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Another Cost Plus Question

 
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Old 05-23-2015, 03:55 PM   #1
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Another Cost Plus Question


If I'm a general on a job, doing a remodel for cost plus 20%, and my company is also doing the framing, do I get to charge an extra 20% on my own framing? I'm going to need to keep an eye on myself and control me as I do the other subs.

I've never done a cost plus, and I'm thinking about it.

Last edited by Calidecks; 05-23-2015 at 04:15 PM.
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Old 05-23-2015, 05:09 PM   #2
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Re: Another Cost Plus Question


Is that your normal markup 20% ?

you should charge your normal rates, why loose money ??

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Old 05-23-2015, 05:15 PM   #3
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Re: Another Cost Plus Question


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Is that your normal markup 20% ?

you should charge your normal rates, why loose money ??
It was an example. But adding 20% to my subs bill I don't think is a bad start
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Old 05-23-2015, 05:18 PM   #4
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Re: Another Cost Plus Question


I would think normal rate for everything.

clearly your running the show.
you should be paid for experience and knowledge.
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Old 05-23-2015, 05:20 PM   #5
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Re: Another Cost Plus Question


The only time I lower my markup is insurance jobs,,,

but I hide a little more $$$ elsewhere...
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Old 05-23-2015, 05:38 PM   #6
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Re: Another Cost Plus Question


I'm thinking about it. I actually am pretty polished when it comes to making money with a set price. It's all in the language of the contract. I need to make sure both will at least be an equal amount of profit. I was just thinking that a cost plus might help me get paid for any "unforeseens" and could make it easier to write up, as far as contract language goes.

But my point about the framing, is it unfair to the HO that I markup the framing because I am also the framing sub? Is it unfairly double dipping? It would cost them the same if I actually subbed it to a framing contractor. This is an question of ethics.
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Old 05-23-2015, 05:48 PM   #7
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Re: Another Cost Plus Question


It would only cost the same if you and the other framing we're the same cost.
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Old 05-23-2015, 05:50 PM   #8
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Re: Another Cost Plus Question


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It would only cost the same if you and the other framing we're the same cost.
True, I'm talking in theory.
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Old 05-23-2015, 06:10 PM   #9
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Re: Another Cost Plus Question


Right but I think it still applies. I feel a GC on a cost plus project is in charge of quality and budget. I always look at a subs cost and quality when I decide what I self perform. If I feel I can do a better job and be competitive (not necesarilly cheaper) then I do it.

I just feel the reason someone trust you on a cost plus project is they feel you have them in mind for keeping costs realistic to their scope, not that you have an open checkbook.

That said I personally don't markup myself. My labor rate covers what it needs to whether I am a sub or a GC.
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Old 05-23-2015, 06:14 PM   #10
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Re: Another Cost Plus Question


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Right but I think it still applies. I feel a GC on a cost plus project is in charge of quality and budget. I always look at a subs cost and quality when I decide what I self perform. If I feel I can do a better job and be competitive (not necesarilly cheaper) then I do it.

I just feel the reason someone trust you on a cost plus project is they feel you have them in mind for keeping costs realistic to their scope, not that you have an open checkbook.

That said I personally don't markup myself. My labor rate covers what it needs to whether I am a sub or a GC.
Yeah, I was thinking of selling the idea, that because I'm doing the framing they save on any markup that would come if I subbed it. I'm a "shoe in" on this job, but I want to be fair. There's a reason why they trust me.
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Old 05-23-2015, 06:29 PM   #11
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Re: Another Cost Plus Question


I do a lot of cost plus work and mark up all labor and material (and permits, insurance, superintendents, etc). I think technically you should be able to mark up your own crew and even your own personal labor. However, from a good will and customer relations perspective, I don't think I would. I would make sure your own labor and crew's labor is compensated at the top rate.
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Old 05-23-2015, 06:44 PM   #12
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Re: Another Cost Plus Question


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Originally Posted by Californiadecks View Post
If I'm a general on a job, doing a remodel for cost plus 20%, and my company is also doing the framing, do I get to charge an extra 20% on my own framing? I'm going to need to keep an eye on myself and control me as I do the other subs.

