Black Lab Remodeling

Why We Don’t Do Time and Material Contracts (T&M). Also, Why Change Orders Are Not The Enemy

We get these questions from time to time, “What’s your hourly rate?”  or, “What would it cost if you just did time and materials?”  These questions reflect the idea that a Time and Material contract is a  possibility for the project.  In California, T&M contracts are only permissible when doing commercial projects.  We are a Residential Remodeling Contractor, every contract we write by law has to be a fixed price contract that spells out the what the payment schedule will be and when they are due.  As well as when the project will start and stop.

What does this mean for our clients?  It means that when you authorize a contract with us, you will have a fixed price for the project given the conversations we have had, a clear scope of work, and the conditions that we know to exist.  You will have a clear schedule of what payments will be due at what times and for what amount.  You will also have in writing a start date for the project as well as a end date of when you can expect to have your home back to normal.  Does this mean things never change?  Let’s take a look at that.

Renovating or Remodeling a room or an entire house is never a cut and dry process.  There are things that come up due to aging infrastructure of the home, earth movement of the area, what previous homeowners or contractors have done without permits and a whole host of other potential pitfalls that can create design modifications (read here, challenges). There is a lot of great technology out there that helps us prepare and get a pretty good sense of what is behind the drywall, but at the end of the day, we don’t have an x-ray camera or vision to truly see what we are dealing with until we open up a wall.  The conversation that happens after exposing a severe structural nightmare is one every contractor would love to avoid with a homeowner.  The reality though is that conversation, as unpleasant as it is going to be, has to happen.  The conversation is going to go something like this:

Contractor/Project Manager, “Hi Mr./Mrs. Client, remember when you were on the phone with that Al guy?”

Client, hesitant, “Yeah????”

C/PM, “Yeah, remember when he said that there might be a time when we need to call a time out?”

Client, “Yeah, I remember that.  He said something about if we were dreaming about the project or if there was something that would require a design change, that he wanted to know if we would be okay with him calling a Time Out on the project.  Is that what you’re talking about?”

C/PM, “Yes.  We found something behind the wall that is going to require a design change, or at the minimum a game plan change.  I’m going to call Al and have him come out and take a look at this with us.  We’ll come up with a suitable plan on how to move the project forward, but it might require a Change Order.”

That last part at the end, the Change Order, is sometimes given a bad name.  There are horror stories about how contractors will use Change Orders to “make up for money they under bid on the project.”  And some of those stories are true.  Change orders are meant to be used only in situations where a knowledgeable and experienced contractor could not be expected to know or suspect that an issue would come up.  Or in the case where a client decides they want to change the layout that was already authorized in planning, or material change to what will be used in the project.  Change orders, like the original agreement will be fixed, and require the contractor to notify the client of any monetary changes (increases or decreases to the contract price) as well as any changes in the length of time the project will be either pushed up or set back to complete.

This is why we emphasize the importance of pre project planning and spending an appropriate amount of time on the design phase of the project.  The more contingencies that are in place, and the more concrete the design is the higher the probability goes that the project will have fewer Change Orders and will come in on budget and on time.

When you decide it is time to tackle that  project in your home, know that regardless of trade, a fixed price contract is the only legal contract you have to sign.

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