What are everyone’s thoughts on the type of deals that get cooked up between owner/GCs (the gutter deal gone bad thread) and the guys that agree to do their work?
Just in my litte neighborhood, which is in a small remote town, there are currently four of these happening, at my estimated package values (land excluded) of $400K to $950K.
Replies
They're great deals if you can make money on them, and have an agreement in place that will avoid situations like the one presented in the gutter thread.
Normally, since the risk is lower on those jobs compared to a lumpsum job, you may make a little less. But that reduced risk is worth something. You've gotta make sure the numbers work for you. I'll take CM work over lumpsum all day every day.
Bob
But its not CM.
The gutter guy thread starter, and these guys in my hood, are making labor rates only. No markups on any materials at all, nor markups on sub work.
It's the owners who are getting great deals. And it is the local full-service legitimate GCs who are getting undercut.
Edited 10/28/2004 1:22 pm ET by Bob Dylan
They're not in the same market, nor are they providing the same service, so how does one undercut the other?
Isn't it kinda like saying that Sears lawn tractors are undercutting the John Deere dealer?
SamT
"It's the owners who are getting great deals. And it is the local full-service legitimate GCs who are getting undercut."
You're right- the owners are getting great deals, provided the labor costs don't overrun their budgets. If the "contractors" are getting paid for labor only, and adduming no risk, the owner must be assuming the risk (there is risk in construction, right?). So is this really a "great deal" for the owner? Sure- if it works out to be less than the local full-service GC would charge. But remember- the owner not has to handle scheduling, coordination, warranty issues, etc- so this "deal" comes at the price of time and greater involvement in the project. So, is it still a "great deal" for the owner?
Now, you say the guy is getting "labor rates" and no markup on materials or subs. Say a carpenter makes $20/hr. If these guys are doing carpenter's work, plus ordering material, and scheduling coordinating subs, and they're getting $20/hour, then they're morons (or they're just happy making less money than they maybe "could" make). Unfortunately, though, the world is full of morons- we'll never get away from that fact.
Someone will always be willing to do work for less, and some owners will always look for a "great deal". What's wrong with that? And what makes the "full service GC" "legitimate"? Is he licensed while the guys you're discussing aren't? Are these guys getting paid under the table? Or are they only "legitimate" because they provide the traditional "full service GC" services that you see as being "legitimate"?
Not trying to be harsh here. Just curious why this type of stuff causes such a problem for some people.
Bob
Edited 10/28/2004 3:53 pm ET by BobKovacs
Just re-read the whole "gutters and ethics" thread. One thing that stuck me is that Bob has assumed that Treetalk made no markup on material or subs. Nowhere were the words "markup" or "profit" used in his posts, with the exception of noting that the $1,000 advance payment to the gutter guy included no OH&P.
Bob and several others are making it appear that Treetalk is an "hourly employee" of sorts, working for the owner who's acting as the GC. To the contrary, in the first sentence of his post, Treetalk says that he "GC'd" a house. He also mentioned tht he did it by the hour, but that could mean he did the project T&M- not that he did it under the table, hourly as an employee/quasi-sub, or anything else.
So, really, without further information, how can we really comment one way or the other on "Ower/GC's like that one"? We don't even know the true relationship.
Bob
And it is the local full-service legitimate GCs who are getting undercut.
No one is ever undercut.
some people can live on less money.
not their fault.
or ... that settle for less money.
their fault ... bt doesn't change the equasion.
that's why you should just come up with one price you'll do the work for ... and be happy with it. If someone else will dig that ditch for five dollars less ...
who cares. You said that price was too low for ya.
Jeff
We are currently doing two large jobs, one with a CM and one with the owner as GC. We usually act as GC but not on these jobs. We will do quite well on both jobs and will lose a lot less sleep than we normally might. The CM job in particular is extremely complicated, with a design that is incomplete and a client who is seeing the budget spin out of control. It is a potential nightmare waiting to happen but we can sleep easy knowing that we are not responsible for making this customer happy. We only need to do our work and be pleasant to the customers when they show up. That is a piece of cake.
Our only concern is that we may have to find interim work if we get ahead of the design. The electrician has been waiting for 6 weeks for a plan and will take 2 months to run all the wiring. This could hold us up. I wish all our problems were this easily solved.
I don't know if the owner is getting a great deal but I do know that nobody is getting undercut. We are probably the only local outfit who could do this work in a timely manner and we are not cheap. Then again these customers are from S. Conn. so we may seem cheap to them.
