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

Holy Cow! We Do Amazing Work

Holy Cow! We Do Amazing Work

As a business owner, doing all the behind-the-scenes things is often so time-consuming that I honestly "Don't get out much." It took a friendly reminder, and now I have a scheduled tour de force every Wednesday with my Construction Manager. We ride around and look at...

read more
Building Science and Remodeling

Building Science and Remodeling

As a residential remodeler for a few decades after being a paramedic for a little longer,  I have learned to take command of a situation and solve problems quickly and efficiently. I have been able to watch the evolution of Building Science. It affects every aspect of...

read more

Leave A Comment

0 Comments

Submit a Comment

Your email address will not be published.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

Recent Posts

Categories

Latest Projects

Master Suite Addition

Master Suite Addition

Master Suite AdditionThe Challenge They came up with a plan drawn by others with several significant errors. One was the size of the addition, and the other was the angle of the trusses. The clients who work remotely turned out to be excellent communicators and...

Dining Room Addition and Kitchen Remodel

Dining Room Addition and Kitchen Remodel

Dining Room Addition and Kitchen RemodelThe Challenge The home had an odd entry room with a coat closet and partition wall in the way. This room was pretty useless and annoying to the client. Then, the kitchen was blocked from the activity in the living room, and the...

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...