Have a business practices question: My brother is in the process of selecting builders to put up a $300K house in CT. He has his selections narrowed down to 2 guys with good reputations in the area and one guy is about 9 grand less on the quote with the difference being in driveway and garage/bonus room finishing work and/or lack thereof. That’s understandable and not really the issue.
In soliciting my opinion about which one to pick, he mentioned that contractor A made it a point to mention that he (my brother) would have to write a check to the subcontractors directly as the work was done while apparently contractor B pays his subcontractors via his own check. Something about the homeowner paying off the subs directly struck me as odd, since it seems that total project management is the reason for hiring a contractor in the first place. What kind of advantage (if any) is there for the contractor, homeowner or subs in having the homeowner pay subs directly? I can’t quite put my finger on it but is seems as if contractor A has some angle in doing it that way while contractor B’s method is more typical. In my limited remodeling experience, we (the builders) always wrote a check to the subs. All opinions welcome. Gary R.
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The thing that pops into my head is this...
If the homeowner is to pay the subs directly, then the contractor doesn't have to go through 1099ing them at the end of the year. If he doesn't have to 1099 them OR report it as income (by not 1099ing them) then he doesn't have to play the insurance game with his company by producing certificates of insurance from all his subs. If he doesn't produce those certificates from all his subs, and he 1099's them, his insurance company can charge him an inflated surcharge on his own insurance to cover those un-insured subs after the fact.
He could be just trying to cut out paperwork and accounting. Or he could just be trying to cover the butts of his uninsured subs. Or maybe both. If nobody is getting 1099ed for any of this work.... it's like working for cash. And your brother is having his dream house built by a bunch of uninsured, non tax-paying, fly-by-nighters. Not to mention that he'll have a better chance at having you have to chase the subs instead of him for warranty issues.
Now that's a worst case scenario. I suppose there could be a legit reason too.
Why doesn't someone ask the contractor why he does things this way?
"Why doesn't someone ask the contractor why he does things this way? "
Oh yeah sure, just go and make a common sense, direct suggestion. Your starting to sound like Jim Blodgett.
I think dieselpig summarized it pretty well.
-m2akita
the guy that has the homeowner paying the subs is a punk..
he's doing the old dodge with "employees" that are not "employees"..
the liabilities are all hanging out on the homeowner.. this bum is not a legit GC.. he's just a con man.. typical scumbag...
other than that... probably a real nice guyMike Smith Rhode Island : Design / Build / Repair / Restore
Tsk, Tsk Mike..aren't you jumping to conclusions?
Im not a scumbag, but I'd be willing to enter in a build arrangement that had the subs paid directly. I suppose I could call myself a consultant, and ask for a fee representing a percentage of the job, or just a flat build fee. I might possibly work by the hour.
As the consultant, I'd review all sub paper and only authorize legit contractors.
Ultimately, all liabilites end up on the landowner anyways, so how you get there seems to a moot point. If the landowner insisted on inserting me into the liability chain, I would gladly do it for an additional fee. The fee would include a sum covering the additional insurances and some additional profit for the additional risk that I assume.
All things have a cost, and therefore are negotiable.
Don't jump to conclusions. I know your a bit more open minded that that.
blueIf you want to read a fancy personal signature... go read someone else's post.
Read the post agian, blue.
If the only differance is 9K in finishing schedules, or lack of, then the guy not paying his subs is making more than the guy that is. He is is getting what you would charge for what you describe as additional risk, without the risk.
I think Mike and diesel pig are right. I would lean toward the guy that pays his own subs, and add a lein release clause to his contract.
Dave
How'd I do tat? I though I was posting to blue, not Gunner. Shoulda stopped beaten those fingers with da hammer long time ago!
Sorry, Gunner.
Edited 9/30/2004 2:59 pm ET by DAVERICHESON
LMAO! I'm sitting here going WTF? Then I saw your note,I guess I have to read the thread now..........On second thought maybe not.Who Dares Wins.
I have been on both ends of the "check directly from homeowner" route, as a contractor and as a sub.
It's not that uncommon around here. There are advantages and disadvantages to both the contractor and homeowner with this method.
Was I scammed, or was I a scammer, by taking part in these arrangements? No, of course not.
