Browse Forums General Discussion Re: Fixed price contracts - Are they really? 10Dec 05, 2006 8:25 am Yamster hi zenith, is there a way for consumers to put clauses in contracts to protect them from construction delays? coz there seems to be alot of clauses in most contracts to protect the builder if the owners don't pay up, but not the other way around - if the builder don't do their work Hi yamster, The best way to work with this is to make use of liquidated damages. This means that for every week late (past the contract completion date), the builder has to pay the home owner the agreed amount. Liquidated damages must be reasonable, however - usually this is set at the amount it would cost to rent a similar house, or service the mortgage, etc. There are more drastic ways to make sure a builder completes a job, but this is your best bet. Re: Fixed price contracts - Are they really? 11Oct 31, 2008 7:56 pm zenithconstructions The job was way underestimated. We estimated less than $300k. At the end of the day this particular job came in at around $430k if I recall correctly. Now, there were lots of reasons for this: 1. The scope of the job changed dramatically (big rock walls, big piers, extra concrete paths, extra joinery, extra ROOMS!), and no one ever kept track of the changes to scope. I believe that accounted for about 40% of the cost blowout. 2. The job was underestimated from the word go. It was estimated at $800/m2. We ended up getting it in for about $1100/m2. If I was to quote it today, I'd be pricing up around $1300-$1400/m2! 3. I was 'project managing' but I didn't have a clue. My boss dropped that one in my lap, and it was a great learning experience for me. The clients weren't very happy though. So - what happened? Well, the fundamental problem was that the clients had signed a cost-plus contract, regardless of what we estimated it to be. We signed a fixed price HIA contract with allowances for prime costs/provisional sums. We are now at 2nd fix stage five months after the work started. Last week we received (without warning) an invoice worth about $13000 in variations on underground main electricity, site excavation and site access driveway. The items represented 58 to 288% on the quoted prices. We were never told that there was likely to be additional work required and to our knowledge were not forewarned of any 'problems' with the site. The HIA contract mentions that PCs and PSs should be a "fair and reasonable" estimate. I called SA consumer affairs who believe that a 50% increase could not be interpreted a "fair and reasonable" estimate and said we have no obligation to pay. We are asking our builder for invoices now but I was wondering how the courts interpret the above wording? Aren't there penalties to builders for grossly underestimating work or not exercising "reasonable care" to do so. Re: Fixed price contracts - Are they really? 12Oct 31, 2008 9:08 pm zenithconstructions So that's my essay. BUT, parting word: Go for a fixed price if you can - there are too many crap builders out there. If not, get an independent quantity surveyor to do an estimate for you, so that you can check it against your builder's. Zenith, I like the idea of getting a quantity surveyor to do a cost estimate. I did a bit of a search and they're not easy to track down. Do you know of any quantity surveyors in Sydney that you could suggest? Cheers, Casa Demolition August 2009, Construction Started September 2009, Completed December 2010 Re: Fixed price contracts - Are they really? 13Nov 01, 2008 5:16 pm Hi Zenith, I think that most reasonable people realise that some conditions cannot be forseen in a building project. These could be rock under the surface, highly reactive soils etc., though that is why a soil test is performed and a builder acting with due diligence should make their clients aware of this fact and if they know the area, have a good idea of potential problem areas.
What people really get upset about is when a builder says "oh the price of concrete and timber has gone up since we signed the contract, so your house will now cost you an extra $5000". If I have a contract for a house of agreed specifications to be built for an agreed price, then I expect the contract to be honoured, unless there is a change to the specifications of the project. A builder cannot just come along and say "my costs have gone up so I am passing it on" and expect the client to wear it. How would the builder react if the client said "the stockmarket crash has reduced my income so I'm going to have to pay you less for the house"? An agreed price for an agreed product in an agreed timeframe, unless the specifications of the product change. Garn. Re: Fixed price contracts - Are they really? 14Nov 01, 2008 11:50 pm Garn Hi Zenith, I think that most reasonable people realise that some conditions cannot be forseen in a building project. These could be rock under the surface, highly reactive soils etc., though that is why a soil test is performed and a builder acting with due diligence should make their clients aware of this fact and if they know the area, have a good idea of potential problem areas. What people really get upset about is when a builder says "oh the price of concrete and timber has gone up since we signed the contract, so your house will now cost you an extra $5000". If I have a contract for a house of agreed specifications to be built for an agreed price, then I expect the contract to be honoured, unless there is a change to the specifications of the project. A builder cannot just come along and say "my costs have gone up so I am passing it on" and expect the client to wear it. How would the builder react if the client said "the stockmarket crash has reduced my income so I'm going to have to pay you less for the house"? An agreed price for an agreed product in an agreed timeframe, unless the specifications of the product change. Garn. Also, I doubt a builder would pass on reductions in things like concrete and timber. Demolition August 2009, Construction Started September 2009, Completed December 2010 Re: A terminology question (lol and a few other q's) 15Nov 02, 2008 1:52 pm zenithconstructions Hi Elizabeth, 2. Under the HIA contract, and it is similar in most others, there is a specific protocol to follow in requesting a variation, whether the request is from the builder, or the owner. This should ALWAYS involve a request in writing, and approval is granted only after BOTH parties have signed it. 2. (b). If the builder requests a variation, that you do not feel you need to pay for, don't sign it. Builder: "If you do not sign it, I'll be forced to terminate this contract as per 33.2 (d): So what happens if the builder does not request for approval for variation. proceeds with the work then charges you for it 5 months down the track? Can you terminate the contract and refuse to pay the variation? Re: Fixed price contracts - Are they really? 16Nov 04, 2008 4:08 pm Is this advice applicable to fixed price house/land packages as well?
