Going Over Budget

TNGHomes

I am finishing up on a house I am building (frame to finish)and have had many changes and added costs, all of which I have had a signed Contract Adendum with the HO for, however I am going over budget on the house as a whole. This is the first time I have gone over budget on New Construction belive it or not and am not sure how to go about telling the HO without him feeling like he is getting ripped off. He is very happy with the workmanship and the way everything has gone, but I have eaten quite a bit on this project and dont feel as if I should lose my a great deal of my profit due to being a nice guy.

gt4674b

Depends on how you wrote the contract. If there are provisions for increases on material prices, you might be able to justify that. If the scope of the work changed, that is certainly an option. However, it sounds like you made change requests that already account for the cost of work revisions. Did you have the plans before you started? If so, I don't really see any justification for passing along your budget issues to the customer. Not trying to be a jerk, but why should your customer pay for you not managing the budget and/or bidding too low? Profit is the reward for the risk you take to build a project, its not a right. Would you give back some money if you made "too much" profit?

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TNGHomes

to be perfectly honest I have given refunds or credits to customers in the past for work that wasnt needed or over charging. I do however feel exactly as you do which is why I am having this moral delima.

thom

People ask, "what happens if it costs less than you think?" I tell them "you'll never know, neither will you know if it costs more."

Obviously change orders are a different animal. Get all changes signed, even if you don't charge for them. Sometimes changes save money, put it in writing with a credit and get it signed.

In contracting, the only money that counts is described in the contract.

Kingfisher

I'm lost aside from the change orders the $ number is the same right? If so no need to feel bad at all you brought the project in on buget and thats your job if not was it you're fualt, theirs, or just price increases. The sticker shock from at the end with final draw and change orders is one reason I collect htem when I do or order the change. That way they know and feel exactly how much it is costing. Don't make less $ because they racked up changes upgrading their home and the bill is big at the end , these are grown ups who made the choices and can live with it now I'm sure.

Putty Truck

Yikes, I've never done that...yet.

I've lost profit and even lost money on jobs. Shoot, I've been near busted at times, but that is business and I made the changes I had to make to stay open.

In other words, whatever you did, don't do it again.

Chris Johnson

Collect money for change orders the minute they are written, hindsight is 20/20, but do that in the future. The easiest way to collect the final sum now is to present an itemized state for all the change orders along with the final draw. Be prepared for the client to him and haw for a few days and ask a lot of questions as he is going to get sticker shock. Don't budge, hold your ground, they agreed to the extra work in writing, unfortunately they are now going to see it as a lump sum and could gasp a little. I'm sure it will all work out.

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Chris

Mike Finley

If you have signed change orders for the work I am assuming that those change orders had dollar amounts on them, I am assuming that when you say you are over budget you are referring to the total budget for the build and not over budget in regard to the change orders. If that is the case I don't see where it is your job to keep the customer informed to the totals or their budgets. If the customer wants a change and is informed and signs off on the costs and you fulfill the change, why is it your job to try to keep them within their initial total project budget? That's what change orders are for and it's the customers responsibility to keep track of the total costs and know when to stop making changes if they can't afford to make more.

Now if what you are saying is not that, but that you went over budget on the individual change orders, for example Change Order #10 for changing the bathroom was signed by the customer stating $10,000 and you ended up coming in at $15,000, well if you're waiting till now to tell the customer this - WTF!

So which one is it?

Flacan

TNG

On one of my first interior renovations (in the 90s), the business bank account balance was $5,000 less at the end of the job than it was at the start of the job (everything else being equal and/or accounted for).

After some jobs, the account has been tens of thousands higher.

I don't believe it's the customer's business to know how much we make or lose on the job we do for them.

But for someone such as yourself, who's returned money at the end of a job, it isn't going to be fair. I just don't think the customer would understand your reasoning for asking for more.

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