By Joseph F. Schuler Jr.. Alice Wilder Hall knew when she bought her house in 1984 that she wanted to re-do her kitchen. Not much had been done to the 1904 "Carpenter's Victorian," so-called because houses like it were built in Palo Alto, Calif., by tradesmen who often lived in them. They're more modest in size and finish than their well-to-do cousins elsewhere in Professorville, a National Historic Register district. The name is derived from those who live there--professors of nearby Stanford University.

Wilder Hall's 1,626-square-foot, three-bedroom house had suffered a kitchen modernization in the 1970s, leaving it with all-brown cabinets, linoleum, and countertops.

"It was a matter of saving up enough money," says Wilder Hall, a widow with two children, high school and college aged. "It took me 16 years." She wanted to take the kitchen back to something it might have been and make it fit in with the cozy, comfortable feel of the turn-of-the-century house.

She hired architect Virginia Schutte, of V Schutte Design, and soon after met with Laura Ferrell, of Woodenwings. Ferrell does 70% of her remodeling in historic restoration and all of her work with outside architects. She loves the city's old homes, and sits on the Palo Alto Stanford Heritage Board, a volunteer preservationist group.

Before Wilder Hall met with Ferrell, she talked with other contractors, and she got a lot of "we could do this, or this," but no calm, rational look at what she wanted and its cost.

Photo: John Sutton
Designer Virginia Schutte says the furniture look is hot in kitchens. In this kitchen, the sink, which is surrounded by wood countertops and flanked by wood legs, looks like it's in an old kitchen table.

It wasn't until she signed a $1,000 price planning agreement with Ferrell that she saw an end to the vagaries and the start of Ferrell's "take down" process, part of what the $3 million-a-year contractor dubs "value engineering." By determining what really mattered, and what Wilder Hall could do without (or do herself), the process pinched more than $36,000 from the original budget of $149,505. And yet, at the end of the six-month remodel, the homeowner felt that she didn't sacrifice much. She got exactly what she wanted: a beautiful, "unfitted" kitchen, with rock maple butcher block counters, generous cabinets, a marble "tabletop" sink to further the kitchen's unfitted theme, custom windows made from salvaged cold, rolled "bubble glass," French doors leading to her back porch, and other details that ferry the room back to 1904.

Pinching the pennies

Whether it's called "value engineering," or "downsizing," the practice of deliberately cutting cost is becoming more frequent in remodels, contractors across the country say. Even wealthy clients are examining what matters--what needs to stay to satisfy their vision yet keeps costs reined in.

"Rich people get scared, too," says Ferrell of the market she serves, 30 miles south of San Francisco, where average household income is $72,750, according to 1990 census data.

Wilder Hall, a librarian and writer, wouldn't consider herself wealthy, despite the fact that she owns a home whose value has skyrocketed from $245,000 in 1984 to a value estimated at $1 million today. Still, what she went through with Ferrell and Schutte to get the project she wanted is something others can learn from.

Besides appreciating the "take down" process, she says she didn't feel from either Schutte or Ferrell that she was going to be "told" a lot. "They really listened," she says.

And cutting costs didn't mean aesthetics suffered. This year, the Wilder Hall kitchen won a regional CotY award from NARI for Best Residential Historical Renovation.

"Value engineering"

Photo: John Sutton

Laura Ferrell sets the tone for her working relationships in a packet she sends ahead of the first client meeting. It acts as a qualifier. She explains the negotiated contract process and the benefit of her open book policy, where clients see every cost line itemized, including overhead and profit. (She now marks up 41%, allowing for a 29% produced gross margin. On this project, completed some time ago, she marked up 21.5%, allowing a 17% produced gross margin.)

Her preliminary pricing agreement, which initiates the "take down" process (see Open-Book Learning), is key in all her projects.

Over 90% of the projects Ferrell takes through "prelim" result in a successful remodel. "Because clients pay for pricing and because they are extending trust, we view our obligations to them as much greater (than a bidding situation)," her handout notes. "We openly share our structure, including how we calculate our overhead and risk/profit. ... The openness that is created and the disclosure of our methodology is the spirit of this process."

Wilder Hall found the process comforting. Her project involved reconfiguring part of a laundry room and hallway, elongating her kitchen to provide a sight line from the front of the house through to the backyard garden, and changing the outside elevation to accommodate the bump-out.

"Laura was especially patient," Wilder Hall says. "I don't know how many hours we spent going through this stuff, saying, well what if we did this instead of that?"

One of Wilder Hall's first cost considerations was square footage. Adding significantly more space would require a variance and test the limits of Palo Alto's 35% Floor-Area Ratio (the ratio of floor space to lot size.) In the end, the project added just 36 square feet, so the FAR wasn't an issue. Historic considerations also didn't matter. Although the house is in a historic district, it was deemed to have no significant local value.

