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ibrewster
Normal budgeting process during major construction?

I am in the process of a major expansion to my home (more than doubling the square footage). I am working with a contractor that I have known for years and who is a good family friend, so I have no reservations whatsoever about the quality of the work he will do, or the fairness of his billing.

What I am not quite sure on, however, is exactly *how* billing works in a project like this. We started the process, as is pretty typical to my understanding, by him giving me a bid, and he has stated that I don't have to worry about being unable to afford to complete the project because it is a bid, not an estimate. OK, fair enough, but what does that mean for the inevitable unexpected issues that cost money?

As an example, his bid included a certain amount for pad prep work (the number there actually provided by a subcontractor). However, this is his first major project within city limits, and as it turns out city regulations were more conservative than technical requirements, requiring an extra two feet of compacted gravel under the footing. Obviously this is a significant extra expense. So who is *typically* going to be on the line for that? Me? My contractor? His subcontractor?

Also, how do "side" expenses play into things? For example, part of the bid was for "bathroom fixtures". However, I went ahead and ordered a tub I was looking at, paying out of my own pocket. Was that a "bad" thing to do, meaning that I will in essence be paying for the tub twice, once out-of-pocket and again with the bid? Or does it just mean that that portion of the money in the bid will now be available to help cover other costs, such as the aforementioned dirt work?

And what about details that weren't discussed at bid time, like what tile do I want for the bathroom floor - the $2/sq foot or the $15/sq foot? When doing the initial planning we didn't get into the nity-gritty details like exactly which tile or carpet I wanted.

I've asked my contractor this stuff, but unfortunately he's not much of a numbers guy, so he hasn't been able to give me a straight answer, since he hasn't really been breaking the numbers down to be able to say "we bid this much for x, but spent that much on it" - it was more a case of figure out an overall cost for the bid, then start paying people as needed, and hope (well, plan to - it's not like he just pulled the bid out of thin air or anything) he comes out ahead.

Like I said, he's a good friend, and I know he will give me a good deal. I'm actually more concerned with him coming out on the short end of the stick due to unexpected regulations/expenses than with me getting ripped off. Mostly though, I'm just trying to figure out exactly how much I can expect to spend, and if I need to be budgeting extra money for the project over the next few months or if I can *really* expect him to complete it for no more than the bid amount.

A. Spruce
Re: Normal budgeting process during major construction?

First and foremost, friend or not, you need to have a contract that clearly lays out the work and whom is responsible for what, i.e. tile selection, fixtures, decorative items, etc. If it isn't in writing, then it won't likely happen. The more litigious your state/municipality is, the more you need your T's crossed and I's dotted.

As for billing, your friend is not exactly truthful on what a bid is. A bid is to give you a fairly accurate assessment of the work to be done, under the known criterion, that is to say, you can't hold him responsible for stuff hidden from view at the time the bid was done. There are always unforeseen circumstances that will add to the cost of the job, but ultimately, the bid IS the starting point from which things happen. You are NOT going to get a bid for one price, agree to the work, then sign a contract for another price, the bid is the starting reference and the price is only going to go up from there, how much will depend on the age of the house, extent of the work, and the finish level.

Example: Tile - Tile pricing is all over the board a basic tile is very cheap, while designer tile or marble is very expensive. There is a whole range in between. Without a specific tile chosen, there is no way that an accurate price can be given, so the contractor's range of is meant to show this. The products used in prep and installation can change as well.

Example: Flooring - Do you want cheap vinyl or designer vinyl, wood, tile, marble, Andorian frog skin, without a specific flooring stated, there is no way an accurate price can be given. Every aspect of your home improvement will be this way, everything from windows to paint choices, flooring to roof covering, everything is a guess until specific materials and items are stipulated.

What it sounds like is that you decided you wanted to do this project, didn't know where to start, so you had the contractor provide you a general bid, a bid that isn't really based in reality, but it does give you a sense of what you're getting into. What I would do with this bid is add at least 50% to the bottom line and figure that this will be your total cost.

Now, if you were to sit down and decide exactly what you wanted for every step of the process, then a far more accurate number could be provided, a number to which you'd add 15-25% to get to your total cost. The additional here will be to cover the unforeseen items, such as the added footing depth. And, as far as who pays for the unforeseen things, you do, it all comes out of your wallet, which is why you add the extra percentage to the total in the first place. Be prepared for change orders to cover the extra work, there are always change orders, no matter what size the project is.

