Accent Builders has successfully used Cost-Plus contracts since our begining twenty years ago. Cost-Plus simply means the actual cost of the job plus a percentage for the contractors' overhead and margin. By contacting our previous clients or viewing the testimonials on our website, you will find our clients are pleased with the work, costs and experience of working with Accent Builders under this arrangement
Why Cost-Plus Works
We have adopted this model due to the inaccuracy, inherent gamesmanship and inevitable unfairness in fixed bid contracts. In fixed bids, one party or the other will come out ahead: the client or the contractor. With Cost-Plus on the other hand, clients pay for work well-done and materials properly used while contractors are compensated fairly for quality, craftsmanship, and service.
Once you see the detailed estimate contained in our Construction Proposal you will see the degree of detail we strive for. But pretending to have all the information before construction starts is simply that – pretending – and unhelpful for all parties. The Cost-Plus system allows our clients to take advantage of design opportunities that inevitably arise as construction proceeds, and for us as Contractors to exercise due diligence in providing thorough product and systems research. For example, there is no reason you should have to pick out every last plumbing or electrical fixture, or type of tile, before we sign the contract, or that we should rush through the heating and insulation designs either.
Why Fixed Bid Contracts Don't Work
The standard approach in fixed bids is to get the contract signed at a certain amount and then get the work done for less and pocket the difference. General contractors learn to leave out certain things, but make the language such that clients think certain things are included. That's the win/lose of the change orders game. Simply put, that is not how we choose to operate. We believe the transparency of the Cost-Plus model is inherently more ethical and fair for both us and our clients.
Also, with a fixed bid model the reality is that clients often have no greater financial security than a cost-plus approach. In fact, there is usually less due to change orders being bid instead of billed at actual costs, items left out of the initial estimate and charging the client retail pricing for all material selections. In a Cost-Plus arrangement, all materials are purchased at cost with our Builder discount which can represent up to a 33% savings off retail pricing and any additions or changes to the scope of work are billed with the actual costs of the materials and labor involved. The reality of the typical fixed-bid scenario is that the Contractor is motivated to get all phases of the construction done as cheaply as possible since his profit is the difference between his actual cost and the contract price. This does not make for high quality, thoughtfully planned and performed work by a team of trained professionals. It does however breed a desire to hire the cheapest sub-contractors and purchase the cheapest materials available which is what most fixed price Contractors do.
Achieving Cost Certainty with Cost-Plus
To ensure quality and accuracy with a Cost-Plus model, we have developed a core set of documents for estimating, job costing and scheduling that keep us on track and under budget throughout the whole project. Also the more time spent up front in pre-construction planning the higher the degree of cost certainty. This gives the quantified line items in the pre-construction estimate validity, as they are based on actual vendor quotes and sub-contractor bids instead of allowances. In any case where the clients are truly concerned that costs could still exceed their budget, Accent Builders can add a contingency to the project budget. Once the designing, estimating and bidding process nears completion we can assess the proportion of quotes and bids in relation to the number of allowances, and with a sense of the level of cost certainty at that time, provide a buffer in the form of a percentage contingency.
This contingency amount will cover any allowance overages or unforeseen conditions. Ideally, the funds will not be used. But in most residential remodeling projects, and in custom, high end and partially-specified new construction, it is helpful for the expectations of everyone involved to have such a buffer. If those funds are used, the Job Cost Report will document exactly how and why a particular line item increased – due to scope change; specifications change; unexpected greater difficulty not due to negligence; or unexpected soil conditions, engineering requirements, or problems that arise with the compatibility or desirability of chosen finishes or fixtures, once these are in place or ordered.
Last but certainly not least, with a Cost-Plus contract the amounts paid to the contractor are for work already in place. You pay for work that's already been done, instead of simply paying an arbitrary amount on a fixed contract's payment schedule.