We got an estimate from one design/build firm and they did a line-by-line quote at the end was a 25% mark-up on everything from the plumbing to cabinets to lighting to trim I mean everything just for managing the project. This was a significant amount because the end cost was around 180K. We have since gone with another gc who doesn't mark-up others work, ie electric, plumbing, heating, cabinets. We know his bid is higher than most but are willing to pay for quality and timely work. HTH

Forgot to mention the costs quoted in previous post, right above, are for a new addition and garage, not just the kitchen. Pevo

Yep! They mark-up everything! Just like cabinet pull-outs - it costs A LOT more to order them in the cabinet than on your own. And they get the stuff at wholesale prices, too. I would NEVER have the GC order lighting and cabinets and stuff like that!

You should have known what the GC mark up was before going into the project. The bigger the company, the greater the overhead, and the higher the mark up. This is simple fact of business.

Think of it this way. When you have the guys from GC standing around, making phone calls, driving around for you to pick up this and that, they need to get paid. This is how you pay him, with the mark-up.

I have seen any where from 10% to 33%. 10% used to be the standard when we did a remodel in 1999. It was more like 20% before the bust a few years ago. My guess is that it is lower now.

We used to think we'd have the electrician and plumber do things to our existing house "while they were at it" and already on our premises. We have since figured out that it costs way more for them to do anything than if we contract out on our own. We are purposely having them not do any more ideas we get and will just hire someone when it is over. It seems like a shame, because it is much easier to run a line, add a light, etc.. when the walls are open and it is all being planned. I understand to charge X for an outlet, but to charge X x 2 for a quad instead of double receptacle feels wrong. Yes, the material cost is more, and there may be an extra few minutes involved, but to pay an extra $90 for that is obscene. Our electric change order was over $5k when we got the first estimate. You can believe we crossed a lot off our wish list then!

I am not sure how much the high costs are due to the electricians or plumbers, but I do believe the gc markup is a factor. I would have hoped that the gc's bid would cover enough profit, but maybe the factor in that everyone will go over in change orders so to keep their estimate low. Then they can point the finger at the homeowner when the budget is blown. I am not talking luxuries either, but for instance, we have a separate fridge and freezer. It was already bought and in our house for a few years before we hired the gc. It was in our plans. However, we got charged for the second electrical hookup. I expected to pay for any extras but some things should have been considered normal such as a cable hook up for a tv in the master bedroom after it was extended and gutted.

to keep costs managable on my project i found a GC who was willing to let me do a lot of the purchasing which has saved me a fair amount of money but it has cost me a fair amount of my time. so it is a tradeoff -do you want to give up your time and deal with the hassle of it and do you have the time and reliable vendor contacts to do it?

it was necessary for me to take on some of it as my budget was tight and i wanted higher end finishes so i could stretch a bit farther than otherwise. the GC stated in his contract the markup rate is 20%. i will be charged $3452 for fabrication and install of my marble countertops for a small kitchen. frankly it is worth it to me. he has to to deal with all the logistics of slab transportation, nitty gritty details of the fabrication, oversight to make sure it is right and deal with the fixes if it is wrong, delivery to job site, install etc. that one i would not want to tackle.

it is all a tradeoff. as a single professional with a very demanding job, i have only so much time so need to choose the areas where i can make a difference and pay for the rest i cannot support. if they are spending their time to purchase and coordinate on my behalf they should be paid for it, they do not work for free. the question is what level of markup. i contracted directly with the cabinetmaker and while i am glad i did it (saved me about $4000) it was a huge effort, required a lot of my time just to get through the design and build phase. construction starts monday... eeek!

You guys misunderstood. Yes, of course, I am paying a mark up. Otherwise there would be no GC! My question was what you thought of the percentage.

It's just that 33% seems high. This is a whole house reno going on 18 months, and the pricing paradigm is not transparent. I have to look back at my notes but I think they indicated close to 20% markup.