I regretted making that post, but too long afterward, because probably any that had any interest in it, by that time had read it. I should not have used the words "legitimate" and "undercut."
The guy in WV who did the job and was getting the bad deal over the "gutter guy gone AWOL" situation was likely acting for the owner/GC as his "prime carpentry sub."
But it didn't seem like he was in fact acting, or being paid, as a CM. The owner, however, was treating him as such on the copper gutter deal.
What I take issue with is a "long distance" owner, seeking to get a big-ticket vacation home package built, prevailing upon an undercapitalized or startup carpentry contractor, and getting him to act as the builder or CM, without actually paying him to do so.
And with our local building department's latest stance, that of not issuing permits without seeing certificates from a contractor evidencing WC, disability, and also liability, these owners are marching their carpentry subs down to the hall with them at permit pull time, getting permits in theirs and the sub's names, only to turn around and directly sub major parts of the package to uninsured guys.
I can't say for sure, but can start guessing, how much fun and fees the attorneys will get from things, if for example, an uninsured roofer helper takes a 35-foot header off the ridge, onto the lumber pile below. Let's see, whose certificate do we have, over in the permit file?
I don't see how any building department should be able to dictate the level of insurance that any homeowner is required to have. The building dept should be limited to determining if the building is built proper.
There are already civil laws that govern roofers falling off.
blue FRAMING ADVICE ALERT!!!! DON'T TAKE ANY FRAMING ADVICE FROM ME. I DON'T KNOW ANYTHING ABOUT IT. IF YOU WANT GOOD FRAMING ADVICE, JUST ASK GABE. DON'T ASK ANYONE ELSE....JUST ASK GABE! REMEMBER, I DON'T KNOW ANYTHING ABOUT FRAMING...I JUST BS ABOUT IT.
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Yes, but if a municipality is going to issue regulations concerning insurance at residential building sites, it probably makes sense to have the building department administer them, rather than setting up a whole nother bureaucracy.
I certainly took no offense at your post. We all know the type of builder that you are talking about. Many of us started out just like that and did offer a great deal to the homeowner. The value of this thread and treetalk's is in teaching us some of the pitfalls of working for the gc/owner.
Your point about the insurance is a good one though if the builder is not paying the subs, he probably is not liable for them, permits notwithstanding. As carefully as we are audited each year by the insurance company, they don't have any questions about subs paid for by the homeowner. That leads me to conclude that they wouldn't be covered by our policies which would cover an uninsured sub paid by us. I am sure that some homeowners hiring uninsured workers will get stung by this.
"And with our local building department's latest stance, that of not issuing permits without seeing certificates from a contractor evidencing WC, disability, and also liability, these owners are marching their carpentry subs down to the hall with them at permit pull time, getting permits in theirs and the sub's names, only to turn around and directly sub major parts of the package to uninsured guys."
Now wait a minute . It doesnt work like you wrote it . You are kinda close , but not on the money.
The building department will let an owner build his own building , he doesnt need the subs with him. Whether the contactor has insurance is not an inspectors job to know.I could care less actually . It is the law that an owner can build his own building . If he doesnt follow the rules of law , then his butt is exposed. The Contractors Licensing Board , is interrested in what you are discussing. Its not the building departments business .
Tim Mooney
Here is how it works where I am. May not be "right," but it is what they started doing about six months ago. Before that, no proof of insurance was required. At least one very expensive fall occured about 15 months ago.
Homeowner wants a new garage out on the back corner of his lot. He's going to have his son build it for him. Tries to get the permit, but the lady in the building department says, no, you need certs for WC, liability, and disability. Tells his son the story, son says, let's try this. Son owns a motel and has employees, and insurance. Gets certs, gives them to dad, and permits issued.
Guy gets a job to build an addition on a summer home. He is the lead man for a two-crew contractor M-F, he'll do this evenings and weekends. Same story on the permit from lady down at the hall. Guy asks his boss, will you please furnish me with your certs as if you are doing this job, so they will issue me the permit. It's done, and permit is issued.
