Browse Forums General Discussion 1 May 11, 2017 3:40 pm Hi Guys I am lucky enough to be building arguably my dream home for my family. We're thrilled It is a very large, split level, custom home... quite unique in its design. We're finding that a lot of builders are having trouble quoting it - fixed price - as its just very custom. One builder honestly said he has had to put in quite a bit of margin (on top of probaly already his 20%) - just to ensure things don't blow out. He's not saying it would - but just in case. It is roughly a $1m - $1.2 million dollar build. He suggested that it might be better to do it Cost Plus... so that he can have piece of mind getting X out of it - but more so, as we've always indicated to him... we want to be very hands on with our selection and materials. I am self employed and have the ability to talk/negotiate and shop for materials/fit outs... and would enjoy doing it. We originaly wanted to Owner build as we wanted to be hands on - but came to the conclussion that a Cost Plus contract almost sounds just as good... paying a project manager/builder X amount to do it and over see it, but allowing us to manage and take care of a lot of the other stuff But... and a big BUT You hear a lot of negative things about Cost Plus. I'm just after some more info... as really, we're not having a lot of luck finding a fixed price builder at this stage. Appreciate ALL replies Re: Cost Plus Contracts - I hear bad things? 2May 11, 2017 3:56 pm Cost plus relies entirely on the builders ability and honesty. There is no incentive for him to reduce costs as he never suffers a consequence. I would go the fixed price option with a shared benefit of savings he can achieve against it. "ECOECO" At 'EcoEco', we design windows, we design the best windows, we do it for you, so that when you’re happy we are happy. Tel. 1800 326 326 Re: Cost Plus Contracts - I hear bad things? 3May 11, 2017 5:20 pm It also relies on your will power to not keep changing your mind. All the time the builder is waiting for you to come to a decision the meter is running. Very easy to go over budget. . . . and not by a small amount. The Harder You Try - the Luckier You Get ! Web site http://www.anewhouse.com.au Informative, Amusing, and Opinionated Blog - Over 600 posts on all aspects of building a new house. Re: Cost Plus Contracts - I hear bad things? 5May 11, 2017 7:29 pm Okay - so let me rephrase the question so I can better understand Where is a cost plus contract beneficial? Cost Plus Contracts - I hear bad things? 6May 11, 2017 8:02 pm We have been building with a local builder in our small town for a little over a year and planned our build for three years before that. It is an architect designed home. We went with a cost plus contract and all parties (probably with the exception of the bank) couldn't be happier. I am project managing the build. You sound like you are in a similar situation to us, and under that circumstance I couldn't disagree with the two previous posters more. * It is true it relies on the builder's honesty, but this is a long and expensive process, and you will want to build a relationship with the builder anyway, and probably some of the main subbies too, irrespective of whether it is a fixed price or cost plus contract. * You can incentivise the builder to save costs, and build that into the contract, but the HIA will warn the builder off that approach because they are very conservative (an act entirely on behalf of the builder anyway NOT YOU). We have done this. * A fixed price contract also requires you to be disciplined, because if you do change your mind, you will pay for the variation, and at a higher rate than the fixed price rate. It happens all the time with project homes and it is very easy to go over budget on a fixed price contract too...and not by a small amount. * The builder should not be "on the clock". It's a cost plus contract and if they are not working they are not incurring a cost. You will, however, need to talk to them about that, because if yours is their only job, they will want to be kept occupied on it. We are lucky, because our builder is in demand, and so he has plenty of work to keep him going on the few occasion that there has been downtime. Often, subbies are on the job and he doesn't even need to be there. There are risks in all projects (not just building), and what the fixed price advocates won't tell you or don't even know is that you, as the client, are paying for those anyway. The truth is that builders, by and large, are not dumb, and they have been at this game and done this more times than you. People on fixed prices seem to brag about how there was a cost blowout in some area and that the builder picked up the tab like its some kind of gotcha moment. But the builder already built risk in. And here's the most important point: if the build goes entirely smoothly, then its the builder that pockets the contingency, not you. With a cost plus contract, it is more of a partnership. You pay what you have to, but if nothing untoward happens, then you get to keep that extra money in your pocket. Is it all roses? Not at all. The