I was assuming that if a builder owns the land they are building on then they would know the condition of the site/soil etc. I wold have thought the price in that case wouldn't be able to be varied. Re: Fixed price contracts - Are they really? 17Nov 05, 2008 10:08 pm Hi all
Im new to this forum but enjoy it very much. I intend to build with NBG and have asked many questions of sales staff and managment, more than the average FHB. I tried to pin down my site cost to get an idea for my total costs. I understand it depends on rocks slop soil etc. I have been frustrated and angry that no one can give me an idea of the final price. I thourght once you get to the contract stage after soil test if was all over, you now know what you are going to pay at the end. It seems Im wrong so whats the fixed price all about. It seems to be misleading. I would like to build with a true fixed price builder and I mean provisional sums & prime sums all included in the total price. To make sure Ive got it correct, prime sums say for tiles to all wet areas. If tiles go up in price between now and final payment do I have to pay more? Provishional sum does this only relate to site costs, rock removal, extra rio in slab? Does any builder do fixed site costs? What can I do to limit my exposure to cost blow out or just getting ripped off in my contract. Where can I get a HIA contract are they all standard form contracts or specially written. Thanks kindly for you valued info It truly is appreciated. Regards KW......... “It's just as unpleasant to get more than you bargain for as to get less” George Bernard Shaw. Review Contract Stage 18Nov 10, 2008 2:16 pm Hi All,
I'm in the stage of review the contract. I also want to sign a fixed price contract plus prime cost/provisional cost. And I would like to see any fixed price contract sample. Where we can get one? Also, can we get one standard HIA contract? Where can we get it? Re: Fixed price contracts - Are they really? 19Nov 10, 2008 5:18 pm King willy Hi all I would like to build with a true fixed price builder and I mean provisional sums & prime sums all included in the total price. To make sure Ive got it correct, prime sums say for tiles to all wet areas. If tiles go up in price between now and final payment do I have to pay more? Provishional sum does this only relate to site costs, rock removal, extra rio in slab? Where can I get a HIA contract are they all standard form contracts or specially written. Your interpretation is correct. Once the non PC/PS sums are excluded then the rest is fixed (but read the fine print for other unexpected costs e.g. extra council fees that aren't included in the building application). One building inspector told me that the biggest contributor to PS increases are related to site works - "Once you are out of the ground, then you can breathe a sigh of relief" The advise by building lawyers is to minimise as many PS/PC items but it may difficult to eliminate them all. The provisional sum thing is there to protect the builder if for instance they do suddenly hit rock in the excavations or the engineer has to recommend different footings. Sometimes they can go ahead with a variation without your consent otherwise the building will not be code compliant or structurally sound. The honourable builder still will communicate this with you early on. On the other hand, all PC variations or owner specified variations should be provided with a quote before work is commenced. The alternative is that the builder will cost you for the worst case scenario and keep the money regardless of the eventuality. The builder should show due diligence when calculating PS costs. There may be penalties for knowingly underquoting. if you feel that the PS/PCs are unreasonable you can ask for the original contractors invoices before paying. You can find HIA or MBA contracts on their websites. Re: Fixed price contracts - Are they really? 20Nov 12, 2008 3:23 pm Garn What people really get upset about is when a builder says "oh the price of concrete and timber has gone up since we signed the contract, so your house will now cost you an extra $5000". If I have a contract for a house of agreed specifications to be built for an agreed price, then I expect the contract to be honoured, unless there is a change to the specifications of the project. A builder cannot just come along and say "my costs have gone up so I am passing it on" and expect the client to wear it. How would the builder react if the client said "the stockmarket crash has reduced my income so I'm going to have to pay you less for the house"? An agreed price for an agreed product in an agreed timeframe, unless the specifications of the product change. Garn. This is exactly what my builder is wanting to include in the contract. They have indicated on their tender that if there is any increase in product or material during both the tender and the contract period, I will be charged according. He has sighted clause 14, and clause 17 to enable this. I have read these clauses and I do not read this as being a suitable reasons. Yes, he could present me with a variation, but I would not need to agree to it, and I feel that I would be able to reasonably be able to refuse to sign it, without clause 17.7 applying, as this would be a different scenario to what Zenith illustraded, as it doesnt relate to work complying with law of some other statutory authority. Do I read this correctly? How should I handle things, as we are not yet to contract? Do I point out my intrepation (in which case I would assume he would have a special clause put in, that I would of course refuse), or do I let sleeping dogs lie and hope that it never arises, and if so just refuse. (i'm also concerned with this as this may cause other problems with progession of work). Opinions please do not pay until you are satisfied with workmanship windows require flashing over the head archithrave and up under weatherboards 3 29107 Thank you so much everyone. This all makes a lot of sense. I guess when you talk to a builder who butters up everything to look very polished, you get to start believing… 7 19817 So AFAIk the outcomes of the BAL ratings form part of a clause that allows them to pass these costs on to you. However the more relevant detail is how did it go from 19… 1 11160 |