Browse Forums Building A New House 1 Feb 20, 2024 12:56 pm Hello Experts, While having chats with a few builders regarding our next build, one of the builders recommended an option where he would act as a Project manager for the build and pass on the construction costs to us. we pay them a fixed percentage of the total cost of the build , and this would mean any extra cost or variations will not incur any builders margin. Has anyone recently build in this manner and what are the pros and cons of building in this way. Any feedback appreciated. Re: Fixed Price build Contract Vs Project management build 2Feb 20, 2024 2:37 pm ![]() Hello Experts, While having chats with a few builders regarding our next build, one of the builders recommended an option where he would act as a Project manager for the build and pass on the construction costs to us. we pay them a fixed percentage of the total cost of the build , and this would mean any extra cost or variations will not incur any builders margin. Has anyone recently build in this manner and what are the pros and cons of building in this way. Any feedback appreciated. Hi Suku The biggest issue with this method is that all risk remains with you and there is no incentive for the project manager to achieve the best price possible by negotiating hard with the trades. They just get a few quotes and pass them onto you. Where as if you are on a fixed price contract the builder needs to bring every trade in under budget or close to budget as they are spending their own money. A recent example for us on a project with a fixed price was that we had allowed $32,000 for gyprock and prices have gone up ( well over $44,000). So we had to leverage everything we could like packaging other projects to get the price back down to our budget otherwise we personally lose $12,000. If we were just project managing and getting 10% or 15% on top we would have just given the client the big quotes and too bad for them, they would be the ones losing the $12,000. So basically, unless you have a super complicated job which is very difficult to price then I would always suggest that you protect yourself with a fixed price contract. Cheers Simeon Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Re: Fixed Price build Contract Vs Project management build 3Feb 20, 2024 3:08 pm Thanks a lot Simeon, As always great response. I can see why someone would want to do project management instead of doing a fixed price contract. I think , unless you know the person personally and can blindly trust them, its better to do a fixed price contract. Re: Fixed Price build Contract Vs Project management build 4Feb 21, 2024 5:19 am ![]() Thanks a lot Simeon, As always great response. I can see why someone would want to do project management instead of doing a fixed price contract. I think , unless you know the person personally and can blindly trust them, its better to do a fixed price contract. Thanks Suku You are correct. There is only one person I have ever recommended going down this route and it was a close mate of mine who was doing a super complicated build on the side of a cliff which involved renovating a 1950's concrete structure and excavating underneath it. The reason that a fixed price contract would have been worse for him is that as a builder we would have to price in massive contingencies up front where as it would be better to have the trades price each item as we progressed and then he trusted us to negotiate the best deal for him. An alternative to this ( and we are doing it at the moment) is to have your builder go to trade on all your key items and then lock in a fixed price contract with some contingencies built in. I hope this makes sense Cheers Simeon But for a regular house Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Re: Fixed Price build Contract Vs Project management build 5Feb 21, 2024 9:13 am ![]() The biggest pro seems to be more transparency in costs since you're paying the builder directly for their management services. Plus, it might give you more control over the project. More control over your project may or may not be a good thing, unless you're strict on yourself with budget and additional modifications. Re: Fixed Price build Contract Vs Project management build 6Feb 21, 2024 9:50 am Project management contract (essentially cost plus contract) for domestic construction in Victoria can only be if the cost of the home exceeds 1 Million, unless it is a renovation and it is not possible to reasonably calculate the cost of the build. I call it a blank cheque contract, forget about blind trust, it may cost you plenty, and it will cost you plenty anyway. That is if you can get the bank to lend you money. Yes you get the flexibility and control but at a price, and it still does not guarantee builder's performance, or the quality, who is going to check project manager? Most people overlook the fact that a substantial part of the building works may not be able to be packaged in neat subcontract packages which leaves the work to be done on a day labour, at hourly rates. The builder may bring in mates, or in any case who is going to check that the work is done expeditiously, and they don't have four "smokos", long lunches, long debates, come late, or leave early, or if indeed they are there on the day? Heard about ghosts? Some years ago I was assisting a prominent retailer after he had problems with his cost plus build, his builder did not keep accurate records. There were invoices and time sheets that could not be verified, so he was whistling dixie on a substantial sum of money. So unless money is no object (which is more than 99% of us) think three times then take a cold shower. Forget trust, its merely a blindfold on a stupid head and only a dumb luck will save you. Foremost Building Expert in Australia,assisting with building problems/disputes, building stage inspections,pre-contract review advice for peace of mind 200 blogs http://www.buildingexpert.net.au/blog Re: Fixed Price build Contract Vs Project management build 7Feb 21, 2024 10:41 am ![]() Project management contract (essentially cost plus contract) for domestic construction in Victoria can only be if the cost of the home exceeds 1 Million, unless it is a renovation and it is not possible to reasonably calculate the cost of the build. I call it a blank cheque contract, forget about blind trust, it may cost you plenty, and it will cost you plenty anyway. That is if you can get the bank to lend you money. Yes you get the flexibility and control but at a price, and it still does not guarantee builder's performance, or the quality, who is going to check project manager? Most people overlook the fact that a substantial part of the building works may not be able to be packaged in neat subcontract packages which leaves the work to be done on a day labour, at hourly rates. The builder may bring in mates, or in any case who is going to check that the work is done expeditiously, and they don't have four "smokos", long lunches, long debates, come late, or leave early, or if indeed they are there on the day? Heard about ghosts? Some years ago I was assisting a prominent retailer after he had problems with his cost plus build, his builder did not keep accurate records. There were invoices and time sheets that could not be verified, so he was whistling dixie on a substantial sum of money. So unless money is no object (which is more than 99% of us) think three times then take a cold shower. Forget trust, its merely a blindfold on a stupid head and only a dumb luck will save you. You make some really good points! Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Re: Fixed Price build Contract Vs Project management build 8Feb 21, 2024 11:47 am 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 them. Thanks for sharing all your feedback. Hello Team, I'm a new builder and I would like to apologise upfront if this question has already been asked and answered. We are 3 friends and each of us are looking to… 0 2040 I'm a home builder. ASK why the BAL report went up? Did you change home position, change design? 2 12930 You talk about deletions, are they variations or PS and PC adjustments? pleas list them 1 18894 ![]() |