I could never have been GC on this project, given its complexity and duration. We added on 2000 sq feet and gutted most of the existing 5000 sq ft. That's why I hired a GC.

oh, btw, i just found an email where they mentioned their 20% markup

now i am really steaming

I don't think anyone minds paying a markup to a gc who is doing their job and handling things expertly for the h.o.. I could not have gc-ed our project. My 2 issues are the parts that feel like gouging and also that I don't feel properly protected by our gc lately. Too much has gone wrong and it has dragged on too long. If I am to pay a markup of a very decent amount, then I expect to get something for that. Our project was a good sized one (well paying) and I feel like when I try to get things fixed, they view me as a nuisance. The gc should be the go between and not a roadblock.

I think a 33% mark-up is very high. I thought that the cost of the marble/ with fabrication was quite high when you posted about this the first time. And I still do. Difference is, I now see why!

In my own case, I had expected my GC to charge me 20% mark-up. However, in a typical "for you" type sales approach, he offered to charge me only 10% mark-up on doing his job of "managing" my project. (Of course, this was on the top of this fees for doing the actual work, buying materials, etc.) However, he also charged me a 10% mark-up on all the items I purchased myself (appliances, cabs, lighting, stone, etc.). He also charged me 10% of the fees that were charged to me by the electrician I independently hired. And, of course, by the time we got finished with a ridiculous amount of change orders, I'd say he walked away with fees that were well above what a 20% mark-up would have been in the first place. Like most businesses run with savvy, the business of being a GC can be very lucrative. Sounds to me like your GC has found the right formula. I sincerely empathize my friend.

you might want to clarify how they get to the 20%. it is at the end of the day the total of the markups on the whole job totals 20% or did they commit to a fixed 20% on each item? they may get better prices from some vendors than others and at the end of the day it evens out.

how much longer do you need to deal with this GC? are they delivering, is their quality good, are you generally satisfied? sounds like you are talking about a difference of ~$300 specific to the counter? given the horror stories i read about GC's on this forum, i would think carefully about how to have that conversation before having it. good GC's are hard to come by and damaging a relationship in the middle of a job could be dangerous. that is not to say you should not have it, i just would have your facts and think carefully about how to approach it before discussing. ie: what are you asking for - a full accounting of all purchases for the last 18 months and refunds on over billing?

Mtnrdredux, I agree, 33% seems high. I'd choose whatever solution--confrontation or paying up--will cost you less emotionally. Nothing feels worse than being angry, except maybe feeling you're being taken advantage of. Believe me, we know these feelings.
This thread makes me grateful that we're acting as our own GC. It's a huge role to play, and it's definitely taken longer (but possibly not much, judging by the timelines of some of our neighbours renovations), but we've made some great connections, we've had full control over every minute detail, and I know our budget would've been blown long ago if we'd used a GC.

Our GC used to charge 15%, in this economy is charging 10%.

The gc should be the go between and not a roadblock. -- Great lien, Dianalo!

Thanks, Martha.

Good advice, everyone.

I am keeping this under my hat until we are 99% done instead of 80% done.
In the meantime, I have a photocopy.

I will also say that i do think my GC could be worse. I guess that is about the best praise I can muster. They are generally responsive and have done some beautiful work. I like them personally, and think they have great taste (although we did almost all of the design work, frankly mostly because we got to it first and they were swamped with execution). While I think they gouge us, because they can, I think they fall short of being out and out crooks. A sad commentary that this might constitute a good GC!

I'm in NYC. The gc's who itemized, totaled all items, added 10% general conditions to the total and another 10% overhead and profit. So about 21%. However, I know that if they were using subs - not their own employees - they added 10-20% to the sub price before entering it as an item. So mark up was really about 35-45%. I'm sure they added significant markup to the cost of their own employees too. Bottom line is, if you use a gc, you pay for it.

We negotiated 10% on all subcontracted work and materials. We're sourcing most of the materials ourselves to avoid the cost. Also, GCs often get discounts, but still bill you as list price for the item. Our contract is for actual cost +10%.

Ugh.

I do the accounting for a goodish number of GC's. Probably 6 -10 different GC's are current clients and over the years there have been many, many more.

I don't know a contractor that could stay in business charging 10%. If a contractor told me they were charging a 10% overhead I would immediately assume they are a flat out liar.

I have one client I work with that will bill out time and materials on particular jobs. On those the least he has ever charged is 12% mark up on just materials but he also charges current market rates for his employees. In other words, if he's paying 15.00 to an employee to paint a room he'll bill it back to a client charging the current going rate, 30.00, for a subcontractor painter.

