Cost plus vs. fixed cost which is better? | Nick Schiffer Podcast
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- Опубліковано 7 жов 2024
- #14 Nick Schiffer Podcast. Nick Schiffer answers your construction, renovation, and business questions in-depth on Coffee Break. If you have a question leave it in the comments below. This week the questions are:
00:25 Can you explain your pre-construction agreement in a little more detail?
03:01 How do you decide that a project is T&M, cost plus or fixed price? Which of these payment systems do you prefer and is the most profitable for you?
11:17 I really want to know how you built the team you now work with. How close are you with them? How personal do you get with them? Do you ask about and know what motivates them?
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cost plus vs fixed pricing
Cost plus vs. fixed cost which is better? | Nick Schiffer Podcast #14
00:25 Can you explain your pre-construction agreement in a little more detail?
03:01 How do you decide that a project is T&M, cost plus or fixed price? Which of these payment systems do you prefer and is the most profitable for you?
11:17 I really want to know how you built the team you now work with. How close are you with them? How personal do you get with them? Do you ask about and know what motivates them?
I’ve worked for many contractors over the years and it is rare to find a employer with this mentality and respect for their employees. Would have loved working for a company like yours back in the day.
Thanks for making the video and sharing!
I’m not a builder, an architect, a designer, or a contractor. I don’t build custom homes or “builder grade” homes. I just look forward to listening to the coffee breaks and the long podcasts. I’ll listen to two hours of hybrid insulation techniques and then read articles on building science about what percentage of my house should be insulation inside vs outside of the studs to reduce condensation ... and then go watch an hour plus video on stucco drainage and problems when you don’t drain. all knowing I’ll never implement any of this. I don’t know why except I enjoy the knowledge from people who genuinely want to share good information.
How do I ask questions about the podcasts? I just listened to the #128 and had some questions and comments (Nest has some great radiant heat settings, for example).
Hey Miguel would love to chat more about this stuff. Can you share some resources? Im currently shopping for a builder to build a new house. I read all kinds of stuff I love the concepts of net zero zeroenergyproject.org/build/twelve-steps-affordable-zero-energy-home-construction-design/ I have come to conclusion: I want to do a whole house humidity control system. Do you think this is wise? Also I love ICF, and the house we are currently in is ICF geothermal, but most builders avoid wanting to do it... What do you think about spray foam? What do you think about spray waterproof membrane? What do you think about 2x6 or even 2x12? What should I focus on?
Love that you hit on this topic Nick. We've done both, and lean towards a hybrid approach. Fixed costs works best because we are really strong on the pre-construction side with plans. If you're bidding on a project that's not fleshed out well, that has a lot of TBD, then cost plus is the only way to protect yourself. It really comes down to asking yourself: In looking at the state of the design, getting a feel for the owner's ability to commit, whether the owner really understands the design, etc. - then asking -- How many change orders am I going to have to submit? If the number looks high and painful, then you're going to want to account for it.
Much respect for your attitude. Your personality shows thru. : ) : ) : )
Hey Nick, love the coffee breaks. I like to hear how other people do things in their remodeling businesses. I haven’t seen in your videos yet how you set up your equipment as far as trucks , vans or tool trailers. Judging by everything else I’m sure there’s a good system to keep everything organized
Nick, thank you for a detailed and sincere explanation of how you operate. This is a very valuable use of UA-cam.
I wish this had a love ❤️ button. Thank you
I am amazed at how many “ professionals “ don’t think that a well organized and successful construction company isn’t considered a professional. When I go to an attorney or doctor, their fees are substantially higher than a contractor. Why can’t they appreciate the talent of a organized and professional contractor. I can’t do their job just like they can’t do my job.
It's due to ego.
And fear. Here in the UK the Consultants fear Contractors when working on major projects because they know the Contractors will run rings around them as they are too street wise for them. That's because the Contractors are run by businessmen who run a business taking all the risk for a typical profit margin of 2%. If a large contract goes wrong that 2% profit margin can easily turn into a 10% loss, so they have become risk aware and risk averse and too clever for Consultants.
