Shop Products
Houzz Logo Print
tealselkie

Fixed bid remodel help please

Tealselkie
2 years ago

If anyone with experience can help us navigate this, I would be grateful.

We started a remodel in the wine country in Northern Ca and after 2 years of no progress, fired our crappy contractor - who we just heard is going bankrupt. We found a new firm and they set us up with an architect, got permits, assessed the poor work that was started (not to code) and is now ready to give us a fixed bid for our extensive remodel. The thing is, he just told me it will be about double what he had originally thought. I know things are crazy expensive now. But double? And I guess I don't get to see how he came up with those numbers because it is a fixed bid? He could be adding 30% profit and 20% contingency, right, which would be his if things went well in the build? I guess I am wondering how to go forward with so little transparency and such a jump in price. We can try to get another bid, but contractors are so busy here now. I would say, forget it, let's just do it next year, when materials may be cheaper, but then our permits will expire. I feel I'm in a pickle and I don't want to be taken advantage of. I mean, I like my contractor and trust him enough, but I don't have the kind of blind faith that translates into hundreds of thousands of dollars. What questions can we ask when presented with this bid, like, are we entitled to know his profit margin and how much he is setting aside for a contingency? Is there a negotiation that can be had at this point?


I appreciate any advice you can give.

Comments (29)

  • PRO
    Joseph Corlett, LLC
    2 years ago

    Damn...Charles and I agree again....

  • PRO
    Mark Bischak, Architect
    2 years ago

    Now more than ever a builder needs a crystal ball to cost estimate a construction project.

  • WestCoast Hopeful
    2 years ago

    Do they only do fixed price? Fixed price protects the builder to a certain extent and helps the home owner know what it will cost upfront with few surprises.

    There are still things that will cost extra if they do. When we considered fixed price it was clear that excavation costs were an estimate only and any increase would come to us. Increases in other areas may come to us if the increase reaches a certain point.

    So we went with cost plus. We saw every bill and approved all things and got itemized lists of everything. This did mean we got some surprises too and went over in a few areas but it also meant we could tighten up in others.

  • PRO
    Charles Ross Homes
    2 years ago

    Fixed-priced contracts protect the client to the extent that the price is, well, fixed. Cost-plus or management-fee contracts shift the risk to the client and protect the contractor.

  • WestCoast Hopeful
    2 years ago

    If the builder puts in enough buffer in the fixed price it should protect them too. I’m sure it’s extremely wired to find the balance

  • PRO
    Charles Ross Homes
    2 years ago

    In the current environment of rapidly escalating material prices, how much buffer is enough? A fixed-price contract includes a finite, non-zero risk to the builder. By definition, a cost-plus contract shifts the risk to the client (i.e., favors the builder); a fixed-price contract shifts the risk to the builder (i.e., favors the client. )

  • PRO
    Rockin' Fine Finish
    2 years ago

    Materials are not coming down anytime soon

  • Tealselkie
    Original Author
    2 years ago

    WestCoast Hopeful, I think they only do fixed cost. Charles, I hear what you are saying about the process of pricing, and believe me, we have been paying for that pricing (and almost nothing salvageable was done before). It has taken us months to get to where we are now. And I am grateful for a pro's perspective. But is was quite a shock. My fear is that because, as you say, the fixed bid shifts the risk to the builder, they may have inflated the bid to insure themselves against loss. I was hoping there was some middle ground that is negotiable - I mean, we want them to make a good profit. We just don't want to lose more money than we have already, unnecessarily.

  • kudzu9
    2 years ago

    A number of years ago, when we did our first major remodel, we interviewed several builders, and went with one that our architect initially recommended. The builder gave us two bids. The first was his best estimate of cost plus; the second was a fixed bid 10% higher than the cost plus. I asked the architect what we should do, and his reply was that the builder had come in right on the money on his two most recent cost plus projects, so we took a gamble and went with cost plus. He was an excellent craftsman, he did detailed and transparent monthly billings, didn't cut corners, and the project came in on budget, and on time. I know this experience might be a rare thing these days, but my point is: What do you know about your contractor's track record and what kinds of reviews he has had from recent clients?

  • elizabeth_eclectic
    2 years ago
    last modified: 2 years ago

    Does his bid include all the finishes (just actual products not the labor)? Light fixtures, faucets, tile, bathtub, wood flooring, counters etc? That’s where you can save money by buying those yourself without the contractor markup. Of course you have to have time to tackle that yourself.

  • millworkman
    2 years ago

    "That’s where you can save money by buying those yourself without the contractor markup."


    IF the contractor she wants to use will work that way. many will not. If he is using a "fixed cost" contract and only works that way there are two chances of him letting you supply material, slim and none and slim left town. Right now with the shortages and the price volatility in the industry if he is will to guarantee you a price and guarantee your selections will be there an not hold up his schedule, the risk is his and honestly probably the better way to proceed.

  • PRO
    Charles Ross Homes
    2 years ago

    "That’s where you can save money by buying those yourself without the contractor markup."


    There's no small measure of naivete behind that statement. First, a homeowner is not going to get the same price on many items that a contractor will. The only items my clients can purchase at the same price I can are appliances and light fixtures. So, there's a risk of paying more than the contractor's discounted price plus markup on some items. Second, the contractor needs to make a particular sum on a job to make it attractive for him/her to perform. Where the margin is applied as a lump sum to the entire (fixed-contract price or fixed-management fee) project, there is no savings to the client by them purchasing materials. Third, if the client doesn't get the correct materials or quantities, they may delay the job which benefits no one and may even trigger a cost penalty depending on the contract terms. Fourth, if the client provides materials, they warrant those items to be free of defects. If there is a problem, it's on the client to resolve the issue. Doing so might produce a delay, and more than likely to produce an increase in cost. Fifth, if the contractor perceives you're going to be trying to save a couple of bucks by reducing their margin they might just take a pass on your job. In our area, there is much more work than can be accomplished by the pool of available contractors. I'm not trying to be arrogant, but difficult clients will have a, well, difficult time finding anyone willing to work with them.