Even at that this particular client is in it because he loves the job and he is by far the cheapest and most talented workman I know.

As the person who does his job costing I am constantly pressuring him to stop doing jobs at a set percentage because we get shafted. We make NO money. None.

Running the numbers using a granite install as an example:

Let's call cost of materials at 2,000. Then paying his subfabricator 1,600 with a profit of 400 for a total job price of 4,000. (I'm just picking these numbers out of memory from the last couple jobs we fabed) Roughly 10 percent profit and overhead I believe.

Some of that o/p in theory is going directly back to the GC. Not for his business, but for paying for his groceries, his rent, etc. Let's assume that he would like to make at least 100 dollars on any job. Just because. That leaves 300 dollars to pay rent, electricity, new/repair tools, shop materials, displays, bidding costs, etc. Then you have got to look at taxes on anything left over.

That's the perfect situation. The best scenario for him at 10% profit.

Now flip it the other way: Let's say that the job goes awry. AND IT NEEDS TO BE REDONE. Assume it's all the GC's fault. It doesn't even matter why. He admits it and promises to make good.

Now, that jobs cost (3600) have to be paid for again. By the GC. Based on using the entire 300 dollar profit and ignoring overhead the GC would need to do the exact same job another TWELVE times before he would be in the black again. Not even getting a profit. If you wanted to you could do the same math assuming that the GC doesn't need to eat or feed his kids. Then he would only have to do the job 9 more times...

I'm not going to say GC don't overcharge. They do. But actually, I consider 30% to be about the right amount for that GC to still be in existence in the next few years.

My gc charges me project mgmt fees of 9,000/month, for 16 months now. I agreed on that and don't dispute it. Everyone is eating, no worry.
I also totally understand the paradigm whereby they buy things at a cheaper price then I can retail, so on appliances, fixtures, etc, the seller is the one, in theory, paying them.
But he represented to me, several times, that his markup is 20pct. So, prima facie, the appearance that he marked this up 33pct is, disconcerting. Especially if he has done that for everything, in which case the aggregate difference is quite dramatic.
I'm not a cheapskate by any means but I am shocked at the sense I get that most clients ask no questions. That is irresponsible.

Judenyc,

I'm in a NYC burb and so is my gc, my old bur

Again, to be clear, I understand a gc has to be paid. My gc uses only subs, has no ee's. I would have no qualms with 20%

Interesting thread. I have been watching your redux project, and I know the NYC burb market well, so I know that you have a considerable investment in your home.

If the GC told you 20% and you find otherwise, and you are also paying a set oversight to the GC you can conclude you are dealing with dishonesty.

You are not your GC's personal bank account. I will assume that you work for your money and that you do not steal from your boss and the feeling that someone is trying to steal from you is not pleasant. The oversight that you are paying 108,000 per year sounds rather generous.

If you feel uncomfortable confronting this dishonesty, at a risk of appearing cheap, realize that this is only the one you caught, and it was likely going on an almost every turn. You are entitled to see every original receipt before paying a penny when you have a cost plus arrangement.

You can donate the amounts you save to charity if you are concerned about seeming petty about this.

I have really enjoyed your pictures and posts, and I hope for a successful and speedy completion of your project.

My GC destroyed our house, so he was fired before his drywall subs could even start. He had his own employees - THEY were the IDIOTS who detroyed the framing, roofing and siding. He told us on day one that the actual electrician would run the wiring - WRONG! His morons did it and then I had to learn all about electric and fix it!

We had to then hire our own electrician. Well, next time we are going with the higher bid from the company we know is reliable. The guy we hired was nice (at first)- and his bid was about $5,000 to map out the wiring the morons did, inspect it, have the electric inspector approve it and then hook it up and get final inspection. The highest bid for all new wiring was around $7,500. Well, that turned into "Oh, you wanted THAT?" YES! Do you not comprehend English? And on and on. In the end it cost us over $8,000 just for the electric, and I actually did the re-wiring (the original MORONS NAILED through the wires!)

