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Yesterday I visited a customer who bought equipment from me. It was a courtisy/ referral visit that I always do after selling. He was still working on a muti-million dollar house not far from me. After discussing things for a while I asked him how he ever bid something like this? I mean I couldn’t even fathom it. They had 4 differant framing crews working all summer, Major barn of a house but no corners cut anywhere I could see and fabulous attention to detail.
His answer astonished me. No bid. Just his reputation for quality work at fair prices and an owner that kept in close contact with the general. No charge either for change orders, just whatever additional time each change took. The crews were paid by the hour and monitered by the general. The general was paid a fee per month for his services and had access to the project’s check book. He’d write out the check and then either send it to the owner to sign and mail, or have the sub who needed payment go by and collect the signature. Seemed to me like a decent way to get what you want at a fair price. The risks involved were all assumed by the owner, who one way or the other assumes all risks anyway.
I’m sure very few projects can be built like this but it seems so simple. too bad it could’nt be done all the time.
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Frenchy,
One of my GC's gets involved in projects that tend to last two to four years. They are usually extremely rich, (200m plus in assets), and that is his nitche. I am on one of his projects now and the owner only likes to see one sub on the job at any given point in time. The 10,000 sf'er has been in production for four years. When I have done his wood floors in the past, I always thought that I did not get the job because years could go by before I would actually do the work. This owner shut down the project for four months because he wanted me to be the next sub in the house, and the flooring that he wanted ( Hickory strip from Mullican) would not be available until then. The builder comes to the job Monday thru Friday whether anyone is working or not. I finally asked him how he works these projects. He said that he works for a flat fee per month however long it takes, although this job has about caused him to quit the business. Its like he is doing time, watching one sub at a time work, and see production come together so slowly. I don't know why he does these type of projects, maybe for the challenge. Our last client had three sound stages in a basement type area to record live music, and each one had to be soundproofed. The flooring in each room could not touch each other under the doorways for fear of vibrational sound travel. His family lived in the two floors above the studio. GW
*You know, the rules change for the very rich. They can afford to wait while things are done because the house they are in now is very nice. Plus they don't have a bank loan eating up interest while they wait. (instead the additional capital will generate additional revenue) they''ll get richer while we get poorer!!!
*Frenchy,It's a great way to work but I don't think it's as rare as you believe. I work for a medium sized GC in the southeast and that's about the only way we work. The majority of our jobs are high-end very very custom residential and are set up as "cost plus." We provide site supervision, carpentry, and design services when required. All of our subs bills come through us. As you said above, the key to making this work is reputation and trust. This means that there is somewhat greater need for client stroking than normal, but if you listen closely, guide them as necessarry, and provide a high quality product for a fair price; it all works out pretty well. Oh,... the other really important thing is to bill REGULARILY. When it starts to pile up and they forget what they are paying your 15% for, it can create undue friction.We provide an estimate on the front end and try to keep close to it but changes always pop up and you have to keep good notes. If a phase of construction runs over, you need to be able to clearly show why, and if a phase comes in under, they always like to hear that they can then spend a little more on finshes.Wife says must go now.Happy building.BeWell, PB
*Hey,There's no need for you to get poorer unless you're just a lousley buisness man. Just give people what they want, charge acordingly, and everyone will be happy.Wood is good, ...and so is buisness.PB
*Frenchy,I am currently on a job that was not bid due to the fact it is a design in progress. Currently we are at 110,000 and going for just a kitchen, laundry room and bathroom.I have done several other projects for this couple and it is always fun trying to figure out what they want next. There are no problems with changes. I bill time and materials twice a month for my time and add 10% to any subs to cover my time spent managing. Frank
*If you know what you are worth, people will know what you cost.If a customer knows what you are worth, they can decide to bear the cost.Most poor contractors I've met are a result of uneducated customers mixed with the poor self esteem of the contractor.Most successful contractors I know are a result of giving people their money's worth (how ever little or much that is) mixed with the contractor's skill, business sense and experience.
