For a fixed price contract that includes allowances for certain items, it’s obvious that if the items cost more than the allowance, you pay the extra. But, what is typical if the items come in under the allowance? I’d think that would then be subtracted off the total price, correct?
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Depends on the contract language.
That said, on our allowance, if the customer spends more they pay more and if they spend less they receive a credit on the final bill.
We will be implementing a policy soon where the customer will pay 10-20% on top of the overage and receive the same percent back if they are under.
So, in your situation if the allowance is $1,000 - and the materials come to $1,100, the customer pays an extra $110 - $120?
And if the materials come to $900, the customer is credited with $110 - $120?
What is the 10-20% for?
What is the 10-20% for?
Handling. Materials don't appear on their own.
J. D. Reynolds
Home Improvements
Pp, Qq
Currently it's a striaght shot one way or another. If the customer spends 900 on a 1000 allowance they get 100 back. If they spend 1100 on the 1000 allowance they pay an extra 100
The new way which isn't in effect yet, gives me overhead and profit on the overage.
I have seen and done a few different things
(1) If the allowance is $1000 and the allowance items come to $1100, the client is billed $100 plus OH&P on the $100. If the allowance is $1000 and the allowance items come to $900, the client is credited $100. OH&P is not refunded.
(2) OH&P is not affected by allowances. The client is charged or credited the difference between the allowed and actual amounts.
I do a combination of these. I handle allowances like #2 above, but my contract states that if entire phases of work are eliminated from the job, I still collect OH&P on those phases. If I have set aside the time and mobilized my company to do your job, I can't have you reducing the scope without being compensated. In almost every case I have told someone else "no" to be available for the expected duration and scope of your job.
That explanation is perfect. Consider it stolen.best,Nick
In the past when I did fixed price contracts I added 10% to the total allowance figure just like I did to everything else.
Client was allowed a total sum of money to purchase all of the allowance items. If the ran over they paid the difference, if they ran under they got 90% back.
10% was for overhead.
Could be or maybe not. That should be discussed and spelled out in the contract.
Someone pinching you for pennies?
Bob's next test date: 12/10/07
Is it typically spelled out in the contract? I've seen three contracts, from three different GCs - each with allowances, and none of them had any language about that.
No contract is "typical" other than the standard requirments to make it legal. All contracts are negotiable meaning you can insert any clause you want to accomplish the end goal in any way you want.If you want to change the way allowances are done on your contract, simply attach an addendum or scribble something in the "other term" section. Bob's next test date: 12/10/07
We do it exactly the way David Meiland described.
Just had a client choose tiles--total tile install is $36,000. We budgeted $8,000. We take O+P only on the $8,000.