Then, AFTER the final inspection, the electrician came back because some breakers were recalled. When the guy was there he looked and said "Oh look, your breaker box (in the basement) has rust - it looks like water is getting in along the main line from the outside. You need a NEW breaker box and breakers. I'll get back to you with a quote." He wanted over $2,300. So, it just so happened that an electrician just purchased the old building my mother used to work in, and she stopped by to see how they liked it. She explained the situation, the guy came out and said "You do NOT need a new box. There is only a little rust. I'll clean it all up, replace any corroded breakers, clean and re-seal the main cable on the outside for $700. If you want a new box for added capacity you can do it later." DEAL! In and out in a few hours, two very nice guys. Not like the other electricians who thought they were God's Gift!

We had to hire someone to rip down and replace all the cedar shakes. The original MORONS installed it with no double-course on the bottom and GAPS showing Tyvek behind the shakes. We found a local high-end GC who does almost all cedar. Yes, the bid included a few hundred extra dollars per day for the GC's "time" (he didn't do any work), but his cedar subs were true artists who usually do high-end work on the water. What a DREAM! They were very nice, one guy LOVED that my house has the old ship-lap plank sheathing, they replaced the Tyvek with tar paper (NEVER use Tyvek behind REAL wood siding), installed all the new (properly sized special order 24" tall) shakes in 3-4 days. They even left us the $2,000 worth of 18"h shakes that were ripped down to use as kindling in our wood stove. Normally they take them because they all heat with wood too ;) The GC even offered to give me cedar scraps in the future if we ever need them (that won't be for a few years though ;)

--

Dianalo, just before the new electricans arrived (the rip-off guys), the ONE available outlet in our kitchen died. So yes, they replaced it the day they mapped the wiring. It cost a few HUNDRED dollars for that ONE outlet with new line to the box (a short, clean run). Had we just called in a local electrician for an hour it would have cost maybe $100 for an hour's work.

I do not understand how your GC added an upcharge to items that YOU purchased?!?! Even my original GC told us "Buy your own light fixtures - make sure they are here by this date." The electricians charged $300 for each ceiling fan install, and $100 for each recessed light. If I had realized how BAD recessed lights with CFLs would light the rooms I could have saved $1,400 and put that towards the expensive sconces and pendants that match my triple-pendant and gotten 10x the amount of light in the room. Oh yeah, they wanted to charge $10 for each CFL lightbulb! We bought our own - this made them REALLY MAD! They claimed that customers NEVER buy their own bulbs! What? That is INSANE!

--

Oh yeah, we hired our own drywallers. The GC was charging a few thousand. The bid was only $700 for labor - we already purchased the drywall because my brother's friend was going to do it (but he screwed up the insulation and I had to fix it, so that idea went down the drain). $700 sounds cheap, but it took only 1-1/2 full days, the other days they came between other jobs. I think it looks like crap, but I did some research (when deciding on paint sheen for the ceiling) and it turns out modern crappy drywall / spackling is NORMAL! I am SO glad I live in an old house with 1" thick plaster walls with smooth-as-butter like a baby's bottom finish. I had to fix a cracked ceiling (WORST experience - threw out my back for 2 weeks), but once I hit the original plaster under the gazillions of layers of paint I couldn't BELIEVE how SMOOTH and PERFECT it was. And someone did it all by hand!

Oh yeah, people think that new construction has crown moulding as an "added value." That's BONK! It's because the framing and drywalling is so bad! You NEED crown moulding to hide the wavy line between the wall and ceiling. I haven't done mine yet because the cost of lumber has skyrocketed and the wood just to make the trim around my patio doors cost over $200. All I can say is Thank God I already do my own custom trim - there are SO MANY screw-ups that need to be hidden. The original MORONS cut the first plank of wood flooring between the dining room and the new kitchen. I looked at it and SCREAMED "WHAT ARE YOU DOING?!?!" They said "Aren't you going to replace that old floor?" WHAT?!?! I said "Are you CRAZY? That is ANTIQUE FIR! WHY would I rip that out and replace it?!" Cutting the flooring and installing a wide decorative strip between the two rooms is the job I am dreading most. That is the one thing I truly fear I can screw up, but I don't trust anyone else after all I've been through. Having to engineer and build new beams and collar ties and figuring out 3 different mitres and bevels to shore-up the roof so the original front roof doesn't collapse is nothing compared to facing that floor!

mtnrdredux --

Your gc is charging a $9k monthly administrative fee AND marking stuff up ostensibly 20 percent but maybe 33 percent?

