"Show Me The Money"
Pricing, Deposits, Draw Schedules & Change Orders
Have a money question? This is where you’ll find the answer! From the types of Contracts to how the price of your project may change, this article will answer many of your questions when it comes to money and construction projects!
Fixed Cost vs. Cost Plus: Understanding Your Contract Options
When embarking on a project, it's crucial to understand the type of contract you're entering into. The two most common contract types are Fixed Price and Cost Plus, each with its own benefits and considerations.
Fixed Price
Most of our contracts operate on a Fixed Price basis. Once the details of your project are thoroughly planned out, we will present you with a Scope of Work and a Quote. The Quote will reflect the total price for completing the project as specified in the Scope of Work. Once agreed upon, this price remains fixed. Regardless of whether the project takes longer than expected or requires more materials, your cost does not increase. Conversely, if the project requires less time or materials, the price remains unchanged.
Cost Plus (Hourly)
In contrast, a Cost Plus contract involves paying for the actual costs incurred during the project, including labor and materials. While there may be an initial estimate or a "not to exceed" amount, the final cost will vary based on the project's actual requirements.
Which is Better?
The choice between Fixed Price and Cost Plus depends on your priorities. If you prefer to have a clear understanding of the total project cost from the start, a Fixed Price contract may be the best option. However, if you're willing to take the risk in hopes of saving money if the project requires fewer resources, a Cost Plus contract might be more appealing.
Can the price of my project change?
The short answer is yes, even with a Fixed Price contract. While the Fixed Price includes a set amount, there are certain circumstances under which the cost might change by the end of the project. These include:
Scope Changes: If you request alterations to the original Scope of Work.
Unforeseen Expenses: Unexpected issues such as discovering a pipe in the wall or rock underground.
Allowances: Overspending or underspending on allocated allowances.
Each of these factors can lead to price adjustments. Although surprises are sometimes unavoidable, particularly in remodeling or ground-digging projects, the way we handle these surprises can significantly impact your overall experience.
Change Orders
When a change arises, whether due to a new discovery or a request from you, the following process will occur:
Communication: We'll contact you via phone or email to discuss the change or discovery.
Documentation: The change will be documented, either through email or a formal document, outlining the associated costs.
Approval and Payment: Upon your approval and payment, we will proceed with the necessary work.
Final Documentation: If a formal change order was not initially filed, it will be created and signed, or the changes will be reflected in the Final Invoice.
Our goal is to ensure there are no surprises at the end of the project. By communicating promptly and consistently, we aim to keep you informed and prepared for any adjustments.
Draw Schedules & Deposits
Money management is essential in any project, which is why agreeing on a payment schedule from the outset is so important. Through our detailed planning process, we’ll establish a draw schedule that suits both parties, eliminating any surprises when payment requests are made.
Payment Schedule Examples
For a remodel:
Deposit: 40%
Week 4: 25%
Week 8: 20%
Upon Completion: 15%
For a custom home:
The project cost is broken down into phases. As each phase is completed, the pre-determined draw amount will be requested. If you're working with a lender, they will assist in constructing the schedule and managing the process, including inspections to ensure the work is progressing as planned.
By adhering to a clear and agreed-upon payment schedule, we can ensure that the financial aspects of your project are handled smoothly and transparently.
Why Do We Like to Talk about Money?
When it comes to working with a Contractor on any of your home remodels or building a new home, it’s important to get these details right up front and be on the same page from the beginning. The worst thing that can happen is to be in the middle or at the end of the project, and you have a discrepancy about money. Our goal in the Planning process for every project is to get everyone on the same page so we can move forward from the same place with no confusion. A detailed Scope of Work communicates exactly what is included, the Quote is clear on the price, and the Draw schedule tells you when payments are expected. With this process, it’s hard for there to be any confusion down the road.
Have a more specific question about how much a project is going to cost? Check one of our other articles that talks about the cost of a Kitchen, Bathroom, or Custom Home!
Ready to schedule a phone call to discuss your project? Set up a Ballpark Estimate phone call!