This is about new construction, not repair. My family is building a
new house. We agreed to "cost plus 12%". We got the first bill
(basically for the foundation), and the contractor is adding in $800
per week that he is paying himself for supervision. In addition, he
is counting that as a cost. On this bill, it makes it cost plus over
23%. His bookkeeper says that the additional is for "profit and
overhead". We understood that he was to take the cost of labor and
materials and add 12% and that was what we paid. To me, it is like he
is getting paid twice - he is to take his profit out of the 12%. He
is working mainly on two other jobs and is rarely there.
Does this seem right? Should we be paying $800/week for a supervisor
that is rarely there, count that as a "cost" and also pay him 12% of
Should does not really enter into it. It should be spelled out clearly
in the contract. In my opinion his time is not a cost. If he hired
someone to supervise your job and paid wages, that would be a cost to
him, and possibly to you depending on how the contract was worded.
Thank you for the reply. There is nothing about it in the papers. He
has estimates for all of the costs and adds 12%. He states that it is
"cost plus 12%". There is nothing at all about adding the supervising
cost. I can see it if he was paying someone else to do it, but he is
paying himself. (and besides that, he counts that as a cost and adds
12% to it, which is another $96/week.)
I think you just resolved the question. If you are willing to pay for
another person to supervise, you should be willing to pay for him? A
supervisor must be paid and it does not matter who does the job.
He should work for 12%. But I wouldn't argue with him too much about
it... there are two many ways for hime to roll the money back into
other costs. I'd either look into cancelling the contract and just
paying for the work done to date, or make up my mind to pay the
bastard. One thing worse than paying a scam artist too much
for a job, is having a pissed off scam artist building your house...
That bogus cost of "supervision" should have been added into the
estimated cost and the 12% should be on top of that. Do not let him
add anything extra or he will start with all kinds of "consulting" fees
that will add to your cost. Sounds like he underbid and now wants some
money to fix that.
Edwin Pawlowski wrote:
Well then he's padding his "cost plus 12%" . The cost of his
"supervision" should be accounted for when he was giving you a price.
Maybe he should have made the deal cost plus 13% to ensure a profit.
Youre getting hosed by him if you dont tell him forget it. Or I'd
require him to be on site 40 hrs week or such. Otherwise 800+ week is
a great hourly rate if hes there for 2 hours Think about that. He may
also start gouging with higher costs by dealing with buddies relatives
etc. He sounds shady to me or someone is a sucker for giving a blank
Jud McCranie wrote:
That would be nice. Are you buying all the stuff? Do you have control over
whether the faucet costs $24 or $42? It is easy to get invoices for goods
that cost much less. Labor the same way. $1,200 for hauling and cleanup
labor. Who's to say how much he actually paid the guy. You can go right
down the line.
If you are controlling all the costs by buying all the materials and having
them brought to site, then it is a good deal. If not, he's getting to you
on the costs plus the % on inflated costs.
You are in a bad position. This must get resolved right away and
amicably. Cost Plus only works if the parties trust each other.
Since you're asking on a newsgroup instead of asking your lawyer, I
have to assume that you didn't have an attorney review the contract.
If that's the case, it's a major mistake. Whether that major mistake
will come back to bite you remains to be seen. If you did make that
major mistake, and the contractor omitted any reference to supervision
being a cost, you may be in luck.
It may be that the contractor listed labor and not supervision under
his assumption that time is time - it's all the same. It's not.
Supervision is management and unless it's spelled out as being labor,
it's not part of the labor cost. In other words, if he's just trying
to lump management in with the trade work, he's in the wrong. If you
missed something in the contract, then you may be wrong.
If the contract goes into detail about what constitutes a cost and
includes detailed estimates for all of the work involved, and there's
nothing in there about supervision being a cost, it's not a cost.
Post the section(s) of the contract that covers what constitutes a cost
and anything that mentions labor, management and supervision.
Most of it is several pages of items and costs, stating "materials and
labor", and an estimated cost. Then that is added up and his 12% is
Wording: ... "The owner will be responsible for the construction costs
stipulated as well as any cost incurred due to alterations in the
agreed upon plans. The contractor will furnish materials and labor
necessary to complete construction and will be done at cost, plus
twelve percent (12%). " And then there are sentences about being
accordance to building codes, contractor is responsible for workman's
comp and liability insurance.
You should try to resolve this amicably but I think you are in the right.
You say that the contract reads in part "The owner will be responsible for
the construction costs stipulated as well as any cost incurred due to
alterations in the agreed upon plans." So look in the contract for the
stipulated cost of the supervisory labor. If it's not stipulated it's not
But, as always, local customs apply so you really should buy a couple of
hours of legal advice. Giving a lawyer $800 once may be cheaper than paying
this fellow $ 800 every week for 3 months.
If you like this contractor and think well of his work you may want to
negotiate some sort of understanding about this supervision that you both
can live with.
If the contractor is reputable guy with integrity he'll do honest job
building a good house. But if he is crooked, this kind of arrangement
is risky. Over the years I have 5 houses built all by same guy. We
communicated very well and he knew what I want/wish. He gave me a piece
of paper with all the things specified, we shook hands and never been
disappointed. Still there are people like that.
Sounds like you may both be right. Sort of.
This should have been spelled out as to exactly what "cost" was. While you
think of material and direct labor, there is some supervision and "behind
the scenes" overhead that is part of the real cost of doing business. It is
easy to understand that the wood cost $100, the man spent 1 hour at $40 to
put the wood together with $5 worth of nails, you should be billed $145 +
12%, What, exactly, does the 12% cover. Someone had to order the wood,
write the check to the lumberyard, order the worker to do the work, then to
inspect if afterwards. Even though the contractor is only there part of the
active working time, he may still be doing work for your job at the office.
Time to sit down and get a better understanding of what is expected, then
Let me get this straight the more money he wastes building your fathers
house the more he makes? instead of using the $4000 concrete guy he uses the
$8000 concrete guy and he makes an extra $480 that week on top... Niceee
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