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Joined: Oct 2000
Posts: 5,392
S
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we now return you to your regularly scheduled flame in progress....

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With those definitions, let’s look at some reasons why you should not get involved with Cost Plus or Time and Material Contracts.
I (dare i say 'we') , can be taught....
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Lawsuits on C+ or T&M jobs are filed at the rate of 2 and often 3 to 1 over fixed figure contracts, and arbitration's are enacted at the rate of 9 to 1 over fixed figure contracts. This is information that has been supplied by both attorneys and arbitrators that specialize in construction related problems.
trade stat's....what's the old adage???

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Lenders will not lend on Cost Plus or Time and Material Contracts unless there is a not to exceed clause in the contract. That means, and I have seen this happen in a court room, that if your job total exceeds the not to exceed clause, then, no matter that you have change work orders signed and dated, you will not get more money from the customer than the not to exceed number.
Lenders do not agree universally on anything but thier own self preservasion and interests.
If in fact, for the sake of argument, we have a renovation job, figures will not commonly be exact. IMO, the 96% status would more likley include contractors giving out exact figures on the unknown....

the 'lender' needs to be intergral in the decision process as events unfold.....if in fact this is not so, get another 'lender'

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Cost Plus or Time and Material Contracts are often preferred by customers because they believe that contractors are charging more for their work or services on fixed figure contracts than they should. Their reasoning is by doing Cost Plus or Time and Material Contracts; the invoices will keep the contractor in line and prevent them from making huge, unreasonable profits. Unfortunately, most contractors don’t even make a livable wage, let alone a huge, unreasonable profit.

C+ has been a trade staple since trades have been called trades, however , the truth of C+ is, at least in renovations, that one does get a better deal, and is able to somewhat prioritize and stipulate vs. a solid figure/work directive.

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The reality of Cost Plus or Time and Material Contracts is that most contractors using this type of contract pad job costs. They will often bury costs, including overhead expenses, into the job costs, thinking that the owner will not be able to find them. In reality, all too often the owner figures out what is going on (often with outside help) and the contractor ends up eating expenses or doing work for cost only, with no money to cover overhead expenses or profit.
Let the bad apples rot publicly i say, all others can bill out with realistic lingo....

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Who draws the plans and gets the permits on a C+ or T & M job? If the owner has the plans drawn, who pays for the Engineering if it is required?

WHO wishes for a concise plan in the first place?
If we fly blind into a T&M job, most will charge permit fees, what is the mystery here? say this to your customer beforehand: YOUR GOING TO PAY A PERMIT FEE

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Who pays for ,impact fees, connection fees, utility hookups, temporary power hookups, port-a-potties, licenses, bonds, various job insurances and performance bonds for your job?

why would these not be prearranged?

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Owners often want to do Cost Plus or Time and Material Contracts and furnish some or all of the materials for the work to be done. They believe that they are saving the contractors markup on the materials. In turn, they expect the contractor to guarantee both the materials and the installation of those materials.
If the contractor does allow the owner to furnish materials on the job, and the materials are not on the job when they are supposed to be, what then? Who goes and gets the materials? Who pays for the down time? If the materials are too big and must be delivered to the job site, i.e.. a load of roofing, who pays for the delivery?

Testimony to the big orange place & co, does anyone here stand behind materials the customer has provided?

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If the owner wants to pay the subs direct, the contractor has recommended those subs and the owner finds out that they could have had the same job done cheaper elsewhere, whom do you think they will call on to pay the difference? If you use a cheaper sub to make them happy, who will be responsible for the quality if there is a problem?

pathetically cut & dry, most GC's will charge 15%, yet if you wish the aggravation, the onus is on you, you get what you pay for, and you are responsible for what you have arranged.

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Owners often want to use the contractor’s suppliers to purchase materials or other items such as appliances for their job. Who guarantees those materials or other items if there is a problem with either quantity or quality?

see previous response....

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Will the owner be willing to pay for your travel time to and from your office to the job site, or from the job site to the supply house and back to the job site if there are problems to resolve or meetings to be held?
ditto......
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If a job is stopped because of one or more missed engineering requirements or any existing or missed code requirements, or some other reason brought on by a building inspector, who pays for the corrections and the down time?

who eats it? by rights he who's fault it is......

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Who pays for mistakes that the contractor makes and the materials that must be replaced or repaired because of those mistakes?

we do
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In Cost Plus or Time and Material Contracts, changes are frequently requested by the owner and made by the contractor, with no change work orders written, under the assumption that the Cost Plus will cover the changes. At the end of the job, the owner is faced with the changes presented by the contractor in written form, and they are often far more than anticipated. Then the owner starts trying to find ways to avoid having to pay for the work that they requested. This is a common item of contention in almost all arbitrations that are done on Cost Plus or Time and Material Contracts.
this i can accept as lack of communication, i've seen it, dealt with it....job 'updates' should follow impending changes....

