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Message
Remodelers asking for cost plus on $300k project, How much cost manipulation
Posted on 3/12/20 at 10:59 am
Posted on 3/12/20 at 10:59 am
And kickbacks to the GC do you think occurs with their subcontracted trades? I just find myself being very skeptical about the cost plus being the only money the remodeling GC is making. Is there a strategy the homeowner can use to mitigate or deter this?
8
Posted on 3/12/20 at 11:19 am to Old Sarge
quote:
Is there a strategy the homeowner can use to mitigate or deter this?
Stop being very skeptical about the cost plus being the only money the remodeling GC is making
Posted on 3/12/20 at 11:47 am to Old Sarge
It's COST + whatever percentage you negotiate. You should get your cost going in and be able to determine the rest. What strategy do you think there is? If he gets a "kickback", what difference is it to you if you know your costs?
Posted on 3/12/20 at 12:52 pm to jmon
quote:
What strategy do you think there is? If he gets a "kickback", what difference is it to you if you know your costs?
Sub and gc could agree to a higher invoice price. Sub gets more, gc gets more and maybe a cut of the subs extra $.
Posted on 3/12/20 at 1:33 pm to Coon
Exactly
Posted on 3/12/20 at 1:42 pm to Old Sarge
You can find a new contractor if you dont like their price.
Its that easy.
Its that easy.
Posted on 3/12/20 at 2:03 pm to kengel2
That’s not how cost plus works
Posted on 3/12/20 at 2:09 pm to Coon
quote:
Sub and gc could agree to a higher invoice price. Sub gets more, gc gets more and maybe a cut of the subs extra $.
So what. Your price can't increase any over what the negotiated cost is plus markup. If the price is fair and agreeable, why would you care who gets what money and from where?
Posted on 3/12/20 at 2:12 pm to Old Sarge
In my experience, cost plus is:
Framing @ $15,000 + 10%
Electrical @ $6,000 + 10%
and so on.
How do you get screwed if you agree to price?
Also, as stated, be the GC and rubout (see how that works out for you) or get another price. The contractor has no obligation to do anything but give you a price, negotiate, and provide service. Also, I am not a GC, fyi.
ETA: all of what I said only works in an agreed upon contract for specific items involved in the construction. If you are building with cost plus on items that can be exceeded at will, it is better to not enter into this, unless you have a relationship with the contractor. I assumed that the price for items you posted in the OP was agreed upon.
Framing @ $15,000 + 10%
Electrical @ $6,000 + 10%
and so on.
How do you get screwed if you agree to price?
Also, as stated, be the GC and rubout (see how that works out for you) or get another price. The contractor has no obligation to do anything but give you a price, negotiate, and provide service. Also, I am not a GC, fyi.
ETA: all of what I said only works in an agreed upon contract for specific items involved in the construction. If you are building with cost plus on items that can be exceeded at will, it is better to not enter into this, unless you have a relationship with the contractor. I assumed that the price for items you posted in the OP was agreed upon.
This post was edited on 3/12/20 at 2:19 pm
Posted on 3/12/20 at 2:17 pm to Old Sarge
quote:
That’s not how cost plus works
If you are the owner you can absolutely tell the cost+ guy to f off and find a new contractor.
Posted on 3/12/20 at 2:18 pm to kengel2
Yeah switching contractors on a major renovation, that’s real simple
Posted on 3/12/20 at 4:37 pm to kengel2
quote:
If you are the owner you can absolutely tell the cost+ guy to f off and find a new contractor.
If you’re working with a general contractor on a cost+ basis and you also have to go out and find subs, why are you working with a general in the first place?
Posted on 3/12/20 at 5:44 pm to Coon
quote:
If you’re working with a general contractor on a cost+ basis and you also have to go out and find subs, why are you working with a general in the first place?
If you think the cost+ contractor ans his subs are ripping you off why would you keep them on the job?
I never said go find new subs, I said go find a new contractor that isnt cost+.
Posted on 3/12/20 at 5:47 pm to Old Sarge
quote:
And kickbacks to the GC do you think occurs with their subcontracted trades? I just find myself being very skeptical about the cost plus being the only money the remodeling GC is making. Is there a strategy the homeowner can use to mitigate or deter this?
You simply need to have a very good and thorough quote. Look it over, and make sure that it looks sound.
The biggest issue with Cost+ is over runs. Or the GC not including something in the scope of work.
Posted on 3/12/20 at 6:04 pm to baldona
The problem with it is the quote really becomes meaningless. They can always come back and go oh look the framers bill came back $4000 more than the original budget in the estimate so you owe 4000 more +20% right?
Posted on 3/12/20 at 6:52 pm to Old Sarge
I am doing a full cost plus build right now. My contractor gives me copies of every bill that’s paid. I often speak to subs about price and it would get real muddy quick if he was getting a kickback. He takes a month to do a bid and has subs (sometimes 2 or 3) hard bid the project then he adds a little bit more in for changes and overages. Some things have been above but overall we are coming in under budget so far. He is making 6 figures off of this so that may make a difference.
Posted on 3/12/20 at 7:02 pm to Old Sarge
quote:
The problem with it is the quote really becomes meaningless. They can always come back and go oh look the framers bill came back $4000 more than the original budget in the estimate so you owe 4000 more +20% right?
You need to ask for a break down and be pretty firm. Dont pay until you get it. If you didnt authorize any changes then why did their bill go up?
Make him show you where the extra 4k came from?
Post it up if you want, its bs if you didnt authorize changes and they gave a bid.
Posted on 3/12/20 at 8:56 pm to Old Sarge
In my opinion most contractors do not pad Bill's, that is the small minority. The real problem is the lack of a win/win for the customer. The contractor has no incentive to work hard to get you the best price. This has helped construction costs increase to where they are now. Fox guarding the hen house.
Posted on 3/13/20 at 5:36 am to Old Sarge
quote:
The problem with it is the quote really becomes meaningless. They can always come back and go oh look the framers bill came back $4000 more than the original budget in the estimate so you owe 4000 more +20% right?
Not for a good contractor that knows his expenses well, which any good cost+ will know. For the work you have planned, he should be able to break that down very very close to the real cost. Now if you make changes and upgrades, sure. But $4000 extra on framing shouldn’t happen if the plans stay true.
Discuss that with him, ask him what happens if his framing costs come in 20% higher then he expected. If there weren’t any changes, then he should eat that as it’s his mistake.
Posted on 3/13/20 at 10:05 am to baldona
quote:
Discuss that with him, ask him what happens if his framing costs come in 20% higher then he expected. If there weren’t any changes, then he should eat that as it’s his mistake.
Cost+: Risk is on the owner
Lump sum: risk is on the gc
You can’t have your cake and eat it too. You can’t go cost + and make the gc take the risk.
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