Normally in these situations, certs. of liability insurance, and WC coverage are required. Some homeowners are control freaks. They don't mind writing the checks themselves-it gives them peace of mind that bills are being properly paid.
Me, I prefer to pay bills myself-HO's often get a distorted view of your profit on the job when they see all the sub's and suppliers figures(they don't appreciate your overhead)
Obviously, I think it's pretty harsh to label this guy as a punk or scam artist on the information provided.
But then, I wouldn't think much of a homeowner who based their contractor choice on the opinion of a bunch of cyber-punks!
John Svenson, builder, remodeler, NE Ohio
Svenny --- "But then, I wouldn't think much of a homeowner who based their contractor choice on the opinion of a bunch of cyber-punks!"
I love that, that's brilliant. And the information would third, fourth, or fifth hand information by the time it gets back to the homeowner too!
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Thanks for all the opinions guys, I did not anticipate opening up that big of a can of worms and get everybody all worked up. It is however always a pleasure to see the different points of view and I always learn a lot from everybody.
I've since spoken to my brother again and he has shared some additional information gleaned from his subsequent interactions with these guys. Both contractors are well thought of in the area and one of the adjoining town's building inspector knows both of them well and has mentioned that my bother will not go wrong with either one of them (said BI being a somewhat distant relation by marriage to the family and is as honest as the day is long).
My brother has also since had more discussion with contractor A. A says that he mentioned HO direct payment to subs only as a means whereby the HO knows exactly where his money is being spent. He says he is perfectly willing to pay off the subs via his own GC checking account and has assured him that he collects insurance info etc. for all the subs working for him and that he abides by tax laws, etc. It seems that he is on the up and up. Again, my concern was fueled by my ignorance of GC business practices. I guess if my brother wants to know where his money is going either guy could probably produce a spreadsheet within a couple of minutes.
In any event, I've since offered to him that with everything being relatively equal between the two guys he needs to follow his gut feeling when picking between the two. Like Kramer once said on Seinfeld: "What does the little man inside you say? You have to listen to the little man".
>>"What does the little man inside you say? You have to listen to the little man".
Sometimes I wish he would stop talking!!
EricI Love A Hand That Meets My Own,
With A Hold That Causes Some Sensation.
MUTTFACE- "Thanks for all the opinions guys, I did not anticipate opening up that big of a can of worms and get everybody all worked up. It is however always a pleasure to see the different points of view and I always learn a lot from everybody."
Gary there certainly nothing wrong with opening up a can of worms if it opens up people to some thoughts, ideas and methods that they have never thought of or considered before. This topic has come up a few times in the past and the discussion has never really gotten anywhere on it because so few contractors understand or even really know about the Construction Management method of project delivery (probably since it really more a part of multi-million dollar and/or fast-track projects) and most of us are certainly just as unfamiliar with the concept of a CM acting as the owners agent.
It occurred to me last night that another advantage to the CM acting as the Owner Agent approach is the owner isn't then making huge payments to the GC as deposits or vague progress payments. I always think it sort of tragically ironic that contractors always seem to be asking how much of a deposit to ask for and how should they collect payments (generally what kinds of percentages to collect) which tips off to me that they really don't know what their project costs really are and when they occur otherwise they wouldn't be asking the question.
While our current project is residential it's only the second project in 14 years of business we've done using the CM acting as the Owner Agent approach and the first one was back in 1993 for a fast track 1.25 million design-build exhibit project we did (built an environment in the Meadowlands Convention Center for a display of 25 of those full sized robot dinosaurs at the time Jurassic Park came out).
I think this is a real good topic and I'm glad you brought it up and maybe it will lead to looking at the possibilities of the CM approach even further.
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We are always a can of worms here. never boring and always either educational or entertainintg - sometimes both. The only thing certain is that you get your money's worth!
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The story's never quite the same by the time it reaches the other end of the bar. I must say that this is entertaining more than anything. Popcorn anyone...?
Thanks for bringing it up. I know I learned a lot just reading this thread. Sounds like it's going to work out either way, ok, for your brother and that's good to know.
There is a game sometimes played in this manner. Basically the home owner hires the GC to watch the flock for say 10% fee. The homeowner is actually on record as a DIY contractor................this is fine if it's been discussed between parties and agreed upon.
