Browse Forums Renovation + Home Improvement Re: Fixed cost contract v Cost plus contract 21Feb 19, 2015 9:19 am About two years ago owner wanted me to help him. He built a large home through a family friend (registered builder) and felt he was diddled by about 40K. Did not get any invoices until end of the job (trust you see). Eventually we got two large files of receipts, invoices and time sheets. Going through it I picked up some inconsistencies and double charges but mostly minor. Most of the other material was of a type that either could not be verified or you needed a forensic accountant to do it. I said to him that it was just too late to do anything and the likelihood if indeed he was diddled of finding proof was small. 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 cost contract v Cost plus contract 22Feb 19, 2015 6:36 pm That's a sad story. It sounds to me as though the person unfortunately didn't know what he was getting himself into and didn't keep an eye on the project and the budget. You can have too much trust. Building Services Engineer Renovating our 1960's modernist home in Brisbane https://forum.homeone.com.au/viewtopic.php?f=53&t=82091 Re: Fixed cost contract v Cost plus contract 23Feb 19, 2015 9:10 pm 1960sModernistHome You've mentioned a couple of times that you thought cost plus contracts has been outlawed, I'm curious to know where you heard that? Last year I did post grad study in construction and contract law at Griffith Uni and we discussed cost plus contracts in a bit of detail, the lecturer never mentioned anything about that? B.E. kindly did a bit of my research for me and posted further extract to what I already gave a snippet of. There are good reasons why cost plus contracts are very restricted. These type are basically a blank cheque and offer little consumer protection. Whether its a friend or not this ruling doesn't discriminate. Maybe you should take this one back to your lecturer or ask for a new one. It is printed in black and white in the DBC act Re: Fixed cost contract v Cost plus contract 24Feb 19, 2015 9:11 pm 1960sModernistHome That's a sad story. It sounds to me as though the person unfortunately didn't know what he was getting himself into and didn't keep an eye on the project and the budget. You can have too much trust. This is why Cost plus contracts are very restrictive. There is too much grey in them and they lead to too many disputes Re: Fixed cost contract v Cost plus contract 25Feb 19, 2015 10:21 pm 33amc 1960sModernistHome You've mentioned a couple of times that you thought cost plus contracts has been outlawed, I'm curious to know where you heard that? Last year I did post grad study in construction and contract law at Griffith Uni and we discussed cost plus contracts in a bit of detail, the lecturer never mentioned anything about that? B.E. kindly did a bit of my research for me and posted further extract to what I already gave a snippet of. There are good reasons why cost plus contracts are very restricted. These type are basically a blank cheque and offer little consumer protection. Whether its a friend or not this ruling doesn't discriminate. Maybe you should take this one back to your lecturer or ask for a new one. It is printed in black and white in the DBC act Section 55 prescribes some very common sense regulations, as it should. It doesn't even go close to "outlawing" cost plus contracts though. For what it's worth, although the grad cert was tailored to large non Residential construction, the lecturer was actually a very experienced construction lawyer. She outlined all the potential problems which I think are plainly obvious to all of us who have spent our careers in engineering and construction, but she also pointed out the advantages and where they could be appropriate or useful. Although from the point of view of a construction lawyer, writing amended contracts and acting for contract disputes keep them in business! As I have repeatedly said, probably not suitable unless you really know what you're getting into. Re: Fixed cost contract v Cost plus contract 26Feb 20, 2015 7:04 am Two of the most important issues in cost plus contracts are 1 Cost control. This must be in real time every day verification of time sheets and who was on the job. It's no good clocking on at 10AM and checking out at 2PM and claiming 8 hrs work. 2 Productivity control. You might have had three men on site but did they actually do anything or just talked about footy half the time. Did one of them duck out for couple of hrs to change tyres on his car? You can bet they will charge you the full hrs. Unless you are prepared to set up full monitoring /control system forget cost plus contracts 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 cost contract v Cost plus contract 27Feb 20, 2015 7:34 am Not sure about other states but I believe in Qld the builder shall provide a fair and reasonable estimate of the total cost before starting. If they fail to do this they cannot enforce the contract. This is a fairly sensible level of protection against the budget spiraling out of control. But the customer still needs to be absolutely vigilant Re: Fixed cost contract v Cost plus contract 28Feb 20, 2015 7:59 am 1960sModernistHome Not sure about other states but I believe in Qld the builder shall provide a fair and reasonable estimate of the total cost before starting. If they fail to do this they cannot enforce the contract. This is a fairly sensible level of protection against the budget spiraling out of control. But the customer still needs to be absolutely vigilant In Vic too you need a fair and reasonable estimate but that even tough it appears to be some protection is worthless. Why? What is a fair and reasonable estimate when owner has varied works and caused delays or nominated contractors that are duds. Isn't the whole point of cost plus contract to allow owners flexibility of changes? You said "But the customer still needs to be absolutely vigilant" Oh yes! and despite that you may still be taken to the cleaners. To deceive is not right but to take advantage of loop holes is a fair game. A good operator will know weaknesses of the system and milk it to the max all within legit tolerances. 