Contractor says there are a lot of “unknowns” in the project.
When asked what happens if some parts of the work come it at a lower cost, he said that would be his profit and if it’s higher, it would be his risk.
This is my first major remodel project with any GC, so I don’t know what is standard. Is it normal to have a % markup on as part of the fixed price contract?
Or is this some kind of trick because I don’t know how it works?
There are in fact a lot of unknowns with the project, I just don’t understand that if the items are padded already for his profit, why is there a % as well.
The critical ingredient for any successful relationship is trust. Remodeling your home with a GC is not purely a business transaction. It is a relationship. You are opening your home to someone and trusting them with it. It is vital to maintain a clear an honest dialogue between yourself and your contractor. If you find that this is not the case I would highly recommend looking elsewhere to find a contractor who you do feel comfortable with. Don’t ignore your concerns and write them off as just not knowing how this whole remodeling thing works. Your concerns and unease about the CG will only get worse. Sometimes a client and a GC are just not a good fit and that’s ok. It’s better for both of you to feel comfortable and confident with each other as you launch into your new remodeling relationship.
Each contractor has his own way to estimate if you think it’s not logical ask him why and let him explain if he or she gives you good explanation that is sufficient for you then you know it’s fine. I think that in your case the GC is using sub contractors and mark up % fee for the management. To save this cost you can find GC that use their own crews and save that fee. Sample if he using sub contractor and charge him 1000 and he charge you 1000 so the fee is logical. if the sub charge 1000 and he charge you 1300 plus fee so it’s not very good. hope that i helped you.
For residential construction there are 2 main different contracts: ‘Lump Sum’ and ‘Cost Plus’,
Lump Sum in contract is basically a fixed price contract where the contractor basically lists his services and material provided for that fixed price, win or loose, he bears the risks.
Cost plus, is basically an open contract where the owner will pay all direct costs and will add a certain agreed fee percentage or fixed fee on top.
It seems like your contractor wants to do a Lump sum contract, but was trying to break it down how he got to the number he presented. So the end of the day you will have to be comfortable with the price and the person, make sure to list in the contract everything needed to be done, as detailed as possible. Good luck!
Lets turn this around… If he were to come to you and ask for more money on a “fixed” contract, would you pay it? That is why there is a built in “cushion”.