Your channel is fantastic. Congrats on your success and valuable insight.
I was just turned on to your videos by my shopmate... thanks very much for your honesty and in-depth explanations. These are super helpful and thought-provoking and I'm looking forward to diving into your podcast!
Hello Nick,
What Contract Plus Contract format do you use? Do you have a sample?
Thank you very much. Very informative
Glad I went cost plus with my builder and asked to see all the invoices. Several times we were billed for things that was from another project they were working on, had we done fixed cost it would have just been an invoice with a dollar amount for what was asked for and we would have went ahead and paid it.
Hey Nick thanks for all the great information you are always sharing. I have a question in regards to the cost plus approach. When you are going through a project and something that was not finalized during the pre construction phase finally comes together are you giving your clients a price on that like a change order before you build it out or are you just tracking costs on it and then billing for what it costs? This is something I battle in that we may not have a final design in place and then as it comes together whether I just track and bill or whether I stop things and price things out and issue it as a change order. Hope that makes sense. Thanks.
Very helpful 👌
Nick
I typically contract a fixed price with terms for alternate add/deduct and change orders
How would you structure change orders with a cost plus strategy?
Planning to build my first custom home and I think cost plus is my best strategy, but looking for your thoughts. Thanks so much for any return comment
Rather than a fixed cost or cost plus, what about a cost + fixed fee arrangement with an incentive to the builder to come in under budget (e.g., split savings)?
Then the job becomes a value engineered job meaning just average work for sake of bonus.
Thank you!
hahaahh cost plus is why the DoD budget is insane it's all I deal with every bloody day. Every so often you find an honest guy like you, but that is RARE!
Check your coffee maker bro
Are cost plus projects applicable to customized homes?
In California, cost-plus & time & material contracts are not legal in residential construction.
I understand why they did this but, as usual, it's stupid there aren't exceptions to this rule. I think it leads to massive inflation in bid pricing.
I can’t imagine why, and something I didn’t talk about was the lack of information tends to end up with inflation to numbers to cover yourself
@@NSBuilders Intentional or not, when trying to win clients builders (and architects) give rosy estimates that are invariably run over and the client doesn't always have the buffer. Shadier builders can even inflate their prices near the end of the project effectively holding the client hostage.
@@NSBuilders @Kevin Pazirandeh Cost-Plus is completely illegal in California. If you have an issue with a client - and you will, on some scale - you won't even stand a chance in the law. It doesn't lead to massive inflation. It leads to a clearly defined scope and budget prior to starting work. It also leads to clients knowing what they will be paying before they sign a contract. Look at how many contracts end up in litigation - by a wide margin, it's cost-plus agreements. To say that "trust" is what makes sure a cost-plus agreement works best... well, there's no "trust" when it comes to fiscal and and legal issues.
I’m paying a flat fee to my contractor I can’t be getting nickel and dimed hourly…..my lawyer already does that 🤦🏾♂️
👍👍
Is that green tea in the jar? It looks like algae.
Green tea, doesn't look like that.
Algae
as a home owner about ready to build I want to hire a general but I want control of the money I also want to see sub contracts bids and get a few of my own to make sure the general is not taking a cut, I want to price concrete and maybe pay up front for it to get a better price?
To meny chefs.
Won't work.
You want to micromanage based on your description.
Get your license and be the GC
@@antonbriggs5680 we can be a owner/builder in the state of South Carolina without one I found out.
So what happens when a subcontractor performs shoddy work and you get it corrected ? Does that cost to fix or resolve fall onto the homeowner or do you make the sub pay for it ?
That’s for us and the sub to figure out. Not the homeowner.
@@NSBuilders From what I've experienced the sub's final price just ends up coming out to be more than what was estimated and homeowner pays it. That additional cost just comes from having to redo the work this is the freedom of doing cost plus.
Seems like cost plus really only benefits the contractor….
UMMM I would think a fixed priced would because they get to keep the extra money if they come in under budget.
You'll make more money doing fixed price. It's all about showing value to the customer...