If you are giving a good contractor 18 continuous months of work in this economy, I think you should be getting some kind of break.

You are probably wise to wait until work on your house nears the end, but I certainly would figure out a way to tactfully bring up the 33 percent evidence. Independent of anything else, your house is exactly what any contractor would want for his portfolio -- original, tasteful and, beautifully crafted. If the gc does flaunt this project, presumably he does not want you to exclaim sweetly to potential clients, "Yes their work was excellent, and they only over-billed me by three orders of magnitude."

In the interim, practice glowering in the mirror.

Cheers

I have a tendency to round numbers. 33% looks too close to 50% in my way of thinking.

How involved in the process have you been and how important was the GC in the countertop? Would this guy have willingly taken the fall if things went badly?

How many other products have had this markup?

All you people whining about contractor markup need to take a chill pill. Markup is what makes the economy go. Think 33% is high ?

Why don't all you cheapskates try running one of these co.'s fo r a month and start paying ALL the things you obviously take for granted: Insurance, phone bills, rent/heat/water/electricity, $4/gal gas to get those big gas guzzling truck to your jobsite with tools and 2 tons of tile - or your pretty oh la la marble with sparkly waves from Italy, insurance on those suckers too, time and $$$ to comply with the new lead paint regulations, professional fees to the accnts and lawyers to tell you how much $$$ you don't have and to go after the dead beats that aren't paying.

Then there's payroll to meet, the taxes associated with that - remember the firm gets to pickup 50% of that cost in addition to what you pay out of your wages/salary, and the new Obama Care package is starting to come online, and you've got to have capital in the checking account just to keep the machine moving.

And this is just a start!

Ladies, what do you think the markup on that Lilly dress you just got for the spring is? How about your kids tennis shoes? Fellas, take a gander at what the markup on that $95 golf shirt you just bought at the pro-shop is? Clothing is typically marked up 100%, and the store is really not adding any physical value to the what you take home! Still think 33% is high ?

mtn - I'd feel a bit pissed too if my that was my deal and they were playing with the #'s. If you really want to be able to re-coup any overages you better have a sitdown now for an explanation -especially at $9k a month. Otherwise you'll have no leverage at completion and your only course will be to litigate.

Mtn is paying $9k a month for supervising and is also expected to pay 20% and then the gc has the gall to pad that up to 33%?! That gc is lucky he is still breathing! If things are like here, the gc is not working on just one project at a time and is not on site for 40 hours a week.
Mtn's project is large, so I am guessing the 20% would not be peanuts. Yes, gc's have overhead, but one customer should not be responsible for covering that for the year in full in addition to giving him a profit unless they are the sole client.
Frankly, I don't truly care what each outlet costs to install as much as I care that I am hit with change orders to things that are not changes. I had expected that the contract covered all the normal items and we'd pay extra for, well, extras. I also am miffed that I am the one supervising and having to ask for corrections. Things should be done right in the first place and if not (which should be rare, and isn't), I should not have to ask repeatedly that they be fixed nor especially have to argue that they are not done well enough. The gc should be noticing anything that is not done well and taking care of it.
Our contract with our gc was over $120k for starters and then we got hit with the change orders. He did not supply or install our kit cabs, counters, floor or den floor (or even our bedroom carpet). I had offered to have them do those, but he did not feel comfortable installing Ikea cabs or Marmoleum. That number does not include any hi hats (we have none) or light fixtures (we bought all). We had already purchased everything before meeting him as we had planned on proceeding a few years before with someone else. He walked into a project that was well planned and had access to most materials on site (and a very detailed list) prior to giving us the estimate. I think an estimate should be factoring in as much as possible or it is worthless. I think if our project went smoother and quicker, the extra costs would not hurt as much, but we feel let down in each category, so it stings.

Hi all,

You know it occurs to me that there is a bit of a conundrum with board etiquette. On one hand, i feel as though the OP should always try to reply to a post (though not necessarily to some of the more philosophical ones, and not necessarily by name). But, if you reply to everyone who comments, you keep moving your thread to the first page.

So, this will be my last reply on this thread.

