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Consultant Michael Stone explores the pitfalls of signing contracts that limit you to 10% overhead and profit on additional work orders for Markup and Profit. Stone says he understands the principle of why some owners and architects want that language in the contract, but suggests that the inevitable change orders are often items that should have been specified in the original bid. Stone suggests if owners or architects wrote complete bids up front, they wouldn't need to control pricing on change orders because fewer would be necessary.

Other times, contractors will be in situations where they are requested to keep a change that exceeds to value of the original contract in order to to hold them to the agreed overhead and profit. Stone says such a practice is dishonest.

You shouldn't sign a contract that stipulates what you can charge, even if it's just on the change orders. I think it's price fixing, but owners/architects or project managers argue it isn't. Whatever you want to call it, do you really want to work for anyone who tells you what you can charge for your work.

You need to stay in control of the major decision that impact your business, and that includes what you can charge for your work. When you cede control to a client, for whatever reason, you're at risk. Be careful what you sign.

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