There are a lot of things that need to happen in order to have a project move from an idea to completion. The portion that we take care of as a General Contractor and Custom Home Builder is Project Management and Site Supervision.
Yes, we also do a lot of carpentry work in-house but that is separate from what we're talking about here. That work could also be done by a subcontractors but we choose to do some of the important work ourselves in order to control the quality and keep the projects moving along nicely.
Here is a list of what could be included for the Project Management and Site Supervision of your project:
Not all of the items above are necessarily required for each project but it is what we would take care of when needed.
Simply put, we are not Designers, Architectural Technologists, Architects or Engineers. We are carpenters and have been trained as such just like the aforementioned in each of their particular categories.
We believe a successful project requires a great team to fill in all the requirements and we are filling in the category of Project Management, Site Supervision and Carpentry. We are more than happy to provide input throughout the design process as it relates to constructibility but we will not do design work (nor do you want carpenters to do designer work).
Here are some examples of things that would need to be provided by somebody else:
Will we offer input on the items above? Absolutely! But the input is in response to the question "Do you think we should go with option A or option B?" as opposed to "What size vanity should we put in, what colour should it be and which faucet should we choose?"
It's important to note that we're happy to get costing for you for options you are considering. All the items listed above that need to be provided by somebody else may require some input from us on costing in order for you to make a decision and we understand that. So when the options need to be narrowed down and cost is one of the factors, tag us in!
The more we have designed and planned out ahead of time, the smoother the project will go. Does this mean everything needs to be decided on before construction starts? No. In fact some things may not be able to be decided on until later.
For example, we don't need to know your paint colours at the time of framing but we will need to know where you plan on mounting things to the wall so that we can include backing where required. You will also want to know where you are going to place furniture so that the designer can complete the electrical plan for the electrician before we insulate and drywall.
As you can see, there are a lot of things to think about and many team members required. This is not a one-man operation. We have multiple people involved with each project from our company alone and we pull on the experience and knowledge of our subcontractors as required.
More often than not, we are asked to price a project with little to no details. We may get a question like "How much will it cost to build a 2,500 square foot bungalow?" or "How much to renovate my kitchen?" If we're lucky, the best plans we'll get are plans that say Issued For Pricing which have very little detail to actually get accurate pricing.
It's impossible to give an accurate price without a full set of drawings and complete set of details and selections. In renovations it's even more difficult as we often don't know what we're going to uncover until we get into the project.
So why set this expectation? Why risk setting yourself up for disappointment?
As a homeowner, we understand that price is important and that it is difficult to commit to a contractor without seeing a price. On the same hand, if one contractor is quoting $250,000 for a project and another is quoting $300,000, this is likely a mistake somewhere and going for the cheaper option is likely not going to pan out in the end (nor does it guarantee that the project will actually be cheaper).
This post is meant to open your mind to a new way of thinking about your project. It's not meant to convince you to work one way or another, it's simply information that you can use so that you can make a conscious decision about what is best for you.
Two Types of Contracts
In our years of construction, we have used a variation of contracts but they have all worked into two different categories:
The Cost of Business
Before we get into the differences between the two contracts, it's important to understand that there is a cost to doing business. That means that it costs money in order to be in business.
For example, if you work in an office, there's a cost to keeping that office running as well as keeping you as an employee. On top of paying your salary, the business also needs to pay for your benefits, the lease and/or maintenance of the building, the utilities, the computers, the desks, the chairs, the cleaning, insurance, taxes, loans, interest, vehicles, software, hardware, supplies, subscriptions and so forth.
That means that your "cost" (meaning the cost to the company) may be $35/hour but the company also needs to recoup all the other costs that are associated with keeping you paid.
As a contractor it is the same. There is a cost to being a contractor in business. There are things required in order to stay in business and continue to deliver outstanding quality and service.
(Yes, there are a lot of contractors who do not understand this but that is why a lot of them go out of business. And that's not good for the industry or for the homeowner.)
Now, whether those costs of business are hidden in the Fixed Price Contract or out in the open of a Cost-Plus Contract is up to you to decide what makes you feel more comfortable.
Here are some differences between the two different types of contracts. Whether or not they are pros or cons are up to you to decide.
Cost-Plus is financially transparent for the project because all financials for that project are shared with the homeowner whereas a Fixed-Price Contract does not require the contractor to share any financials. As an example, if a toilet costs the contractor $400 and the fees in Cost-Plus Contract work out to total a 30% markup, then you know that toilet will be $400 + 30% which equals $520 (plus applicable taxes). In a Fixed Price Contract there is no requirement to share the cost of the toilet so the contractor could charge you $700 (plus applicable taxes) if he chooses to. Ultimately that 30% needs to be worked into the price somewhere. Whether it's hidden or out in the open is the difference.
As part of our contracts, we offer a 3-year workmanship warranty (New Homes have a 7-year Tarion warranty). Outside of the workmanship warranty, there are also products that will have warranties. With Cost-Plus you will have a copy of every receipt and invoice for everything for your project. With a Fixed Price you will not receive any of those receipts or invoices. Any product issues you have will need to go through the contractor as they will have the original receipt.
Cost-Plus may seem as though the financial risk is on the homeowner, however, if the Fixed Price Contract does not include everything or anything is unclear, there is the risk of Change Orders for an undetermined amount. If the contract is tight and the work is very clear, a Fixed Price Contract could be the best option. If there are a lot of uncertainties or things are not detailed extremely accurately, the Cost-Plus Contract may be the best option.
It may seem like a Fixed Price Contract has the most incentive for the contractor to stay on schedule in order to hit milestones and receive payments, however, there is no benefit to a contractor taking longer for a Cost-Plus Contract either. It's always beneficial for any contractor to get in, do the work as quickly as possible and move on to the next project. Whether it's a Fixed Price or Cost-Plus, there is usually a fee for the project management and taking longer on a project is not necessarily going to increase this fee which means lost money to the contractor in either case.
Which Contract Does TCB Use?
For the last couple of years we have only used the Cost-Plus Contract. Does this mean we would not do a Fixed Price Contract? No. We would be happy to do a Fixed Price Contract however we would need a lot more details than what we usually get at the beginning of a project.
That being said, we understand that homeowners need to see a price. It's hard to understand how a 2,500 square foot home will cost $900,000 until the price is broken into categories. Knowing this, when we are contacted at the early stages, we can put together a rough estimate which shows where costs could go depending on the final design, details and selections. This, to us, is the starting point. From here decisions need to be made in order to address as many of the project priorities as possible.
Which Contract Is Best For You?
That's up for you to decide. No matter which route you go, you want to make sure you feel comfortable working with your contractor. Whether it's a Fixed Price or a Cost-Plus Contract, there are going to be unexpected costs due to changes and/or site conditions. It's a reality of renovating and building custom homes. It requires a lot of work and the lines of communication need to be open between everybody involved when these things happen.