Custom Home Construction Services
Steps to Complete Project
Phases of Luxury Construction
Permitted Drawings & Permits.
Engineering Drawings for Construction
Finish Drawings for The Finishing Stage of a Home.
- ▪ Window Measurements
- ▪ Door Measurements
- ▪ Solar Survey
- ▪ Roof Survey
- ▪ HVAC Survey
- ▪ Hybrid Water Survey
- ▪ Other Products Surveys
Steps to Complete Your Project
- ▪ Record NOC in Court
- ▪ Apply for Permits
- ▪ Receiving Products
- ▪ Schedule Installation
- ▪ Installation
- ▪ Delivery of a clean, beautiful, functional and finished project
- ▪ Email Warrantiy Documents for systems provided
- ▪ Happy Client Review and Referral Rewards
How May Custom Home Can Work With You
MAY CUSTOM HOME is one of the few builders who provide honest and transparent pricing systems. As a home owner you will have the choice between two pricing systems for you project as follows:
A lump sum contract (or stipulated sum contract) is the traditional means of procuring construction, and still the most common form of construction contract. Under a lump sum contract, a single ‘lump sum’ price for all of the works is agreed before the works begin.
It is generally appropriate where the project is already well defined when tenders are sought and changes are unlikely. This means that the contractor is able to accurately price the risk they are being asked to accept.
A cost-plus contract, also termed a cost reimbursement contract, is a contract where a contractor is paid for all of its allowed expenses to a set limit plus additional payment to allow for a profit. Cost-reimbursement contracts contrast with fixed-price contract, in which the contractor is paid a negotiated amount regardless of incurred expenses.
Cost-plus, or time-and-materials bids are often used on jobs with a lot of unknowns and hidden conditions, such as repair work. While generally used for smaller jobs, these contracts are sometimes used for large jobs as well. Whenever the plans and specs are fuzzy for whatever reason (never a good idea), cost-plus may be the only way to proceed.
On jobs with many unknowns, the client can benefit from cost-plus pricing, in theory, because the contractor does not have to add big “fudge factors” into his fixed bid to cover the unknowns. The homeowner pays only for the actual work completed. Without adequate protections built into the bid, however, the owner is taking on an enormous risk that job costs will spiral out of control. There is little incentive for the contractor to get the job done quickly and cheaply.
In this scenario, the contractor bills the client for his direct costs for labor, materials, and subs, plus a percentage to cover his overhead and profit. The problem with this approach is that the contractor has no real incentive to complete the job quickly or cheaply – the longer he takes and more he spends, the larger his profit — not necessarily a good deal for the owner.
In this scenario, the contractor bills the client for direct costs, plus a fixed fee for overhead and profit. In this case, the contractor is motivated to complete the job quickly and cheaply, or his overhead and profit percentage keeps dropping. If the customer increases the scope of work through change orders or a changed scope of work, then the customer and contractor would need to renegotiate the fixed fee or follow a prescribed formula.
Nearly all cost-plus work comes with an estimate of costs. As with a fixed-price bid, the estimate should contain detailed plans and scope of work, and material specifications, along with an itemized breakdown of costs. An exception would be an emergency repair, where there is no time for a detailed estimate, so a ballpark estimate will have to do. However, it should be made clear that all cost-plus “estimates,” are a best guess, not a fixed bid. The greater the unknowns, the less precise the estimate will be.
When clients are concerned that job costs will spiral out of control, some contractors will provide a guaranteed maximum price. In one version, the contractor will split the savings with the customer if the job comes in below the maximum. In this case the contractor has an added incentive to beat the maximum price (or the set the maximum price high enough that he can easily beat it).
A similar approach is to negotiate a flat fee with an incentive bonus if the job comes in on time and on budget. I’ve also seen cost-plus contracts where the owner has the right to terminate the contractor if the owner is over budget by a certain percentage at any draw by the contractor. The goal is to build in some protections and incentives to help protect the owner from a runaway budget.