I've never done a cost plus, and I'm thinking about it.
Only if you are doing the job at cost...that's why we call it cost plus.
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Old 05-23-2015, 06:49 PM   #13
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Re: Another Cost Plus Question


Quote:
Originally Posted by AllanE View Post
I do a lot of cost plus work and mark up all labor and material (and permits, insurance, superintendents, etc). I think technically you should be able to mark up your own crew and even your own personal labor. However, from a good will and customer relations perspective, I don't think I would. I would make sure your own labor and crew's labor is compensated at the top rate.
I agree completely, and couldn't have said it better. There is nothing unethical about marking up a subcontractor's number by 20 percent, even if you are serving as the subcontractor. You are still managing the overall project and adding the cost incurred from doing so is not unreasonable, or, as I said, unethical. If the cost to the customer is what you have to get to stay viable, it is what it is.
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Old 05-23-2015, 06:50 PM   #14
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Re: Another Cost Plus Question


If the job contract calls for cost plus 20 it should not matter who does the work it would be cost plus 20.
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Old 05-23-2015, 07:01 PM   #15
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Re: Another Cost Plus Question


My crew labor rate, hourly or bid is set up to pay their wages, burden, vehicle and tools, and a reasonable profit like i would if i was a sub contractor. It is a separate entity, carpentry and being the builder. I mark up all invoices and reciepts on cost plus or fixed , including my own crew on a fixed bid or a cost plus contract. I have 3 cost plus projects under way, and a fixed bid that comprised of tearing down all but 900 sq ft of a house, gutting the remaing framing, adding on to the foundation and 3200 sq ft of living space. It was a way of getting around an ordinance for new construction on that lot. As it was basically a new custom, we did fixed cost.

I figured my crews labor on all four jobs, and added my mark up to all 4. It is not under handed at all, they pay for different things. Would a framing contractor not expect to make a profit from the framing?

What Andy said about value to the customer i am 100% in agreement with. I believe they are getting a better product with my crew. As far as good will with clients, we are all word of mouth, so they must be happy.
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Old 05-23-2015, 07:16 PM   #16
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Re: Another Cost Plus Question


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My crew labor rate, hourly or bid is set up to pay their wages, burden, vehicle and tools, and a reasonable profit like i would if i was a sub contractor. It is a separate entity, carpentry and being the builder. I mark up all invoices and reciepts on cost plus or fixed , including my own crew on a fixed bid or a cost plus contract. I have 3 cost plus projects under way, and a fixed bid that comprised of tearing down all but 900 sq ft of a house, gutting the remaing framing, adding on to the foundation and 3200 sq ft of living space. It was a way of getting around an ordinance for new construction on that lot. As it was basically a new custom, we did fixed cost.

I figured my crews labor on all four jobs, and added my mark up to all 4. It is not under handed at all, they pay for different things. Would a framing contractor not expect to make a profit from the framing?

What Andy said about value to the customer i am 100% in agreement with. I believe they are getting a better product with my crew. As far as good will with clients, we are all word of mouth, so they must be happy.
I expect to profit from the framing as the framing sub, so can I ALSO expect to profit from the framing as the GC?
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Old 05-23-2015, 07:29 PM   #17
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Re: Another Cost Plus Question


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I expect to profit from the framing as the framing sub, so can I ALSO expect to profit from the framing as the GC?
Yes.

I dont feel most contractors are nearly as organized as we are ( not saying you) but we are organized properly. My crews labor, expenses and profit are tracked completely separate from our revenue as a GC. My truck is under GC overhead, my 5 crew vehicles are under their expenses. You bet i expect to make a profit from owning equipment, a shop, vehicles and training and maintaining a crew.

I dont know any builder who would not mark up the framing sub as a general, nor would i. We disclose how everything is billed and expensed, and they see reciepts for everything, our billing packages are like books.

If i just bumped their rate up 20 or 30% to cover not marking it up, thats just perception. On cost plus we 100% transparent.

Never been an issue for us.
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Old 05-23-2015, 07:50 PM   #18
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Re: Another Cost Plus Question


Another way to put it, if your doing a 100k remodel and you need to gross 20% on it to pay yourself, pay overhead and produce a profit, thats 20k. If the framing is 18k, you just did that job for 16,400, or 16.4%. So it doesnt compute to me.
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Old 05-23-2015, 07:56 PM   #19
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Re: Another Cost Plus Question


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Another way to put it, if your doing a 100k remodel and you need to gross 20% on it to pay yourself, pay overhead and produce a profit, thats 20k. If the framing is 18k, you just did that job for 16,400, or 16.4%. So it doesnt compute to me.
Great example.
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Old 05-23-2015, 07:59 PM   #20
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Re: Another Cost Plus Question


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Another way to put it, if your doing a 100k remodel and you need to gross 20% on it to pay yourself, pay overhead and produce a profit, thats 20k. If the framing is 18k, you just did that job for 16,400, or 16.4%. So it doesnt compute to me.
It doesn't make sense to be able to make my 20k ONLY if I subbed it out. Why should I penalize myself for doing the framing in house?

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