I’m competing for a complete remodel of an old house with an addition. This is the first time I’ve ever bid against someone else. In the past I have had referals gave a price and did the job. This is also the largest job I have ever done. My other jobs have been bathrooms kitchens and one room additons, not rebuilding a whole house. I’m concerned that my subs and I have seen several things which will likeley come up as problems. But, since I am bidding a set of plans against others I need to make sure I am not putting in a bunch of padding in that others may not be. Also, the homeowners instructions for bidding is “just bid all the finnishes as middle price range”.
I want this job but I need to make sure there is proper margin on it because it’s an hour from my house and it’s going to be a three to for month job.
I’m planning on using allowances for all the finishes and bidding the rest based on subcontractor bids based on the plans that I have (which of course is all I can do) Then of course as things come up I need to run change orders.
So to make a short story long. here are my questions.
How do I pay myself? Do I put in a set fee to cover my time for however long I think it will take? Would this be in addition to a 15% mark up on all the other work that takes place?
If I give him an allowances for fixtures and finnishes, should I get to mark up the fixtures with O and P? Or is that considered part of my fee?
Etc.
Replies
eeek!
as an architect who bids to contractors and reviews proposals for really high end remodeling and new homes regularly here's my best advice:
be up front and honest with all of your questions, concerns, and numbers. the more detailed and specific you are in your proposal, the more professional you look to the owner (and architect if they are in the picture for construction administration) AND the more you are covered once you get the job and you end up doing a lot of work that was not your contract. be clear about the material allowances that you use in your proposal for fixtures and finishes.
there are several contract options: lump sum, cost+fee, etc. as an architect, i highly recommend using a standard AIA construction contract (they have them for all kinds of contractual relationships.
i'm used to seeing general contractors charging 10-15% (depending on the size and scope of the job - larger percentage for smaller jobs) for overhead and profit, as well as including another line item for general conditions.
are you also the carpenter, or another trade doing the work? if so, you could include yourself as a sub, and give them a lower rate for O&P.
either way, I recommend not charging them a mark up on fixtures and finishes, just be up front about it, and make your money on the bottom line. (although, i consider it standard for a plumber to charge a mark up on plumbing fixtures).
good luck!
i'm used to seeing general contractors charging 10-15% (depending on the size and scope of the job - larger percentage for smaller jobs) for overhead and profit
NO way is that enough mark up. consider this: $100,000.00 cost (including fixtures), 8 weeks on the project (low time line but doable). That's $7500 a month for overhead & profit based on 15%. truck payment 500, insurance 100, phone 250, fuel 400, taxes 1500, rent 800, utilities 400 , Misc expense 300 and whatever expenses need to come out.......leaves about $3250.00 before any other issues. a bit better than wages if you don't count in time for book keeping, estimating, ordering materials, pickup & delivery, sales time, profesional fees (attorney, accountant, etc.).
If you look at what they preach at the remodeling conferences, a 67 % markup is where you should be. The reality is to make money ( as in a profit & make it worth the risk & bs) most markups are between 30 and that 67 %.
all the expenses you list are typically put in a separate line item: general conditions.on larger commercial jobs insurance & even site supervision (when a dedicated super is required) are also separate line items.i definately agree we're all in business to make money, and if you're good at it, you should be compensated for it. i'm just saying it's good to be upfront and honest about where all the money goes in the contract to the owner.i'm interested to hear more about the 67% the preach at conferences, as I haven't heard that before... 67% mark up on what? is that including your labor?the 10-15% i'm referring to is the O&P for the general contractor, not including expenses such as general conditions. I suspect if broken down apples to apples, your 67% would reflect something similar, or perhaps that's more of a bench mark for a subcontractor's proposal to a general?
On publicly funded/larger commercial jobs & insurance work general conditions is a line item & often required.I spent some time in a job where I was bidding on projects in that arena and am familiar with it. Keep in mind most of us aren't bidding that kind of work.
95% or better of my work is now commercial, my niche stops at around $500,000.00 I spend a fair amount of time bidding against alot of the mid size companies and get a fair amount of work based on price more than experience. It's when I bid against other small lean operations I have competition. Because price point is an advantage, I don't have any desire to show the numbers listed in general conditions, o/p etc. It also helps avoid customers pricing me ala carte against other bidders.
The 67 % concept probobaly does come in close to the concept you are thiking of but I have never costed it out. Walt Stoppleworth (sic? like most of my typing) of Remodeling magazine and others ae who come to mind as promoting the 67 %. They are primarily involved in the residential remodeling end and have been promoting this as part of maintaining a profitable operation. And yes it is 67% across the board on job costs, labor and materials.
Welcome to TU (Taunton University) Curious Architect.I hope you don't get peeved if I chirp in against the AIA contracts. I think that would make it 4 against and one for them. I considered using the AIA contracts at one time and read them all and I found them to be created in a way that gave Architects all the power and none of the risk. I'm going to guess that you don't see it that way. Do you really think they are balanced and fair to the owner and GC? Bob's next test date: 12/10/07
first, props to Howie, you've got just the right spirit that i was hoping to describe... and one more point on yours, the jobs that your not getting may just be the jobs that you really don't want to get anyway! some people can really suck to work for!!as far as the AIA contracts, I'm not offended at all! how many architects do you see here in this forum? i've heard all jokes about "f@cking architects", and can actually appreciate them! as a residential architect, i actually have a hell of a lot more building experience them most of my contemporaries...that being said, i'm actually interested to learn why everybody shuns the AIA contracts. there are a ton of them to choose from, and most of them (or the ones i've worked with) outline a contractual realationship between owner and contractor. i'm typically hired by the owner to visit the jobsite to help administer the contract, but in doing so I'm there to stand up for the contractor when extras and change orders come up, particularly in remodeling.Anyway, back to the AIA contracts... i'm aware that they lean slightly toward the architect/owners interest, but i've seen many contractors gladly use them with only a small rider attached to it.all that being said, i'm not an expert on contracts! i just don't know of what the other choices are that are out there, short of hiring an attorney to custom make one for you, which can be expensive...