downside is that you need to plan and plan, and make sure that you know what the build entails and how much that will cost. I worked with our builder and he did three solid quotes over time as we adjusted the scope so that we got to a point where we knew pretty well what it would cost and we were happy to start. Are we on track, pretty much yes, although we did make some minor adjustment and they have cost us extra just as we expected. In the end, if you are the kind of clueless client (and I have come across some of those in the short time I have been on this site) that wants to visit your build one a week and be a bit hands off, then cost plus is not for you; but if you are invested in the design, have a reasonable amount of intelligence so you can pragmatically think through problems, want to actively manage the job in partnership with your builder and save money by sourcing a lot of your own product, then I suggest that a cost plus contract might give the flexibility that you need. I am more than happy to talk this through with you in some depth if you would like to do so. If so, message me directly and I will give you my phone number. Re: Cost Plus Contracts - I hear bad things? 7May 11, 2017 8:21 pm Did a cost plus type build, end result was a huge saving, had a friend build a similar size home that was a nice home but a much easier build in the same area, we ended up been 100,000 less, but would of come in, 200,000 more if we had gone fixed, key was a really trust worthy builder project manager who really knew how to get best quality for less with me chipping in regularly with similar thoughts, this gave me the time to save up to 50 percent on many purchases, quality was always before price, so no compromise on quality despite this. Re: Cost Plus Contracts - I hear bad things? 8May 11, 2017 8:32 pm Thanks for your very detailed reply. Appreciate it I am actually self employed and run a small business, so to a degree - I know what is like managing people, managing trades, controlling costs and so on. I'm not a builder - never have been... but I understand peace of mind vs being hands on (fixed vs cost plus) I've spoken at length with builders and sure - everyone absolutely is after looking after themselves first - but a cost-plus contract doesn't seem that unreasonable too me if its fully costed and planned. The builder can still make a decent sum without the back end worries of a complicated project build. The owner gets the benefit of being able to perhaps negotiate with suppliers and save. I would expect no less than the builder costing this entire project - from start to finish - so we have a fair and reasonable idea of what it may cost and the builder I spoke with said he'd do that. To some degree - we've already done this... and I've had prices of $110k, 99k and $90k already for windows and again, fluctations already for Trusses and walls. I can already kind of see - with some diligance and persistence by asking questions and talking with a range of suppliers - I can potentially save money. The way I sort of see this is that the Builder is allowing say 20%... perhaps even more onto their margins. That's fair and needs to be lucrative... but they're also inflating it incase things do go wrong. Again, fair BUT and a big BUT... if things go write, its a great outcome for them. If i positively and optimistically look at it the same way - that things are planned and proceed and go RIGHT... then the stipend is for US... which we can reinvest into the house if need be. The thing is - I'm new and haven't built... so I don't know if this optimisim is naive. I was really hoping to hear from people that entered into Cost Plus contracts and how it worked out for them I'd be happy to have a chat with you I'm in the south east suburbs of Victoria FYI Re: Cost Plus Contracts - I hear bad things? 9May 11, 2017 8:34 pm Joker Did a cost plus type build, end result was a huge saving, had a friend build a similar size home that was a nice home but a much easier build in the same area, we ended up been 100,000 less, but would of come in, 200,000 more if we had gone fixed, key was a really trust worthy builder project manager who really knew how to get best quality for less with me chipping in regularly with similar thoughts, this gave me the time to save up to 50 percent on many purchases, quality was always before price, so no compromise on quality despite this. Great - thanks for your reply. This is how I am trying to see it... get a trust worthy builder and work hard to save money by making my own purchases. A fixed price might allocate $80sqm for tiles for examples - but I'm the sort of guy to look and shop and look and shop and find exactly what I want, hopefully for less. 1000000% definitely add insulation. I have in my home and it makes a big difference minimising sound transfer. Insulation is pretty cheap and definitely worth it 2 6394 We are building a house that was planned to be clad in Hardie Linea, our builder has now requested to swap this for BGC Nuline Plus. They look fairly similar and he has… 0 893 MBA and HIA both have sub contract agreements, check them out 2 7450 |