Replies

1. 
   TommyB12 | Jul 09, 2003 01:32am | #1

   Someone here posted a link that listed the reasons why you shouldn't use a  cost plus contract but I've managed to lose it.

   I like the one in the taunton book on construction contracts.  I have used it a few times but would rather bid the job if possible.

   Tom

2. 
   JerraldHayes | Jul 09, 2003 02:27am | #2

   Tommy B. that person posting that link might very well have been me. I think I posted links to Michael Stones 22 Reasons Why You Should Never Do Cost Plus (C+) Or Time & Material (T & M) Contracts Or Billing For Construction Projects several times but he's made changes to his site and those old URLs are no longer valid. This one works.

   Dan, if you are really insistent on doing the project cost plus (I'd be interested in learning why) there are a couple of cost plus agreements in the The Contractor's Legal Kit

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   The Contractor's Legal Kit: The Complete User-Friendly Legal Guide for Home Builders and Remodelers by Gary Ransone ,

   Just a good book period in my opinion for contract documents and how to use them but then again you really should run what ever you do by your attorney to make sure it A-Okay for your state and/or locality.

   Also there are few AGC documents you might want to consider too. I've done just two cost plus projects in the thirteen years I've been in business and for one last summer I did the work with no agreement just from a phone call request ( the client came extremely well referred) and the other I did years ago in '93 using AGC 510-Standard Form of Construction Management Agreement Between Owner and Construction Manager (Where the Construction Manager is the Owner's Agent and The Owner Enters Into All Trade Contractor Agreements) for a million dollar plus fast tracked exhibit job we did.

   Anyway there are a few documents in the AGC 500 Series (Construction Management Documents) you might want to look at (they're listed about halfway down that page) but once again using them without thoroughly understanding them or without an attorneys advice and review is really risky.

   ---

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   "Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it's the only thing that ever has." - Margaret Mead

1. 
   FastEddie1 | Jul 09, 2003 02:34am | #3

   I just got the Contractore Legal book, and although I have not gone through it thoroughly, it looke like it was worth the cost.  And having the docs on cd already in Word format will save a lot of time.

   Do it right, or do it twice.

2. 
   TommyB12 | Jul 09, 2003 05:00am | #4

   I was gonna say it was you Jerrald, but I wasn't sure.  Belated thanks for posting that, I enjoyed it.Tom

1. 
   JerraldHayes | Jul 09, 2003 06:00am | #5

   Tommy, no problem at all and no credit needed here. I just wanted to cut you off from possibly wasting your time searching around on this site for a link I knew was now out of date.

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   "Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it's the only thing that ever has." - Margaret Mead

3. 
   danmcl | Jul 09, 2003 02:57pm | #8

   thanks for the advice I thnk I have found another way to structure the job.  I dont like cost plus either to many possible problems.

   dan

4. 
   mdresimprov | Aug 24, 2003 04:28am | #9

   Thanks for the info. I had two customers this year who after our initial meeting and my producing an extensive bid, told me they only hired on a time & material basis. Guess what? Never did pound a nail for them!

   Mark

3. 
   mike_guertin | Jul 09, 2003 06:25am | #6

   Dan,

   I've never used any boiler plate contracts but have been using my own system of 'cost plus' for 14 years.   You could really call the method 'cost plus a flat fee'  It's very controversial (threads I participated in on Breaktime several years ago really showed the diversity of thinking).  I charge straight through costs for materials and trade contractors.  I tackle a number of the tasks myself (the ones I want like concrete work, framing, insulation, boarding, trim, tile, hardwood and a few others).  And I charge a 'management fee'  On new construction it's typically around 8% to 15% of what I anticipate what the project will cost (less land costs).  Remodeling is higher because it takes more management time.  15% - 25%.  Many costs that some 'contractors' would would classify as 'overhead' I also include as an approportioned line item on the project budget.

   What I like about cost plus is it fits in nicely with fast tracked projects and projects where construction begins with known - unknowns, meaning the client is aware that there are things that aren't designed yet or undetermined 'hidden' problems to overcome.

   I like it because my financial risk is reduced and there is a trade for that - I may not make as much as other 'contractors' who work on a fixed bid basis.

   I don't recommend jumping into a cost plus system of any sort on a big project unless everything is clearly defined on the plans and scope of work.  After a few projects you'll work into your own 'flavor' of cost plus that works for you and your clients.

   One thing must be said - there's more paperwork you have to compile.  I feel that's a good thing though, it forces you to be orderly, communicate effectively with clients, and you'll learn more about project costs that the typical 'fixed bid' contractor.

   Mike

1. 
   danmcl | Jul 09, 2003 02:53pm | #7

   Mike thanks for writing back.

   I think that the clients and I have come up with yet another way to work the contract.

   The project is a large remoldel in a well cared for Victorian(right in E.G. on the Hill),  we designed both the addition and the renovations and the clients trust us but they want to phase the job and maybe do some of the work themselves.  Since I can not control the clients quality or work rate I usualy hate this kind of deal but I think we have worked it out.  We will bring the entire project to finish plaster as one price and then give a logical break down on the finishes based on the floor in question.   Materials, Labor, Profit & Overhead will all be computed for each phase and then we can easy tell where our work will end and the cleints will begin.  I suspect that we will end up with all the work because the guy will decided that going to his son's soccer game is more fun than trimming and tiling his master bath.  I have let them know that we will have to revisit some of the framing cost once the walls are opened,so I think I'm cover for any surprises that might pop up.

   I have found that most clients do not like Cost Plus becasue they are afraid that the price will keep going up and up.  A fixxed price works for me but it usually has to be so high the I scare good clients away.  I think it is all about educating them and getting them to trust that we know what were doing.

   thanks for the advice.

   Dan