Thanks curious architect for your comments! Your right ,sometimes you get that gut feeling and red flags flying that you know this job is not going to work well and would be best left alone!
A question for you...Do you have a specific list of Contractors you work with? How do you like Contractors to contact you that you haven't used before, for possible future work?
A suggestion to all: I use UDA technologies for all my Contracts, Estimating, Scheduling, Proposal integration and a lot more, I know it sounds like a plug, but I bought it specific for contracts written for California and had my lawyer look at it and their pretty thorough. They have all types of contracts, I really like the program!
Howie
Curious Architect
I am not a hater of AIA contracts. I do have certain issues with them that I don't like. They make the Architect the referee. The problem with this is the Architect is not wrong if he is the judge. He also is going to be slightly biased toward the customer who pays the fee. If the architect decides that his vision is not realized (even if it was not drawn or in the specs) he can attempt to make you rework something at your cost. If he is part of the contract it is silly to give him the authority to be the one to authorize payments.
That being said, they are better than a self written contract because they are already heavily litigated. If your lawyer writes you a contract you will get to argue every single line in the event you are involved in a dispute. This is good for your lawyer as he will charge you by the hour to go to court. The AIA is already protected by precedent and you will only argue the addendums. So you will get to arguing the actuall merit of your dispute instead of contract langauge.
The options besides AIA contracts are having your lawyer write one, write one yourself, use an AGC contract, use a Consensus Docs contract or use a contract generating software like UDA to deal with them.
I think you have to decide what works best in a given situation. If there is not an Architect already involved in your project it is silly to hire one to administer the AIA contract.
Jason
Definitely a couple of things I don't agree with above... AIA contract.... 10-15% markup...
When you are bidding a job competitively and you see problems that are not addressed on the plans, you can do one of two things: 1) address those problems in your proposal and risk being higher than the others BUT maybe getting the job anyway because the HO appreciates your proactive approach. This is what I do. Or.... 2) bid plans and specs and run change orders later. That may be the way to compete hard and take the job from the other guy, but you risk having a client who resents the fact that you are running change orders on them. Mistrust and resentment can build up quickly.
Mistrust and resentment can build up quickly.
And if it does it is very hard if not impossible to get that trust back. It may also be difficult to collect on the change orders etc.
Like you, I/we try to be very upfront and honest with people. I'll explain why I see potential problems either in their plans or in the renovation process. Hard to know what you will find once you open the walls of an old home that has been renovated in the past.
I'll typically explain up-front what I think may be present behind the walls, (knob & tube, lead or galv pipe) what ever and what we think the worst case scenario would be.
Another potential problem is selling a rosy looking job, having the change orders, and the customers not having the money available to complete the work, so either you leave their house torn up or loose money yourself. Either way someone or likely both parties are left with a bad taste in their mouth.
IMO it's much better to be honest and open up front then to risk ruining a relationship with a customer down the road. No good in selling them roses and providing them manure.
If in your gut you think the H/O is looking for the cheapest project rather then the best process and project it's best to walk IMO.
I second the tip of avoiding an AIA contract. Also honesty is always the best in this type of work. Walking into a presentation with all your plans notes and discussing the potential pitfalls in a design will put you leaps and bounds ahead of most of your competition. If your prospective clients want to be sold the moon, you really can't afford to have them as clients no matter the budget.
I vote for avoiding it as well. I have my own written by my attorney who insist I don't use the AIA contract. Mine are written to be fair but are written to provide more protection for me. It may seem unfaiar but you only have to chase some one for a good chunk of change once on a mediocre contract to rethink this.
me ... I'd bit it just like I would any other project.
"I'm concerned that my subs and I have seen several things which will likeley come up as problems. But, since I am bidding a set of plans against others I need to make sure I am not putting in a bunch of padding in that others may not be."
so ... you're concerned your crew might actually know what it'll cost in the real world?
what's the other option? Pretend you didn't see any problems and hope the money is there in the end?
doesn't sound like a job I'd want to win.
I say this ...'cause I have a buddy who does much the same.
and screws himself each and ever time.
but at least he got the job, huh?
anyways ... I'd bid it like everything else ... and as I walk them thru my very detailed proposal ... and it's not "padding" ... it "preparing".
Jeff
Buck Construction
Artistry In Carpentry
Pittsburgh Pa
badarse,
As the others have said, I do also. When I see things are to going to be a problem or there are details that are missing that I know from experience that I will have to deal with, I am very up front and honest about the problems to the owner.
I explain what might be missing or how I'm going to tackle this problem even though it's not on the plans and that I have allowed for dealing with this situation in my bid...explain in detail what you are talking about.
Most of my bids are in the middle to upper end and I explain these things with confidence and experience, not arrogance. And I am truthful about things that you really won't know about until you open up that wall or floor and make an allowance in the contract for those types of things.
It doesn't matter if it's just framing, siding, a deck, an addition or a whole house it still works the same.
I have lost very few bids with truthfulness, honesty and showing the owners exactly what I'm talking about. It doesn't always work because sometimes it is only the bottom line that matters, and that's ok! It won't matter how you explain it.
But with the above approach I win more than I lose!
Howie