Trimming a Project, Item by Item
Major Items Cut Budget Actual
Demolition $3,710 $2,870
Foundation Work $17,800 $12,640
Roofing $3,750 $2,950
Cabinets $15,000 $12,245
Painting $8,000 $0
Rough Plumbing $3,700 $2,249
Finish Plumbing/Fixtures $2,300 $1,778
Rough Electrical $3,400 $2,860
Masonry (Porch) $9,780 $0
Supervision (2.5% of total job cost) $3,562 $2,424
OH/Profit (21.5% of total job cost) $26,455 $21,021
TOTALS $97,457 $61,037
Total, major cuts: $36,420

Cutting the fat

Other items were eliminated early in the take down process due to cost considerations (see "Trimming a Project, Item by Item," right). They included veneer on the foundation (it was left as poured concrete, to be covered with plantings); a raised brick porch, saving nearly $10,000; and fewer cabinets.

Framing and roofing costs went down when the bump out and its roof shrunk. Rough plumbing and electrical notched down when Ferrell decided to do the work in-house (under her California general contractor's license, a small percentage of plumbing and electrical can be completed by the GC).

Wilder Hall kept her old refrigerator and bought a rebuilt 1940s Wedgewood stove that Schutte designed into the plan, mimicking a trend in English cottages where stoves nestle in fireplaces. A "fireplace mantle," really a plate rack, cleverly hides the hood.

When Ferrell's crew ripped up layers of linoleum, they discovered rotting floorboards, so Douglas fir from the old laundry room and boards salvaged from another project were laced in. The homeowner decided she could do without bordered flooring.

Photo: John Sutton
Before

When workers ripped out the exterior walls to reframe the bump out, Ferrell discovered there was no foundation, only a curb 6 inches deep. The solution required a structural engineer, who speced a new foundation tied into the existing brick foundation with epoxy-set rebar, in accord with seismic codes. Wilder Hall admits this added cost terrified her, but by eliminating planned foundation work for the entire house, she ended up on the plus side.

In all, the contractor, designer, and homeowner revisited 25 items in the 34 line-item budget, making adjustments or wholesale eliminations. The process reduced the total job cost from $149,505 to $118,797, a drop of $30,708, or 21%. Ferrell worked to cut more out of the budget, more than $36,000 in major items alone, including supervision, overhead, and profit, which dropped as a percentage of job cost. But unforeseen conditions (besides the foundation, the main stair was discovered to be unsupported) or minor additions, addressed in a dozen change orders, added back $13,241.

At one point, seeing her funds diminishing, Wilder Hall asked if she could paint inside and out, and the contractor OK'd an $8,000 rebate.

Ferrell, who's used to doing "monster kitchens," says she doesn't like them as much as Wilder Hall's, which perfectly fits her house. The remodeler loves how she got there. "Let people make their own choices," she advises others faced with similar scenarios. "It's a hard balance, because sometimes what people want is way out of their budget, and you don't want to waste time. But you need to be respectful of what people really want."

Photo: John Sutton
Remodeler Laura Ferrell built a "fireplace mantle"--actually a plate rack--to hide the range hood over the 1940s Wedgewood stove. It mimics a trend in English cottages of nestling stove into fireplaces.

Open-Book Learning

Laura Ferrell says she's able to help clients rein in costs because they know all the costs, including overhead and profit. She passes along manufacturer discounts and covers materials handling in her 41% markup, allowing for a 29% produced gross margin.

It's not a popular philosophy in northern California contracting circles where, if contractors "show," it's 15% to 20% overhead and profit, with hourly labor rates often loaded up to 125%.

Ferrell thinks loading labor costs is wrong. "The people I've worked for so far have been able to handle the truth," she says. "It's almost a bellwether for whether I want to work for them. Will you let me make some money?"

Ferrell estimates that in 80 contracts worked this way, her open book philosophy backfired just once--recently, on a job where she dropped her markup to 30%. That was "because of the times. The economy here is hard," she says. "It looks like everybody's rich, but we have 8% unemployment."

She lost the job to a contractor who loads labor costs, after the clients assured her she was the contractor of choice and they weren't putting the architect-speced job out to bid.

Ferrell's estimate was $723,000; the clients wanted to spend $400,000. "I said we can get to anywhere you want, but you're going to have to be willing to make some sacrifices," Ferrell explained. "I got Alice's job from $150,000 to $118,000, and essentially, she didn't lose a whole lot. But you have to roll up your sleeves and work on it. What's important?"