This guy is pulling a con like Mike said.
There is one slight advantage... owner pays subs, therefore subs have been paid so there is no lien release issue. In many states the pre-lien paperwork that contractors are required to give to owners points out that the owner can protect themself from lien by subs by paying the subs directly.
That's not why contractor A is doing it, however. He's doing it because he's a punk.
It will all become clear when your brother insists to "builder" A that everyone, him and any of his direct-pay "subs," will need to furnish certificates of insurance evidencing workers comp coverage, plus general liability, plus (if statutory) disability.
There will likely be some hemming and hawing, some sincere bullsh*t about how "it's not a problem," but your bro should press this guy hard at this point, and if it starts to smell at all phony, like, those certs will never be produced, he should walk.
And choose B.
Or, just choose B and not even say another word to A.
I'm in favor of asking the guy directly. He is obviously playing a game of dodgeball to one degree or another. Ask him how he runs his paperwork and operation, you have the right after all with the amount of money you would be paying him. Maybe he has legitimate cause, so just tell him that you need to know since you are talking to your lawyer about all this so that things can be straight as to who is responsible for what and where does the money go. Then carefully watch him and see what he says.
Be wise on this one. I smell heartache in the air.
More than anything, spend a small amount of time and get references.
Muttface with all due respect to the other contributors here those who are categorically saying that your Contractor A (who is having the owner paying for subs) is a low life trying to pull a con, really don't (necessarily) know what the heck they are talking about.
I am currently working a project in CT where we are using a AGC 510 Construction Management Contact Contract which is described as "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 Contract)". There is really nothing wrong at all with the arrangement. In fact as projects get bigger and bigger arrangements where the CM is acting as the Owners Agent become even more and more common place. And as well as the lien issue protections that David Meiland brought up the arrangement can in fact potentially provide the owner with some cost savings too in that the CM isn't charging the owner for "financing" his project which he or she would be doing if they as the General Contractor were writing the checks.
Your brother's Contractor A may or may not be specifically using an AGC 510 but if he or she is generally speaking then he or she would also be using an AGC 520 CM Agreement Between Owner & Trade Contractor (CM is Agent) to manage the sub relationships and that agreement covers the insurance issues that some of the others here seemed to be concerned about as well as other details.
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Edited 9/30/2004 3:31 pm ET by Jerrald Hayes
jerrald ... would you like to put some money as to wether or not this guy is going to act as a CM ?...hah
or wether he even knows what CM is ?
hah.....
methinks he would have laid this out in his conversation if that is what he was getting at.. c'mon... guys who do CM are pretty proud of it.. they use it as a selling tool...
.i don't do CM... but i've known quite a few.. the legit ones all seem to have one thing in common... they've all been thru bankruptcy... and CM was their only way back into the game..
this guy is not legit... bet he's never heard of AGC 510..Mike Smith Rhode Island : Design / Build / Repair / Restore
Mike, Mike, don't be so hard on this guy, contractor A. Give him the benefit of the doubt.
We heard he was asked if he was going to act as CM. He was asked this in a noisy bar, and thought the question was "GM." His response, "no, I am not a girly man."
And when asked about the AGC 510, he thought it was an alternate shortcut out to the interstate.
I think we need Robert Haugen to come in here and give us the Arizona law perspective.
Jon Blakemore
arrrrghhhhhhMike Smith Rhode Island : Design / Build / Repair / Restore
Mike Smith---"jerrald ... would you like to put some money as to wether or not this guy is going to act as a CM ?...hah"
---"...methinks he would have laid this out in his conversation if that is what he was getting at.. c'mon... guys who do CM are pretty proud of it.. they use it as a selling tool..."
Yes Mike I would. First of all you should have recognized that you were hearing the story regarding the situation third hand from the client's brother and not straight from the horses mouth at all so it's first of all subject to both Gary R's interpretation and understanding and second of all not all that much information to go on. Contractor A may very well have explained that to Gary R's brother and we just not hearing about it. And I very certainly wouldn't have been so absolutely sure as you were that this guy was " a punk" and would have at least considered other possibilities. In fact like Blue_eyed_devil I was really quite surprised to see you going off so absolutely hog sure that this guy was just a punk without thinking out the possibilities. That's really not like you at all.