*I have had the opportunity to work with only 2 cost plus builders. One of the owners had no construction loan and was in no hurry to finish. I assume for the reasons stated above, the longer it took the more interest he made rather than paid. It was a great project, EVERYONE got to pay attention to the details.Second project, same builder; these owners had a loan and put the 3200 sf house on a 5 month max schedule. Also a great project, Everyone paid attention to detail.The only real difference between the 2 projects was how much of the work the builder actually did himself. The 1st home he framed,sided,did flatwork,tiled and punched. The 2nd he framed and sided only. Both were profitable and the homeowners were easy going. I don't think you can beat a cost-plus job. It works for all parties. I just need to find them....Steven
*I worked on one job like this that I know of. The owner was a woman who owned an art gallery in NYC along with rental property. She would show up on Friday to pay the subs for their billable hours and make changes. We would tear out whole sections of new constuction,site built cabinets,walls ,windows ,weekly because it was not what she visualised in her mind. It was pretty much a time and materials job for the GC for three years. She inherited over 20 million more halfway through the project when her father passed away.Never saw the job through completion and always wondered how it finally ended up.Beautiful 4000 sq.ft. house with two barns on an estate overlooking a resivoir in South Salem NY. Nice lady.
*There is a point of diminishing returns when the challenges are gone. Some of us like to see a finished product within a certain set of limits. An evergoing job turns into a routine and a waste of precious resources. It would tear my guts to have to demolish freshly site-built cabinets on a regular basis, just like in a very bad dream when the same things keeps on happening over and over again... That nice lady and I are sure glad we never met.fv
*b WBA At Your ServiceI work for a large GC/CM (approx 150 - 200 employees) that is doing more of this work all of the time. It is generally done out of our Insurance Repair division which is geared toward residential work. I much prefer this over rebuilding a fire damaged structure, but I'm not sure our office will agree with me in the long haul. Dealing with certain clients on high end projects can be pleasurable in some cases, but require large doses of Valium in others. I don't run this business. I take care of managing my ten jobs at one time, but I don't get involved in the business end of the deals. I am curious as to how the business owners feel about a T&M or cost plus job as opposed to straight contract bidding. It has always been my impression that bid jobs for the most part were always more profitable in the long run. This does seem to be the case with us. Do any of you have any feelings on this ? Whether it's from a business standpoint or just an emotional one. Thanks
*We have about an even mix of cost-plus and bid price jobs which yield about the same profit. The cost-plus jobs usually arise out of an incomplete design and the desire of the client to get the project rolling. Getting paid is not a problem for us but keeping the decisions coming and the job moving can be. Our most profitable jobs are bid jobs. They are the jobs that we bid extremely high on because we don't need the work. I guess this says something about being too anxious about an open schedule and taking anything that comes along to fill it.
*I'll put in a comment from the other side - I'm currently in an arrangement like this with my contractor. Why? it's design build, very complex, I'm somewhat knowledgeable and have my own 2 cents to add occasionally, and I really TRUST the GC. He cares about his work. I don't know how his profits been on the job - it's certainly been expensive, due to circumstances. When he brings in a sub, he pays them, and when I bring in a sub, I pay them. ANd I certainly don't have him rip out cabinets. (THough, I did make some strapping come down once...).Basically, it's a completely custom job, with a lot of stuff coming up as we go along. No way to do it on a bid without one of us getting screwed.
*b WBA At Your ServiceCharles, wish we had more like you, everywhere...thanks.
*Charles if you need a one man crew in the future e-mail me. Registered, insured with references.
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Yesterday I visited a customer who bought equipment from me. It was a courtisy/ referral visit that I always do after selling. He was still working on a muti-million dollar house not far from me. After discussing things for a while I asked him how he ever bid something like this? I mean I couldn't even fathom it. They had 4 differant framing crews working all summer, Major barn of a house but no corners cut anywhere I could see and fabulous attention to detail.
His answer astonished me. No bid. Just his reputation for quality work at fair prices and an owner that kept in close contact with the general. No charge either for change orders, just whatever additional time each change took. The crews were paid by the hour and monitered by the general. The general was paid a fee per month for his services and had access to the project's check book. He'd write out the check and then either send it to the owner to sign and mail, or have the sub who needed payment go by and collect the signature. Seemed to me like a decent way to get what you want at a fair price. The risks involved were all assumed by the owner, who one way or the other assumes all risks anyway.
I'm sure very few projects can be built like this but it seems so simple. too bad it could'nt be done all the time.