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 cost contract v Cost plus contract 29Feb 20, 2015 8:53 am I also think a lot of the problems that ensue when going cost plus or even some general quote jobs is that the documentation from day 1 is sadly lacking. Floorplans with a lot of dimensions and RLs missing, few if any detailed sections, elevations that are not correct and skimpy specifications. Get those right and a lot of the problems that could arise will be very easy to resolve. Stewie Re: Fixed cost contract v Cost plus contract 30Feb 20, 2015 9:01 am Stewie D I also think a lot of the problems that ensue when going cost plus or even some general quote jobs is that the documentation from day 1 is sadly lacking. Floorplans with a lot of dimensions and RLs missing, few if any detailed sections, elevations that are not correct and skimpy specifications. Get those right and a lot of the problems that could arise will be very easy to resolve. Stewie Agree 100% Clients don't want to pay architects and engineers what it really costs to put together fully co-ordinated, high quality documentation. If you pay peanuts.... Building Services Engineer Renovating our 1960's modernist home in Brisbane https://forum.homeone.com.au/viewtopic.php?f=53&t=82091 Re: Fixed cost contract v Cost plus contract 31Feb 20, 2015 4:01 pm 1960sModernistHome [ Section 55 prescribes some very common sense regulations, as it should. It doesn't even go close to "outlawing" cost plus contracts though. For what it's worth, although the grad cert was tailored to large non Residential construction, the lecturer was actually a very experienced construction lawyer. She outlined all the potential problems which I think are plainly obvious to all of us who have spent our careers in engineering and construction, but she also pointed out the advantages and where they could be appropriate or useful. Although from the point of view of a construction lawyer, writing amended contracts and acting for contract disputes keep them in business! As I have repeatedly said, probably not suitable unless you really know what you're getting into".[/quote] Doesn't go close to outlawing Cost plus? It clearly says they are only permissible under a certain circumstance and that is if it can not be reasonably costed without commencing some of the work. Maybe "outlawing" is a pretty strong work, but it is very clear the use of them is very restrictive and they are not a user choice style contract. If your lecturer isn't versed in residential contracts then that's probably why. Commercial contracts laws are different. I am actually pretty surprised to hear they are actively used without cause. I remember sitting through contract seminars as a Builder and having this constantly drilled into us Re: Fixed cost contract v Cost plus contract 32Feb 20, 2015 4:42 pm Here’s a good example of when they work well, or can work well. When we bought our current house, we knew there was termite damage in one of the back walls. There was some visible damage, and when we got the pest inspection, his thermographic scanner gave us an indication of the damage behind the wall. We bought the house knowing this and got it for a good price. When we moved in, we got our builder around to have a look at it and give us a estimate on repair costs. I asked for a best case scenario estimate, and a worst case scenario estimate. On that basis, we proceeded on a cost-plus agreement. It ended up costing about half way between best case and worst case. If I had asked him for a fixed price contract, it doesn’t take Einstein to realise that he would have priced for worst case scenario to cover his backside, and rightly so too – I would do the same thing. So in that case, I am pretty certain that a fixed price contract would have been to my financial disadvantage. Building Services Engineer Renovating our 1960's modernist home in Brisbane https://forum.homeone.com.au/viewtopic.php?f=53&t=82091 Re: Fixed cost contract v Cost plus contract 33Feb 20, 2015 10:14 pm That's also an example of how it fits within the law. There may have been a lot of unforeseen work that could not have been discovered without an intrusive inspection or at least with starting the work. Major termite damage was one example I was going to put forward but you beat me to it. I actually inspected a house with major termite damage about 12 months ago. They wanted an assessment and Quote. Personally I don't like unforseen, I like owners to see it up front and have an up front understanding of the cost and involvement. I would just hate going to the owners and saying "well it's going to be 5K more". Even if it's fair and justified it would tend to sour the relationship. Well anyway, what I did was say, well you obviously are going to fix it, and this plaster sheeting in this area needs to be removed agree? I said I would go to my car, grab my hammer, and pull the sheets off free of charge and an obligation free quote. I did so, then gave them an accurate and fair quote, I got the job, they got no surprises, I got an extremely happy client. All that aside, it's still not a user choice contract. I couldn't think of too many more examples apart from termite damage that you could go cost plus. The law is clear about it Re: Fixed cost contract v Cost plus contract 34Feb 20, 2015 11:02 pm Large heritage restorations are often cost plus, or may be a lump sum contract made up of a lot of Provisional or PC sums for different aspects of the work. No builder in their right mind would put in a full fixed price lump sum for some of that stuff unless their contract had 50 pages of exclusions and get out of jail clauses Building Services Engineer Renovating our 1960's modernist home in Brisbane https://forum.homeone.com.au/viewtopic.php?f=53&t=82091 Re: Fixed cost contract v Cost plus contract 35Feb 21, 2015 10:05 am Nearly all our renovation work was done like that as cost plus - mostly on older federation homes, Victorian terraces, post-war etc. You can break it down to individual rooms like a bathroom where you strip it back to bare brick and everything in the room will be new, but for a lot of it particularly where there is lots of patching to separate rooms and the clients wanting changes or add-ons to an original estimate, a fixed quote is hard to do unless you allow a heap more to cover yourself. If I had a dollar for every time I heard a client say " while you guys are here and you've got your tools out ..." That's where cost plus comes into its own. Give the clients an estimate and work from there. Stewie Alternatively, you can sign a contract with pre-defined known amount you pay to the builder for management and warranties and then you just pay the invoices their provide… 2 5045 Are you saying that these consultants are involved at key-points of the building, and perform site inspects at the stages, or only after building is completed to point… 4 8504 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… 8 2124 |