Secondly if the project was a $30,000 I might have gone with the this guy is a punk premise but the project cost was described as being $300,000 so a Construction Management approach really made sense and seemed to fit the profile better.
---".i don't do CM... but i've known quite a few.. the legit ones all seem to have one thing in common... they've all been thru bankruptcy... and CM was their only way back into the game.."
That a gross wild generalization to make. The CM firms you know of are hardly a valid enough statistical sampling to make a categorical judgment and assumption like that on. In my experience I don't know any construction management firms (certainly none of the ones we done work for or with in the past) that have been through a bankruptcy.
---" this guy is not legit... bet he's never heard of AGC 510.."
How do you know Mike. How do you know that 100% for sure? How from the 219 words in Gary R's initial post could you be 100% sure that the Contractor A he was talking about that his brother was dealing with wasn't talking about Construction Management. What were the keywords or phrases in those two paragraphs that tipped you off that this guy was a punk at the exclusion of all other possibilities? I guess I just don't have the clairvoyance that you have. I just think maybe you should have asked for more information on this one before you threw out the baby with the bath water or at least mentioned other possibilities. And FYI there are plently of other Construction Management contract formats out there too not just the AGC 510. I only mentioned that one since that's the one we worked with in the past and are using again right now.
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Edited 9/30/2004 6:39 pm ET by Jerrald Hayes
Boy, Jerry- haven't seen you around in a while, and Mike's got your undies all in a bunch all ready....lol.
What's happenin'????
Bob
Yo Bob, how ya doing? I'm really not bugged out by this but I do think I might have gotten Mike's undies all in a bunch a bit. I just don't think such an absolute one-sided, "this guy is a punk" view of the situation was thoroughly thought out.
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Gee, have I missed all the fun by stepping out for a minute here?
;)
I have done several job management jobs too, but I sit on Mike's side of the table on this one, if the facts are clearly presentled. It is possible that things are skewed a bit since we are getting it third hand.
Anyway, when approaching a customer with a deal like this, it is paramont to be clear up front, " Here is how we do things" or "We can do it this way or that way" and explain how the choices could effect the client honestly.
The fact that a price was presented and then as an after thought, he mentioned the little bombshell in there is what tells he he is flakey, IMO
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piffin -"The fact that a price was presented and then as an after thought, he mentioned the little bombshell in there is what tells he he is flakey, IMO"
But piffin you're making the same kind of mistake in reading Gary R's post that I think Mike (and some others have) made here. No where did Gary R say that Contractor A brought up the topic of the Owner paying the subs after the fact. Where does it say anything like that in his post? We have no way of knowing when it was mentioned and if it was indeed a CM proposal I bet with odds of 99-1 that the CM approach was mentioned up front.
if anything appears after the fact (and we can't really be sure of this either) it would be that the brother solicited Gary opinion on which two of the finalists to select after the fact. Gary wrote:
So that to me sounds like the brother had already done a lot of his due diligence since he has worked from a long list and had "his selections narrowed down to 2 guys with good reputations in the area". If anything Gary might be coming into this after the fact (and like I've inferred we just don't know that for sure either). In fact the brother has worked the list down to two guys with good reputations in the area and yet a bunch of online folks here who are hearing the story third hand are sure that Contractor A is bum. Where does the Contractor A being flakey assumption come from? You're not even basing that on third hand hearsay, you're basing that on an unsupported assumption!
I really just don't get where so may people are so sure Contractor A is a chump when Gary's initial post offered nothing in the way of evidence supporting that assumption and in fact stated the guy had a "good reputation".
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With all due respect Jerrald, you're starting to sound like one of the Breaktimers that has to ram his opinion down everyone's throats until they choke on it.
Sometimes people just see things differently. I gotta agree with you, of course there could be a legitimate reason. But some don't think that is likely in this case, I'm one of 'em. You do. No biggee.
With all due respect right back at ya Dieselpig but I'm not trying to ram my opinion down anyones throat at all. I came into this discussion to point out that:
1.) People were basing absolute conclusions on assumptions they were making that weren't really supported by anything Gary R (Muttface) wrote in his initial post and...
2.) That a Construction Management approach with the Owner Entering into All Trade Contracts is a genuine valid approach to projects.