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And finally comes the issue of how to handle problems on the job. Which is the most economical way to handle dispute resolutions? Should you mediate, should you specify binding or non-binding arbitration's, should you hand the whole problem to your attorneys and let them slug it out in court. Guess who would pay for that scenario?

18% from the average 'headhunter'......

Joined: Dec 2000
Posts: 127
G
Member
I agree with George that at least a lot of small businesses don't fail. I shut down a good business because I realized I really wanted to do something else. I'm sure I am not unique in that decision.

[This message has been edited by gpowellpec (edited 07-22-2002).]

Joined: Oct 2000
Posts: 5,392
S
Member
A well as one of your tenure should Gerald, yet however, how did the trade stat's play this?
With all the chp's this & that, the variables, etc, in this 96% i side on the scare tactic marketability.....

( wait!, this can work for my company too!)

96% OF ALL DYI'ERS THAT DON'T CALL AN ELECTRICIAN WILL BURN!

(pat. pending, all rights reserved...)

[This message has been edited by sparky (edited 07-22-2002).]

Joined: Jan 2002
Posts: 1,457
E
Member
I do mostly remodel jobs and many of these are time and material. I am NOT going out of business any time soon, although I have been doing it for 8+ years so maybe my time is about up. When I do quote a fixed price for a job I am gennerally certain about what the job will entail and I seem to make a little more money on these jobs. For peace of mind for myself and customers I have no problem with t&m billing at all.

Joined: Apr 2002
Posts: 914
E
Member
If you're not good at business, you will fail whether you use T&M or fixed bids. Both can be screwed up! I much prefer to give a fixed bid because I then have a chance to turn the job into pure profit by bringing it in under budget and faster than planned, but this is not always the best way to bid. As I stated in another post, I recently finished the rough on a tough project that I made very good money on by using T&M, but I would've lost my a$$ on a fixed bid because it was worse than my wildest imagination.

As someone else just stated, no matter how you bid, you need to spell out who's responsible for what ahead of time. And realistically on T&M or C+, you charge for everything you do, from permits to plan, etc.

[This message has been edited by Electric Eagle (edited 07-22-2002).]

Joined: Nov 2000
Posts: 2,236
Likes: 1
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Wow... *grabs popcorn*

I don't see much of a difference in T&M(+O&P) and C+... seems to be like saying "6 of one and a half dozen of the other"...
To me, the "+" in C+ would be the same as the "P" in T&M(+O&P).

Enter in the bid jobs, and seeing into the future would be the only difference.

My observations:

We, as Contractors, like to do bid jobs because of the potential to make more than we could on T&M, however, the General Contractors apparently want us to bid in hopes that we'll come under what it would have been for T&M (i.e. a loss, or under-bid) and in order to make both parties happy, a solid guesstimate of the T&M(+O&P) costs should be pretty close to the bid price anyway...

So what's the big deal? Ideally, it'd be the same numbers.

I don't like doing bid jobs because I'm not good at estimating, but I'm getting better at it...

Joe M. has done nothing but T&M for the last eight years.

I don't get it either, Steve...

(I've read "part" of his book too...)


-Virgil
Residential/Commercial Inspector
5 Star Inspections
Member IAEI
Joined: Oct 2000
Posts: 5,392
S
Member
yeah, well.......
i can be wrong, and i can be taught.....2400 posts stand as testimony to this....
perhaps Michael will chime in, i'll stop blowing chucks for now...
( lest webmaster digs out the valium blow-gun...)
[Linked Image]

Joined: Mar 2002
Posts: 360
T
Member
Well, I thought the spelling of Gremlins (Graemlins?) was right, That is how it is spelled if you click on the smilies legend link. I spelled it with no "A" at first, then looked at the legend and changed it.
Trianwire

Joined: Nov 2000
Posts: 2,236
Likes: 1
Member
Trainwire,

I knew what you were talking about!

And it is "Graemlins"...

When a UBB board like this one converts ACII text smilies to graphic images, it is indeed called a "Graemlin" rather than a smilie.

However... technically, since Steve imported his as a <img>, then it is merely a graphic.

</analyzing to the Nth degree>
</boring trivia>

[This message has been edited by sparky66wv (edited 07-23-2002).]


-Virgil
Residential/Commercial Inspector
5 Star Inspections
Member IAEI
Joined: Apr 2002
Posts: 7,333
Likes: 7
Member
Sparky & Everyone else:
Guys, I hope that my comments didn't pi.. off anyone. Wow did this topic get long..

As to the "crack" about the spelling....hey, it was supposed to be funny, not a serious thing.

See ya all later

HotLine1
John

[This message has been edited by HotLine1 (edited 07-23-2002).]


John
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