New construction billing
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Hey guys, looking for a little advice regarding a recent issue i have ran into with billing on a new construction job. I am looking for some logical answers here.
We are the general contractor on a custom new home and are within 45 days of completion. Prior to our start we had to fill out a line item sheet for all phases of construction on this project, so we can take completion percentage draws throughout construction. This job was not a cost plus job, but instead a fixed cost project with any change orders to be cost plus.
On our line item breakdown we incorporated our profit and overhead into a few of the various lines. Our latest draw request shows that we were requesting 100% of electrical rough-in. Our homeowners seen our draw request and assumed we were making upwards of 70% on that particular line ( not the circumstances due to incorporating our profit and overhead into a few of the various line items). They are now requesting breakdowns of everything to " ease their minds" .
When talking to them they mentioned that they were unsure as to how to save money if this was how it was going to be on every line item. I explained to them that on material finishes, i would give them an allowance to meet or beat and if they were under budget on allowance items they could put those funds else ware to upgrade or just save the money.
Has anyone ever been put in this situation on a FIXED COST project. I would assume that on a fixed cost project nothing matters other than allowance items, productivity, and quality. I have nothing to hide but get irritated when people think they should be the only ones making good money and if you are making above what they may think is "reasonable" then you are in the wrong. I am not in this industry to make a wage, but instead to make a living and work hard while doing so, and build a business, not maintain one.
We are the general contractor on a custom new home and are within 45 days of completion. Prior to our start we had to fill out a line item sheet for all phases of construction on this project, so we can take completion percentage draws throughout construction. This job was not a cost plus job, but instead a fixed cost project with any change orders to be cost plus.
On our line item breakdown we incorporated our profit and overhead into a few of the various lines. Our latest draw request shows that we were requesting 100% of electrical rough-in. Our homeowners seen our draw request and assumed we were making upwards of 70% on that particular line ( not the circumstances due to incorporating our profit and overhead into a few of the various line items). They are now requesting breakdowns of everything to " ease their minds" .
When talking to them they mentioned that they were unsure as to how to save money if this was how it was going to be on every line item. I explained to them that on material finishes, i would give them an allowance to meet or beat and if they were under budget on allowance items they could put those funds else ware to upgrade or just save the money.
Has anyone ever been put in this situation on a FIXED COST project. I would assume that on a fixed cost project nothing matters other than allowance items, productivity, and quality. I have nothing to hide but get irritated when people think they should be the only ones making good money and if you are making above what they may think is "reasonable" then you are in the wrong. I am not in this industry to make a wage, but instead to make a living and work hard while doing so, and build a business, not maintain one.
1 - 8 of 8 Posts
Why line item on fixed cost contract.
Only line item on fixed cost is perhaps an allowance item.
Your bill should look like this:
Rough electric complete to Jones Residence.
$18,000.00
$2700.00 Profit & Overhead (your figures)
$20,700 Due (client only sees this number)
Only line item on fixed cost is perhaps an allowance item.
Your bill should look like this:
Rough electric complete to Jones Residence.
$18,000.00
$2700.00 Profit & Overhead (your figures)
$20,700 Due (client only sees this number)
the line item breakdown was for the financial institution funding the project and the way they require it in the beginning. We then fill out their version of a draw request and the owner signs along with us. I would personally think that it doesn't matter what anything cost my company, as long as it is a fixed price contract and bills are getting paid, work is productive and quality is exceptional. I will add that our price per sq.ft is extremely aggressive as it is, and extremely fair for our region.
So you would just list P&O as a line item for that draw since it is part of the fixed cost.
Someone else already said profit is not a dirty word...:thumbsup:
Someone else already said profit is not a dirty word...:thumbsup:
Would I be out of line to say that a fixed cost is a fixed cost and it doesn't matter which line items I incorporate my p&o of the project into? And that the only items which I will discuss are finish material allowances(as stated per contract) and that if they want savings then they need to scale back according to finish allowances provided.
The time to save money was first at the planning design phase then next at the bid phase. They have already agreed to the fixed price so no matter how you line item it as long as the bottom line equals the fixed price plus C/O's all is good. This is a basic business premiss that clients must be educated on.
Thank you Griz, that is pretty much dead on with how I see it as well. A contract is a contract and it is a little late to deter from at this point.
1 - 8 of 8 Posts