A. Spruce
Re: Normal budgeting process during major construction?

The key to minimizing surprises and maximizing your enjoyment of the process and the end product is to be as thorough in your prep-work as possible. It is up to you to do your own shopping to know what kinds of plumbing fixtures, light fixtures, paint brands and quality, tile types and styles, etc.

I have always provided pricing for the "intangibles", the general construction and things you can't see or take for granted, and left all the visual aspects of fixtures and surfaces up to the client. This doesn't mean that you have to buy all the stuff, you just have to specify exactly what you want so that the contractor can provide it and include it in the bid, just know that anything the contractor buys will cost you more because of his time to purchase it and get it to the site. If you are willing to take on this aspect to save some money, then you need to work with the contractor to know exactly what you need to furnish and when. Be aware that delays and errors on your part are going to cost you.

Here's an example of a large project I did last year, one bathroom refurbish, bare stud kitchen and master bathroom remodel, new floors and paint throughout.

I pointed the customer in the direction of good suppliers and they themselves purchased the flooring, all plumbing, all tile and marble, cabinetry, all the decorative fixtures, all the appliances. Everything was either delivered or prepaid and ready for me to pick up. My bid was for all the labor required and to provide the non-decorative materials. Now, I didn't just leave the hanging to make decisions for themselves, I met with them regularly before and throughout the project. I helped them choose finish quality, marble over tile, tile over hardwood, colors, cabinetry needs, etc. I never tell people what they want, I help them figure out what THEY want, make them a part of the process so that THEIR vision is realized, not someone else's, insuring that they'll be amazed and in love with the results of all the work.

On a more typical project I'll outline and bid the basics, things that need to be done regardless of trim level, then offer options, such as for counter tops, Formica (base ), cultured (man-made ), or standard basic tile. The customer then chooses which level they want and that number is added to the bottom line. Similar with flooring, vinyl, carpet, hardwood, tile, all have different costs. I choose a mid-grade in each category, and have samples to show the client as we're going over the bid. The customer has the choice to either go with one of my samples or go find and choose their own materials. Decisions are often made in that moment and the job total can be tallied by the end of the conversation. From this bid and list of options a work order is created, specifying everything in great detail. The contract is then drawn up with all the legalese and references to the work order as it's defining criteria. This is just how I do things, your mileage may vary.

Heed that you do not get pulled into being bullied by either the contractor or project designers. There is a large segment of both of these groups that expect and demand that you do exactly as they say, designers in particular. This is bull****! It is your house, your money, the decisions are yours and yours alone. Contractors are there to make sure the work is done properly, to code, safely, etc., if necessary, explain why something will or won't work or can/can't be done. Ultimately, very few things "can't" be done, it just takes thinking and money to make it happen. Designers are there for their ideas and opinions, you do not have to agree with them or implement those ideas.

Lastly, I want to reiterate, if it isn't in writing, it isn't going to happen! If you have any questions what-so-ever, get direct answers and get it in writing if it affects the contractual agreement. If you want Kelly Moore paint, make sure Kelly Moore paint is specified in the paperwork. If you are to supply fixtures, make sure it is specified. And, when it comes to change orders, get pricing BEFORE the work is done.

ibrewster
Re: Normal budgeting process during major construction?

Thanks, that was basically my thought - if it costs more, I should pay more. So I need to know how much the bid included for certain items, so I can know if a specific choice will cost more or not, and how much. And, of course, if I purchase items myself, I'm simply not paying that amount to my contractor, so no problem there.

Part of my confusion arrises from the fact that in the past when he has done work for me, he did just charge me the amount he stated up front, even though the work took an extra day or so from what he bid - but then, in the past the projects were smaller, and any cost changes would have been much less significant, so that's probably the difference.

BTW, with regards to contracts, there is no contract involved here. I asked him to do the work, he agreed, enough said. As details come up to be done, we talk, figure out the best option, and work goes on. As far as I am concerned, if you don't trust your contractor enough to work like that, or don't trust them to get all the job done correctly without it all being in writing, then you need to find a different contractor. If there is *any* chance of litigation, then you *really* need to get a different contractor. It disgusts me how legalized and formal some people make things. But, then, that is my personal opinion, and I guess I'm just lucky to be able to work with someone where I *don't* have to worry about any of that junk. :)

ibrewster
Re: Normal budgeting process during major construction?