And in fact given that I happen to be running a project right now that way (only the second one I've done like that in 14 years) couldn't it be assumed that everyone saying that Contractor A is a chump and a punk were also slighting my and my company? I didn't think that but wouldn't I be justified in thinking that? Then would what I writing be just defending and justifying my own position against a bunch of attacks? A good old friend of mine here runs what he considers to be a small construction management firm ( I think 5 guys) and according to a McGraw Hill report I recently read they manage something like 35 million dollors of volume. They are hardly "punks" and I based my decision to do the project we are running that way based on their success.
Right now I'd like to see if Gary R can't get us more information on all this too.
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Never mind Jerrald.
Go ahead and keep ranting. You are taking this way too personally.
Believe it or not, this isn't about YOU.
Yup, you make some good points, especially the one about not really having clear info presented here, which is what I said in the beginning of my post.
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jerrald.. first .. how much we gonna bet?
how about my favorite.. a $50 gift certificate to Outback ? ( shut up duane and jeff )
now dat we gots dat outta da way....
muttface said.. that both bids were substantially the same except that one had less in his scope of work..then he designated one "A" and one "B".. not specifying which one had less in his scope..
however .. they were apparently equal in price if you deduct the difference in scope.
so..one is gonna be a GC.. and the other is gonna require that the homeowner pay everyone.. if the price is the same, where is the savings from the Construction Mgmnt contract ?
next.. i didn't say YOU went thru bankruptcy.. nor that all , or even most , that use CM have been thru bankruptcy.. i merely said that the two that i knew ( and one used to give seminars on CM at the JLC -Live show) had both been in bankruptcy..
so... yeah.. he had a good reputation with SOME people.... i just never thought much of him after that
the one bought most of his equipment back at the sherrif's auction after pulling the plug.... never paid his subs, never paid his suppliers.. but a year later he was right back at it.. building $500 K houses and $1 million churches..
anyways.. who cares?.. now if muttface can ever find out if the one was REALLY talking about CM.. or he was just doing the old "no employees " dodge.. then we can settle up
but ,hey, whadda i no ?
Mike Smith Rhode Island : Design / Build / Repair / Restore
"jerrald.. first .. how much we gonna bet?"
You beat me to it ... hey .. what'd ya do to my font?
anyways .... that's what I was gonna say ... place yer bets!
U two ... I don't care that much ...
plus .... Mike .. ya know I love ya ...
but I really wanna see Jerrald eating at the Outback!
hell ... I wanna see anyone else but U eat at the Outback!
Muttface .... dig deeper ... we need the final stats.
OK ... Mike and Jerrald ... give this guy a list of Q's to quiz the contractor about ...
then we'll judge.
and I'll be unbiased when hoping that Mike goes hungry .... for once ...
not that I'm bitter ...
JeffBuck Construction, llc Pittsburgh,PA
Artistry in Carpentry
Jerrald and Mike,
I've been subcontracted numerous times in the situation Jerrald is describing. I'm in the middle of this type project now. Everything is on the up and up - I had to submit insurance certificates and I bill the GC. I'm 1099'd for the amount paid. The check comes from the homeowner (and usually pretty quickly). This arrangement is an occasional occurance with several GCs that I work for frequently. When I inquired about it, the explanation was that the financing aspect was taken out of the equation. The GC worked for a slightly lower percentage for not having to use their own money (or borrow and pay interest). The guy in question may very well be a punk, but this arrangement is apparently fairly common.
I invented punk.
"I'm 1099'd for the amount paid. "
Who sends you the 1099's?
And invidual does not need to send a 1099, only business.
And am I not sure that it is kosher for the GC to send them out unless he was the one that made the acutal payments.
Might want to re-check that with your accountant, Bill.
IIRC, "casual labour" doesn't get a 1099. Anyone contracting -- on a regular basis -- as an individual should get one, according to mine.
Might be a difference in state laws, but I doubt it.
_____________
Bill Hartman wrote:
"I'm 1099'd for the amount paid. "
Who sends you the 1099's?
And invidual does not need to send a 1099, only business.
And am I not sure that it is kosher for the GC to send them out unless he was the one that made the acutal payments.
______________Leon Jester
Roanoke VA
We weren't talking about casual labor, but a sub-contractor.
