ACTUAL AND FAIR We believe in the time-and-materials, because with this type of contract our customers are asked to pay for the actual and fair costs of their remodel, and we work as a team to complete their project. As a design/build company, we work with the customer to design what they want, and we develop a budget as a result.
We use time-and-materials for our customer contracts as well as for our contracts with subcontractors. As a remodeler, we are the client of the subcontractor. We choose skilled subs who work to move the project along to our customers' specifications. Our contracts with our subcontractors will be based on the character of the work they will be doing. If it's a whole-house project with many unknowns, or a small project on a tight schedule, we ask for a time-and-materials contract with a budget approximation. This avoids bids with padding for unknowns or substandard work if the subcontractor's fixed bid was significantly under actual cost. In a few cases, if the work is well defined we will ask for a fixed bid.
AVOIDING ADVERSARIAL RELATIONSHIPS With time-and-materials, it's very important to have a pre-screened, quality subcontractor with whom you have a relationship. We also communicate regularly with the homeowner to make sure they are aware of progress against budget and the cost effect of changes.
By matching our sub agreement to the work to be done, we keep the team approach consistent for customers and subs and avoid the adversarial relationship of fixed bids. Our incentive to complete with quality, efficiency, and timeliness is a happy customer who asks us back and refers us to others.
Mercer Island, Wash.
GETTING THE NUMBERS RIGHT We have fixed-price contracts with our clients, so it makes sense to have the same with our trade contractors. We try to do this with all subs. Fixed price puts more of an onus on us and our subs to get the numbers right. It is also a selling tool. You can tell the client that fixed price for them and for the subcontractors protects them, so they don't feel they need an open pocketbook.
The fixed bid protects the homeowner. Time-and-materials is a gamble because there is no commitment as to the final cost and there's no real incentive to get the project done in a timely manner. With time-and-materials, you constantly need to justify the labor costs.
COMPETITIVE PRICING On the remodeling contractor end, the more detail you get prior to locking in the price, the better, because there are fewer and smaller surprises between start and finish. Not everything can be foreseen on every project, but items in question should be few and identified prior to construction.
By IRS rules and regulations, a subcontractor must have the right to earn a profit, but also run the risk of losing money or earning less than expected. By using quality, experienced subcontractors who know what to look for when they bid a project, the surprises will be fewer for them as well, and the risk of cost variance is shifted from the homeowner to the general contractor to the subcontractors. We stay competitive with fixed-price contracts. If we, or our subs, are not pricing competitively, we lose the job. If we do that too often, we lose the business.
Seattle Big50 2000