  • elizabeth_eclectic
    2 years ago
    last modified: 2 years ago

    @Charles Ross Homes This is how my contractor prefers to work he says! I go to his flooring place, tile shop, plumbing supply, and slab yard, then he places the order after I make my selections. Then they send me the invoice or he forwards it to me and I pay with my credit card. It’s worked out great so far! I do have to order everything in advance and have it sitting in the storage unit out front so they can pull it when they need to. That was made very clear that I had to make decisions early early early, haha. Honestly, I prefer it this way too. I know for example, with my door knobs, I wouldn’t feel comfortable telling him “antique brass” and just roll with it, when there are 50 million brass door knob options and shades/finishes of brass.


    I should note I do live in the Bay Area CA where the cost of building right now is even more insane than the usual insanity.

  • PRO
    Joseph Corlett, LLC
    2 years ago

    I can't imagine any contractor giving a fixed price proposal in this climate. That is courage bordering on insanity.

  • PRO
    Jeffrey R. Grenz, General Contractor
    2 years ago

    Three remodeling contractors will have at least three different models to price your project:


    A. Labor + sub trades + materials + risk + overhead + profit

    B. Hours x marked up labor rate + you pay all materials

    C. Hours x labor rate + materials+ markups not necessarily applied equally across the board.


    Even cost plus open book projects should have contingency funds to eliminate time consuming negotiations for normally expected variables.


    I've learned over the past couple of projects clients expect the same service, right or wrong, no matter who purchases the big ticket items, so my numbers are not linear nor equal per line item. Clients who purchase their own _______ often create more work on our end.

  • Tealselkie
    Original Author
    2 years ago

    It's funny, the first contractor, the one who has now declared bankruptcy (in this busy market) had me buy all my own materials - which are now sitting in our garage. Luckily, if was just for one small room of the remodel; we didn't get very far, which was the problem we had with him in the first place.


    Well, I didn't come here to be mollycoddled, and I sure haven't been, but I have been given a contractor's point-of-view and, I think, a dose of reality. Materials and labor are astronomical right now- it is just a really expensive time to remodel. But weighed against waiting till who-knows-when, I don't see the point. I do think, in that this bid has been months in the making, that it would have been smart to give us a heads up about the skyrocketing costs so we weren't so blindsided, but that's neither here nor there at this point. We do like and trust our contractor. We knew he wasn't cheap going into this, but we also know he does great work and isn't a flake, which after what we have been through, means everything to us.


    Thank you all for your help. I feel much better about going forward now.

  • PRO
    Jeffrey R. Grenz, General Contractor
    2 years ago

    One thing guaranteed at Houzz: No mollycoddling.

  • suedonim75
    2 years ago

    “been smart to give us a heads up about the skyrocketing costs”

    Cost are changing pretty much daily. And every week there is a new shortage of “something”. And honestly, Im not sure how you didn’t know prices were skyrocketing. Its pretty much one of the top ten topics being discussed in the US right now. Probably one of the top 5.

  • millworkman
    2 years ago

    Exactly suedonim75, I was wondering exactly the same thing.

  • WestCoast Hopeful
    2 years ago

    I disagree. If prices for a project I’m participating in go up I deserve a heads up. Just because something is on the news doesn’t mean I should automatically assume it impacts me. It also doesn’t mean I can ignore it. Ideally everyone involved would be checking in often and confirming all still in agreement. Making assumptions on what either side knows always leads to disappointment

  • Tealselkie
    Original Author
    2 years ago

    Yes, I knew costs were up, but did I know that lumber in my area is up 300%? That labor had more than doubled? No. And I bet no one who isn't in the building field would know that either. No amount of toilet paper or other shortages this last year prepared me for my bid to DOUBLE in price in a matter of months, that was the point. I don't buy that I should have known that.

    But thanks for your input.

  • kudzu9
    2 years ago

    Perhaps the moral is: Even with perfect knowledge about this happening, what do you, or can you, do about it?

  • bry911
    2 years ago

  • kudzu9
    2 years ago

    As the MasterCard commercial says: "Priceless" ;-)

  • WestCoast Hopeful
    2 years ago

    Kudzu9 the OP could have stopped the process earlier, could have started to budget for this huge change, could have had a chance to not be blindsided by the news. Communication is everything

  • Tealselkie
    Original Author
    2 years ago

    @kudzu9, If we didn't have the permits I might be tempted to wait a year. I think what we do now is take a good look at where we can save by cutting back, at what things we are willing to do without and what things are priorities. This will be our retirement home, so we do want it to be right. And I don't want to be sitting around for 20 years looking at cheap doors because we didn't want to spend the money now. My general philosophy is, when you can afford it, is to buy quality and buy once. It will be ok. It's just a shame we wasted so much money and time with that bad contractor.

  • kudzu9
    2 years ago
    last modified: 2 years ago

    WestCoast-

    True...but all those "could haves" don't necessarily mean a better or more affordable outcome. That was my point.

  • WestCoast Hopeful
    2 years ago

    Of course they don’t. But they do give the home owner time to process the info and make a plan with less time invested.