Someone that is in business, whether they are self-employed, partnership, corp, or LLC has to send 1099's for any one that they sub-contract with, except (I think that this part is true) with sub-contractor that is a corp.
However a person that is acting on there own, as an individual, when they hire the same people/companies they don't have to send out 1099's.
If Harry HO decides to remodel his house and hire a GC and then hirs an landscaping contractor and then hires a painter he does not have to send them any 1099's.
Although I don't think that there is anything prohibiting an individual from sending out 1099's it normally is not done and most would not ever know anything about it. That is why I ask Greencu.
But if Retail Ray wants to remodel his store and hires the same people to do the work for his companies building, then his company has to send them all 1099's.
I may be wrong about all of them - have to dig out records and I'm not that enthusiastic about proving I'm right - but, the one that sticks in my mind I know I was. The checks came from an account set up just for the project (which was a million $ home) with the contractor's and homeowner's name on them. The homeowner signed.
I invented joint checking.
I managed accounts here for one client for 8-10 years. he gave me his SS# and an initial deposit to start the checking act with.
It had his name, his SS # and my signature.
I had a couple other accounts with joint signature required in the meantime.
On the last job I did CFM, I could not start a new bank act with another person's SS#. They required having mine on the act as well, so we also made that a joint act. New banking regs.
Not sure if I would do another CM deal. There is more profit in cost plus
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piffen-"Not sure if I would do another CM deal. There is more profit in cost plus"
Huh? There's nothing that says a Construction Management project can't be done cost plus and in fact it seems to me that there are more CM projects done Cost Plus Fixed Fee than there are in the more typical and traditional GC type project environment we see every day. The project I mentioned that we did 14 years ago we did as a CM project precisely because it was a fast-track project it had to be done Cost Plus or we never would have met the production deadline.
As for is there more profit in Lump Sum projects or Cost Plus I that arguable at best but I would argue on the side of Lump Sum projects which is why every project we've done since then has been Lump Sum.
The CM project were doing right now we while were using essentially the same AGC CM contract we used all those years ago we are running it as a Lump Sum project although since not everything is designed or worked out yet it's essentially a string of Lump Sum sub-projects all that were stringing all together.
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Gerald, pardon the interuption.
Nice record setting game that was a while back. Remodeling Contractor just outside the Glass City.
Quittin' Time
Calvin you are of course talking about the game just the other night where Bernie Williams won the game with a walk off 2 run home run to clinch the division title and set a new team record for home runs in a season 262 by doing so, correct?
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Hell no jerald.
Think alot of runs to no runs.
Forever in the record books.................Remodeling Contractor just outside the Glass City.
Quittin' Time
I am not up on the subtleties. Will you please explain how a project done CM cost plus fixed fee differs from one done cost plus fixed fee?
Or is it another one of these "owner pays subs directly" deals, and that is the one we are calling CM?
Bob Dylan-"I am not up on the subtleties. Will you please explain how a project done CM cost plus fixed fee differs from one done cost plus fixed fee?"
Well there is no difference between a CM project done via CPFF and one done CPFF but I'm gonna assume that just a misprint??? Are you asking what's the difference between a CM project done CPFF and a CM project done Lump Sum or what the difference between a CM project and the more typical GC package?
"Or is it another one of these "owner pays subs directly" deals, and that is the one we are calling CM? "
What might be helping confusing the issue is that with ANY legit ""owner pays subs directly" deal" that is really has to be looked at as a Construction Management project because it just doesn't fit or make any rational sense under the typical GC mode (at least not to my understanding).
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Let me explain in more detail.
One can do a deal where the agreement is between the owner and construction manager (CM). It is cost plus fixed fee.
One can do a deal where the agreement is between the owner and contractor. It is cost plus fixed fee.
What is the diff?
In a "true" construction management agreement, the CM does just that- he "manages the construction" for the owner, and the owner holds the contracts with the subs (or a separate GC) and pays them directly. As you know, in the GC model, the GC holds the contracts with the subs, and a separate contract with the owner.
We do a lot of true CM work with school districts here in NJ. As the construction manager, we help the district with budgeting, getting bond referendums passed, assembling bid packages, evaluating the bids, and negotiating contracts. We then provide oversight to the owner during construction, advising when the schedule is slipping, reviewing change orders, approving monthly billings, etc.
