Of course customers want to know how much their project is going to cost. In the conventional model, many architects (and yes, sometime us) prepare drawings, a ballpark budget, spec’s and ultimately send it out to several trusted general contractors to get a lump sum bid…But what if that model is wrong?
The answer is you save real money, spend more time and have less certainty. Here’s why: A lump sum price has built in fat to cover the incidentals, the grey areas and still make a profit.
3 alternatives are discussed below
1. A “cost plus” contract (often called time and materials) invloves the contractor purchasing the material and labor at “cost” plus a mutually agreed fee.
The downside is that a monitoring system needs to be in place to review all costs (usually a weekly basis) which takes substantial time for the owner and contractor and good book-keeping and good communication.
2. The next alternative, is paying a construction manager (someone with lots of construction experience) who actually has no workforce on the job but coordinates and oversees day to day operations. The construction manager is generally paid by the hour, week or a percentage of construction cost. This too is for owners who do not mind getting their hands dirty but wish to save money. Like the example before the materials are usually obtained at net cost. Labor is usually bid out among several subs.
3. A GMP (Guaranteed Maximum Price) is based, as the name implies that the contractor provides a GMP. However, he continues shopping for possible savings on materials and labor. If there are savings- the savings are split between the owner and contractor at a mutually agreable percentage.
This not for the faint of heart and the uncertainty of not having a fixed price can also be harrowing…BUT typical savings generally fall in the 10-30% range!
We have some other ideas and would be happy to discuss them with you, CALL NOW 914 980 5532.