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Homeowners often want to know how construction contractors and renovation companies price their projects, and while every custom home build is unique and therefore uniquely priced, you can choose between two ways of paying in your contract:
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Lump Sum Construction Contracts and Cost Plus – Which Is Best?
Homeowners often want to know how construction contractors and renovation companies price their projects, and while every custom home build is unique and therefore uniquely priced, you can choose between two ways of paying in your contract: The lump sum model This contract involves the homeowner paying the contractor an agreed-upon price for a specific result.
The contractor will understand the value of each one of his trades – from site work and masonry right through to framing, roofing and finishes – before putting his mark-up on the project based on the value of his service to you. He will then present you with a total price that you can choose to accept, or not. Pros of the lump sum model: It’s easier to get your project done within the confines of a set budget, provided you don’t make any changes during construction and there are no unforeseen circumstances. The contractor is obligated to deliver what he promised for the price he gave you You get a price for a project without having to know all of the details involved in the project. ● ●
Cons of the lump sum model: It can be expensive should you wish/need to make any changes to the project once construction work has begun. Before the project can begin, every detail will need to be laid out in full, which if you’re in a hurry to complete the work, may not be such a great payment model. ● ●
The cost plus model While presenting homeowners with a greater financial risk, this model does however, enable them to be more intimately involved in the accounting on their project. Sometimes referred to as the ‘open book method’, every single cost of the project is charged to the client, plus an agreed-upon fee or profit markup on top of that for the contractor. Pros of the cost plus model: You get to be more involved in decisions made about materials, for example, since you’re paying for them directly. ●
The design of your home can be changed and developed as the project progresses, since all costs are being paid for by you. You get to have the final say on which subcontractors and vendors are hired on your project, and when your contractor presents you with multiple bids on each trade, you can make your choice based upon price and quality. ● ● Cons of the cost plus model: There is a greater financial risk for the homeowner, such as if bids come in higher than anticipated or a subcontractor has to be fired and replaced, for example, which almost always will cost more. ●
Your involvement in the project will be higher with this model, since you’ll be expected to approve bids, materials costs, and otherwise participate in the accounting and money management of your project. ● Which type of construction contract you end up choosing will likely be dependent on a variety of factors specific to you and your project, but as long as you hire a reliable contractor who is willing to work with you to get the results you want, you can’t go far wrong.
RZ Construction Group Inc is one of the best fully inclusive construction companies in Queens NY. From initial design to final clean up, our results speak for themselves. We are fully licensed, insured, and bonded to provide both commercial and residential construction services to customers in Astoria and the surrounding area. We also offer apartment renovation in Queens NY. Proud to serve New York State for 25 years. No job is too small nor too big. If you are looking for a concrete contractor in Queens NY or want to know more about our wide range of professional but affordable construction and repair services, reach out to us at (718) 938-9887.