Many times the term "construction management agreement" is used in other forms, but this is the true meaning of the term in the commercial arena.
Bob
The PM jobs I have done were hourly rather than percentage
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"with the contractor's and homeowner's name on them. The homeowner signed."
Based on that it is really not clear "who" is doing the paying. Just that the HO is the one that authorized your payments.
Something like that would get down to any contract that you signed and the relationship between the HO and CM/CG.
And then only if a problem arised.
I was just wondering because. But the 1099 are the problem of the payor and not the payee so it really doesn't matter to you who sends them or if they don't send any.
Mike, Mike, Mike!
A guy doesn't need to know what a CM is, to implement the theory...and be legit. Just because someone does business in a different way doesn't mean that its a scam.
And...Im not saying this guy isn't scamming....I'm just saying that there's not enough information to jump to that conclusion.
blueIf you want to read a fancy personal signature... go read someone else's post.
After having read most of the replies, it apperas to me that there are two different proposals entirely - apples and oranges comparison.
Contractor A sounds like more of a construction manager - a guy who represents the owner but does not actually pay the subs. If he's legit, he will require written contracts and insurance certificates from all subs. He may not have any crew of his own, and if he does, it will probably be only one or two guys who will be jack-of-all-trades types. Mr. A will be able to read the plans, supervise the subs, and generally be the on-site, middleman between the HO and the subs. He will review requests for payment, and then release the request to the owner if he determines that the work has been completed to his satisfaction and per the plans and the owner's requirements.
Contractor B is a guy who may or may not be on the site all the time, but he will have a fairly large crew who may be able to handle many aspects of the job that might ordinarily be subbed out, and one or two foremen who can handle his crew and supervise the subs. He will pay the subs, and lump their fees in with his own in a monthly or weekly payment request. The Ho will only be writing checks to one company. I have worked for a company like this, and there have been times when we have had licensed plumbers, electricians and HVAC people on staff, such that there were no subs at all.
In both cases, it should be the owner's prerogative to ask for or deny certain subs, or to ask Mr. B to sub out certain parts of the job if the owner wishes. I find that it's actually harder to get a bad job done right with type B than with type A, because the CM will not forward a payment request until the job is done right. With type B, often the sub gets paid and the GC winds up "fixing" or completing a bad sub job.
Hope I didn't offend anyone, but that's the way I see it. I think more of this applies to commercial and industrial construction than residential; but in the trades, you get all kinds.
Gary/Muttface,
Tell your brother to come over here so we can get all the information. I think it might help clear some things up.
OK, heres the deal. I live and work in Ct.
If a sub bills me I pay 6% labor tax on the amount. If he bills the HO there is no tax on owner occupied residential or new construction.
I am doing a remodel now In the 100 K range. I am acting on behalf of the HO collecting ALL neccesary certificates of insurance, comp and contracts. The HO is writing checks to the subs only after my approval.
It takes a high degree of trust between myself and the HO for such an arrangement to work. I dont know if I would be comfortable as a HO hiring someone I did not know with this arrangement.
I think I would be inclined to go with the guy who pays his own subs.
I've been contacted by a GC and paid by the homeowner more than once. Reduction in paperwork.
All the facts aren't in here, so what's the point in getting all hung up?
Right now, I think Jerrald has the best take, especially after your sales tax post. Don't worry, we can fix that later!
Muttface,
It's been about three years since I was activly involved in any form of Construction. But I think I would ask some questions.
It's not nearly as rare, and doesn't automatically make the guy a punk because he wants the home owner to pay the subs Directly. It makes him a COnstruction Manager like Jerrald said, not a GC.
I can name about a dozen very reputable builders who are in fact CM's and not really builders. Their finished products run from just above average to spectacular multi million dollar homes.
You brother needs to ask ask some questions. The two different types of relationships have different risks and benefits and he doesn't want to be left holding the bag. He will want to call the Building inspector or state and find out if He goes with the CM guy what he is required to do. He may have hidden costs that make the comparison not really apples to apples.
All this assumes he has checked both guys out. It may simply be that no matter how good this guy is he is bad with money and his subs will work for him but don't trust him to pay them.