From what you are saying, I guess this isn't really being handled in a typical manner. Guess it's more of an "Alaskan" project than I thought! :-D

A. Spruce
Re: Normal budgeting process during major construction?

It is the contractors prerogative to give you whatever he wants, many, including myself, do stuff for free all the time. The problem arises when the client expects things done for free, or that allowances be made here and there. Let's put it this way, when you give something of your own accord, it is a gift, you feel good about doing it. When something is demanded or taken from you, how do you feel? The best course during business transactions is to have everything outlined in detail, maybe not to the Nth degree, but well covered, then there are no hard feelings because all expectations are out in the open.

I hear you on wanting to live your life by way of a handshake, I too feel this way, the thing is, you can't just expect others to be as you are. If you know your contractor to be a handshake kind of guy, a man of his word, then by all means press forward, just know that handshakes don't go very far in a court of law, nor do they prevent bad blood from developing between parties when implied expectations are not met. Even if you choose not to have a contract, I would highly recommend a more accurate outline of what is expected from both sides and a price put to it. Again, lay all expectations out there and agree upon them.

Good luck on your project, keep us updated as it progresses :cool:

ibrewster
Re: Normal budgeting process during major construction?
A. Spruce wrote:

The problem arises when the client expects things done for free, or that allowances be made here and there.

Exactly that is what I am trying to avoid. From the way my contractor talks when I ask, It sometimes feels like he is saying that I *can* expect that (he mentioned, for example, that he quoted his labor at $50/hour, but that it might not actually be that much when all is said and done), but logic - and what you are saying - says otherwise. So I'll continue expecting to (and planning for) have to pay for every little extra, and if he doesn't charge me, I'll just be pleasantly surprised :) Worst case scenario is I'll just have to call a temporary work stoppage due to lack of funds as we get towards the end of the project, but I can live with that.

A. Spruce wrote:

Good luck on your project, keep us updated as it progresses :cool:

Thanks! The walls started going up yesterday, so weather permitting (how much framing work can get done in the rain?), and assuming walls continue going up at the same rate, I'm expecting to see most, if not all, of the exterior walls done by the time I get home. Quite exciting times! :D (pics at https://flic.kr/s/aHskAKPRQq if *really* interested)

A. Spruce
Re: Normal budgeting process during major construction?

You said you're doubling your space, how many square feet is that in total?

ibrewster
Re: Normal budgeting process during major construction?
A. Spruce wrote:

You said you're doubling your space, how many square feet is that in total?

Should be around 2,500 sq feet total, of which something like 700 or so is Workshop/Garage space. My wife and I have been doing woodworking as a hobby out of our living room for the last several years, but with the arrival of our first child four months ago, that was no longer a viable option. Figured if I was going to spend the money to add on a workshop, might as well go a bit further and add a couple of extra bedrooms and another bath as well.

dj1
Re: Normal budgeting process during major construction?

I also want to wish you good luck with your big project.

Friends or buddies aside, you need a contract. I've seen high school buddies stop talking to each other over a business deal without a contract. Believe me, your contractor will thank you for bringing the subject of a contact up, particularly since he is "not so good with numbers and details".

Take materials for example. If you want to bring in materials, be specific to what materials, what quality, what colors, etc. This goes mainly for finish materials, not rough materials - fixtures, floors, tile, windows, doors, and so on.

You mentioned the added cost in the grading - you see, right off the bat you have a question about who will have to pay for added gravel (You BTW). Things like this will pop up daily. You need a clear and unbroken line of communication with him at all times (except, don't bother him too much, you have to let him do his job...).

And there's more, a lot more. If there was a way to put all our knowledge in a chip and hand it to you, we would have done it. But there isn't a chip like this. Welcome to the school of hard knocks.

ibrewster
Re: Normal budgeting process during major construction?

Well, walls are up, roof trusses are going on, and electrical plan is taking shape. My contractor thinks they should be completed with the roof trusses today, and have the area dried in by end of next week. :)

https://flic.kr/s/aHskAKPRQq

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