed customer was also less than wise - but he could have haad other "situations" with this customer enough to have him pegged as one of those kind who keep needling you and nickle/diming you to death and finally lost it, deciding he didn't need them around any more as a customer.
Excellence is its own reward!
I think that I am in disagreement with the majority on this one.
Granted, if there is negligence on my part, I should be the one to pick up the tab. If it is a mistake, I don't know about you guys but I make them ten or more times a day. Most are tiny and fixed in a few minutes but they sure do add up. Do I refund the customer for all of these? It would be foolish to even let him know about them but even in the case of the customer standing right behind me, I think I can make him think that my correction is just a conscientious adjustment.
I want my workers to take enough time to get things right and to spend the time correcting their mistakes. Sometimes it does seem like nothing is getting done, but if we are there every day doing our best, we will generally have a happy customer.
The customer pays for all our services, warts and all. And if a compromise and a few gentle words are called for, so be it.
the car shop should fix the wheel stud it would spread a lot of good will,and it would surprise me if a stud was $2.00 and take more than 30 mins to fix. especially at a fully equipped shop.
The only way they break is over tightening and sometimes when you crash
"The only way they break is over tightening and sometimes when you crash"
Suppose the last wheel and tire guy took a torch to the lug nut to get it off because the guy before him over torqued it, and she has hit a few bumps.
Are all wheel studs on every vehicle manufactured perfectly formed? I honestly don't know about them, but I have had bad bolts in other situations.
replacing it for free would probably avoid bad feelings butmight not buy to many good reports, depending on the nature of that particular customer..
Excellence is its own reward!
I believe the key thing to have in these binds is: communication. The client has to know what´s wrong, you have to have a true account of the situation ready (plus documentation, Times - who, where, what - DIGIPICS). The problem arises when two or three people are involved...and/or somebody lies. In the economic situation over here at the moment, I cannot include overhead for mistakes. I have great guys working for me, who know that the problem they may have created will not result in chewing their head off, finding out who´s to blame. Only then do you get half the truth.
One of my former master-carpenters (he´s out, because his shoulder gave out - now schooling for engineer, was the epitome of the carpentry pinnacle) said, and this goes for people on a payroll: If the Boss wants to blame somebody - take the blame! It does´nt cost anything...
This is what we don´t want. Never do T&M for clients that are not accessible directly (on a cruise, business trip, no cell phone#...). The Truth will be relayed by architects and wifes...You´ll never know what reaches his/her ears. After the fact...that´s too late.
Been there, done that..got the T-Shirt.
http://www.raulfcarpenters.com