Bob, I doubt that the city has the power to withhold a permit until they see certs. This sounds like another case of governmental badgering. I'm fairly positive that if someone challenged this in a lawsuit, the city would end up biting the bullet.
blue FRAMING ADVICE ALERT!!!! DON'T TAKE ANY FRAMING ADVICE FROM ME. I DON'T KNOW ANYTHING ABOUT IT. IF YOU WANT GOOD FRAMING ADVICE, JUST ASK GABE. DON'T ASK ANYONE ELSE....JUST ASK GABE! REMEMBER, I DON'T KNOW ANYTHING ABOUT FRAMING...I JUST BS ABOUT IT.
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You may not be right. They do it here, but no one has challenged them yet. They may need to change things a little to permit owner-performed work.
I said this in another thread, but when I was asking her recently about how the requirements have changed (in prep for pulling a permit), she told me all about the insurance stuff.
Evidence of insurance is required in many jurisdictions all over the country. Surf around the web and you can see it in black and white. But everywhere else I have seen it, the authorities have written in a loophole for work the owner will perform himself. They pretty much have the same language everywhere, clarifying that 100 percent of the labor is by the owner. No hired people whatsoever. In those jurisdictions, a type of affadavit is signed by the owner, and the insurance requirements are waived.
I guess that's what is used here in MI Bob.
States do have the right to make laws....that's why I have libertarian leanings. I don't like laws that protect me....from me.
blue FRAMING ADVICE ALERT!!!! DON'T TAKE ANY FRAMING ADVICE FROM ME. I DON'T KNOW ANYTHING ABOUT IT. IF YOU WANT GOOD FRAMING ADVICE, JUST ASK GABE. DON'T ASK ANYONE ELSE....JUST ASK GABE! REMEMBER, I DON'T KNOW ANYTHING ABOUT FRAMING...I JUST BS ABOUT IT.
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"In those jurisdictions, a type of affadavit is signed by the owner, and the insurance requirements are waived."
Thats what the insurance is for ; the owner.
Let me say it again. The owner has the right to build his own building by acting as his own contractor. If "he" chooses , he may waive the requirements. He is the responsible party at that point.
Contractors bidding a job as the prime contractor must be licensed , insured, and bonded, with of course workmans comp. Let me say here that the building department is out of line in this field . This is not their business and they also collect no monies , or are responsible in any way. This is a state level requirement and should not be a city function. The state will have jurisdiction and will not pay the city to police it . Someone has pulled a dum dum move.
If a contractor is not licensed or a home owner is in violation , I can pick up the phone and call it in and the state will be here in the morning . Ive washed my hands before they got dirty. If you are not licensed [ which if you are , you are required to be insured and bonded] . If you show me a license , Im done . I will ask however for a license. Any time I catch some one operating with out one , Im calling the state on my cell , report it and write it up and send it to the state. I carry the forms at all times. Thats my responsiblity alone.
Now I will say somthing else which wont be popular on here and especially wont make Blue feel any better. [ or Keith] No matter how unpopular , its the truth;
The city can do as it damn well pleases! No butts , ands , exceptions, to it really in reason. The city has the right to excess the laws and codes and be more restrictive. Yes, they can do as you say {I suppose} , but its a dum dum move because its a ,lose , lose any way you figgure it. The state gets paid to do the job and the city doesnt . The less you piss people off the better recieved you will be . I would rather wait to make someone mad when its absolutely necesary and no way out . This is too much to risk loss of votes over, since all city positions are political. Your people are dummies to be involved at the state level.
On a saftey matter that will save lives or will protect a persons home from failure at the owners expense at a latter time , I will step into the open with both guns loaded and take any heat there is to take . I will go over and above in a situation like that and surpass codes and laws. But I need to be able to proove it. I dont live there and only visit once and a while, and I dont like to stay long. I would never live in a situation as you describe.
Tim Mooney
Tim thats not true here in Michigan.
We went through a period where smaller localities were getting excessive in their right to demand unusual code variations. Eventually the buiders association filed suit. The suits were filed because many localities started using code as a way of stifling developement. Controlling development is one thing, stopping it is another.
One of the solutions was to create a uniform building code. Although there is some flexibility, there are limits to that flexibility.
Contractors here have to provide proof of license. WC insurance is not necessarily needed because if you don't have any employees you don't need WC!.
blue FRAMING ADVICE ALERT!!!! DON'T TAKE ANY FRAMING ADVICE FROM ME. I DON'T KNOW ANYTHING ABOUT IT. IF YOU WANT GOOD FRAMING ADVICE, JUST ASK GABE. DON'T ASK ANYONE ELSE....JUST ASK GABE! REMEMBER, I DON'T KNOW ANYTHING ABOUT FRAMING...I JUST BS ABOUT IT.
