Cost Plus Vs. Flat Bid for Remodeling

by | May 25, 2012 | Levco Builders Process | 0 comments

Reading Time: 2 minutes

As Thing Change

In 2005, when I was just starting Levco, remodeling here in Boise, Idaho, a potential client asked to do a cost plus contract (Cost Plus means you present the actual bill and mark each one up a specified percent) on a whole house remodeling project. I was excited about it because I had no idea how to estimate correctly.

The idea of a true Cost Plus contract sounded great, because it essentially decreased my risk. What could possibly go wrong?

My brother Maurice had sent me a book written by Michael Stone called Markup and Profit and in it Michael discouraged the use of this type of contract, so I was fretting in a coffee shot at 9:00 AM and my meeting was at 11:00

I had the brilliant idea of calling Michael and, to my surprise, I found Michael’s phone number in the back of the book, and he answered the phone himself!

After explaining my situation briefly, he quickly said, “No problem, but you must be aware there are going to be two people ticked off at the end.”

Hey Time's up!

“Oh” I said, “only two … I can live with that,” I thought. That was when he told me who the two people were. “The only two people that are ticked off at the end of a cost plus contract are the

  • #1, The Client

and…

  • #2 The Contractor

Freaked out again, he helped make some contractual adjustments to solidify my position in the deal, and then off I went to my meeting.

I later met a contractor in town who uses the cost plus system and likes it. His biggest complaint with the system is that it requires a tremendous amount of photocopying. He went on to say that it is a fair way of working, and he swears by it.

My experience was not so good. Toward the end there were many accusations of being in the bathroom too long and working slowly on purpose, and you can guess the rest. We did eventually complete the project and it turned out well. Another lesson, learned I suppose.

Levco does do not provide a Cost Plus option any longer. My projects are all bid, which is the price for the scope of work specified. Change Orders not notwithstanding, I charge the bid price.

Your comments are welcome. To ask questions or get more information about remodeling email me directly or visit our contact page.

Disclaimer: Some of these images came from the WEB. If they are yours, and you object to them being used, please claim them and I will gladly remove and replace them at once.

Disclaimer: Some of these images came from the WEB. If they are yours, and you object to them being used, please claim them and I will gladly remove and replace them at once.

Related Posts

Dealing With Changes Is Not Optional

Dealing With Changes Is Not Optional

As the owner and operator of a thriving, vital remodeling business, I experience things that a less involved owner might not. I like to say, "It's always better to be on top of the wave than under it." The one sure thing about remodeling is that things change. We must...

read more
Unsung Heroes Time To Shine

Unsung Heroes Time To Shine

In any business, behind every successful owner is a group of dedicated people who believe in them and follow the leader into battle. I Am So Very Grateful In my life, I have been surrounded by these fantastic individuals. They are angels; they collaborate for a common...

read more

Leave A Comment

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

Categories

Latest Projects

Primary Suite Remodel with Deck

Primary Suite Remodel with Deck

Primary Suite Remodel & DeckThe Challenge Inaccurate plans were provided that had to get updated over the course of the project. The project is on a creek so lots of precautions were needed to keep erosion out of it.  The Idea Create a primary suite that is...

Whole House Remodel

Whole House Remodel

Whole House RemodelThe Challenge The home was in the hillside district and in the WUI which means that the home has some extra requirements as far as firesafe and extra structural requirements. There had been an addition done to the house years prior that was not...

Whole House Remodel

Whole House Remodel

Whole House RemodelThe Challenge The property was occupied during design and the new owners were very occupied with their school aged children. Lots of deferred maintenance items had to be addressed. The Idea The home was purchased in advance of moving in with the...

Garage Remodel

Garage Remodel

Garage renovationThe Challenge The sagging roof caused be removed bracing over the years made it look like a sway-back horse. A chiropractic adjustment and some serious support were needed. Keeping with the historic look and feel of the garage was important. There...