Detroitburb, Thank you for your kind words. I do not worry about seeming cheap, but I think that sometimes does inhibit people. We all know the difference between a friend who never buys drinks, and someone trying to oversee their financial interests! If there is one thing that I have learned, it is you should never feel embarrassed to question people you hire! You'd be surprised how often even good people mess up, and in all likelihood (esp if you are a GW'er) you have given the details of your job way more thought than anyone working for you. I also don't think it is petty, because my concern is not about this particular bill. My concern is that it might be representative. in which case i would be being over charged by GC to the tune of 67% ... 33%-20%, divided by 20%, equals 67%.... on a a high end job that involved over 7000 sq feet and over 18 months. That would be a big number!

Nat, I am really sorry! That sounds like an awful experience. I must admit my experience has been rosy comparatively. I do hope the fir floors work out ok!!!

Honor - We really have seen no evidence in our area of getting a break in a bad economy, I dont know why! I will work on my glower. Unfortunately, I really like my GC team (husband and wife) and knew them socially first. I always find myself in this bind, either hiring a friend or becoming friends with someone I hire. It is hard not to do, but it screws things up when you have abeef and feel inhibited about it. My second piece of advice - it is less stressful to use people who are not friends.

Florantha, Yes, 33% just sounds high. I don't begrudge the 9k and the 20%, I agreed to that, and that is that. I do not usually see the bills so I have no idea if this is an isolated incidence or they have blatantly misrepresented their markups.

As for this particular countertop, yes they would have accepted responsibility for problems... they are very good about that. But I chose everything in my house (they are deign build but I beat them to the punch and did the vast majority of design work). I sourced the marble from a vendor they had not used before. I sent a markup of how I wanted it fabricated. They did oversee the layout before it was cut, and suggest changes. That is ok for 20%, as agreed.

Antss --- I am glad I read your whole post before going mental! In your last paragraph you clearly got my point, which is the deal is 9k/mo plus 20%. So it doesn't matter what anyone thinks of 20%, it matters what the deal is. I am considering how to handle it, but it is indeed tricky.

Dianalo, Thanks for coming to my defense, as it were!

Two things you wrote are verbatim things i say a lot (although peppered with several profanities in my case). One, stop calling them change orders when they are NOT CHANGES. Just find a new word for it at least!!! Second, if I am paying you as a GC to manage the project, YOU should be inspecting quality and telling the subs what they need to fix, not ME!

I know the feeling. I got a quote from one GC, a friend of the family who's so close they're considered family. I trusted him, so I made the mistake of telling him my total budget including appliances. Normally I would never show my cards. In the course of compiling the quote, he had a custom cabinet maker come by and take measurements.

A few days after measurement I follow-up asking for his quote on the project. He said he was still working on it, but told me that he got a great deal on the cabinets, $20k plus installation by his crew of another $3k. I told him no way. My budget for cabinets is $16k. He calls me back the next day and says he talked the cabinet maker down to $16k and what a great deal it was. To me, that was a great deal for all-ply all-cherry solid doors, considering all my previous cabinet quotes were all particle board and maple for the same money plus installation.

So I make a visit to the cabin maker's shop to check things out. He pulls out my paperwork and I see $16k without any indication of a price adjustment. I asked him about the price. So he says, "Yeah, I told [such-and-such] that this is what I could do it for. It includes installation, soft close everything and free hardware. Anything you see on those two displays [Amerock and Richelieu]." That's when it hit me. It was a $7k markup ($4k on the cabinets and a trumped up $3k installation charge). So I filed that knowledge away and waited for the quote.

A few days later, the GC sends me the itemized quote. It magically totaled the budget number I told him. It left me with nothing for appliances. As I scanned down the list everything was compiled by pricing each task "by-the-book." It was as if I was hiring them for a bunch of odd jobs all strung together. What happened to economies of scale? It's a good thing I already had quotes to compare and knew what was reasonable.

Needless to say, that so-called friend of the family didn't do me any favors and I didn't hire him. But I did hire the cabinet maker who agreed do do it for what he quoted. In subsequent conversations with the cabinet maker, he confirmed that $16k was his installed price all along.

You know that old saying that the work expands to fill the time? Well, it seem that for GC's the costs expand to fill the budget too.

Ouch, that hurts. Good for you for ameliorating the situation.