END OF ALERT!
"Contractors here have to provide proof of license. WC insurance is not necessarily needed because if you don't have any employees you don't need WC!."
Thats correct . They would still need to have liability insurance and be bonded to act as a GC. You are right but , here if you should hire a sub , he must submit to you his insurance requirements, or you must insure them if you choose to use them. They just passed a law here making the general responsible for his subs. Licensing too! The way you project working by my self as a GC , is the way I have always chosen. I hired help as subs . Now though Im responsible and thats changed things if they arent and that has changed contracting here. Before that I could make more money hiring all subs because they were responsible for their selves.
I do not condone over riding codes with out merit ! I was wrong on the truss thing and got corrected and accepted it in a hurry! I make mistakes like everyone else and Im not a pro in all areas. Im practiceing ! LOL!
But , and there always is a butt, there are rightful exceptions. My city owns its water and sewer company . Lock stock and barrel, they have paid for it . It is a privaledge , not a right to be connected to it . The city owns every sewer line and main as we do our truck. Every pole and line in the city is owned by the same. State , or federal has nothing to say , because they have no rights. If you want utilitities you must cooperate with their rules . If you dont , thats fine . There is plenty of land out side the city that has rural power, rural water , septic tanks , little amenities and all are much more expensive. The fire rating drops from a #3 to a #10 rating quickly doubling rates . Side walks , taxes, schools , gas milage, 7 ball parks , swimming pools , 5 youth centers, etc. are all perks to living in the city. But , they own it. I told you that so you can think from that side of the coin. If I were to visit your house it would certainly be by your rules or I wouldnt be welcome. I would need to stay out side or leave if I didnt want to cooperate with house rules. The people here have voted in most of the rules or people who changed them.
If the city wants all pipes to be bonded and its not state code , they shall be bonded. If they dont want your car parked out in the yard on blocks , they own the utilities as a final say if their city laws are ignored.
I didnt say all that to piss you off . I just said it to reinforce the city has control inside their limits. That said , if a city wanted to require licensing and insurance it could . My only question is why if its state mandated?
I guess I am answering more the next poster instead of you anyway.
If anything is unfair it should be protested . I believe all rules should be fair to all concerned if possible. If they are not , there has been an error made and it should be admitted and fixed. There are several things Ive seen thats not fair and they need to be changed. I know those problems exist.
Tim Mooney
Just did a Google search for "building permit insurance requirements," Tim, and got lots of hits. You can go to endless pages and see jurisdictions requiring proof of insurance as a prereq for a permit.
We've no licensing in New York state.
>>We've no licensing in New York state.
But many counties do. In Westchester, you need a license. No exam, for proof of insurance and $300.00 you get a piece of paper.
They did not require WC in the past then instituted it. It was fought as it is a State thing ans NYS says sole prop/no emp you don't need it. County says no ticky, no ####.
You can get a waiver if you jump through enough flaming hoops though and you must swear to God and your country that you will not hire subs, even thoough they do not check.
They do require liability. Most towns in the county same deal for permit.
Putnam county has similiar rules + bonding.
EricI Love A Hand That Meets My Own,
With A Hold That Causes Some Sensation.
"We've no licensing in New York state."
Ok, no licensing board to govern contractors. Who governs insurance requirements legally ? Would it not have to be a state agency? You say that the city building department has taken it on their self. What would happen if a plant was built out side the city limits or a small city or township that didnt have an inspection department ? Plug that into reason. Wouldnt it have to be a state requirement ? Look it up for your state and see please , since it really concerns you .
Tim Mooney
Bob,
My 'first big job on my own' went that way; and it was a good experience for both the owner and me. i'm sure they don't all go that way.
Small town sort of, the owner new who I worked for, and knew many other trades people in the area.
The Ho worked hard, had his ducks lined up, I showed up to a back filled, level and square foundation done by a mason I knew and did the framing on a bid that include me calling out the materials list and loads.
Would you like to give me a price on the sheetrock and taping, he hired me. Went on to do the tile trim and cabinetry, poured the basement floor and some more.
He was up front and on the ball. For me starting out, it was a great thing. I'd do it again if the money was right AND the HO was capable of calling th shots. I knew he was in this adventure, that why I went in.
Eric
I Love A Hand That Meets My Own,
With A Hold That Causes Some Sensation.