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Old 03-29-2009, 05:02 PM   #1
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GC Contract questions


Hello Everyone!

I am looking for some advice regarding what is reasonable for a contractor to put in his contracts. This is a long story so here goes!

We live in an extremely rural part of the midwest and have no major contractors with commercial experiance in the area. Personally, I have some experiance with construction and GC'ing small projects, but am in no way qualified to do this myself. I have finished several basements and a couple of kitchens and baths as a DIY'r.

I am looking at expanding my business (yeah I know watch out for the small mom and pops) and currently have plans to construct a > 5200 sq ft building. SIP's walls and roof, membrane roof, 3 - 5 ton HVAC systems, brick and stucco exterior, interior will consist of large retail space, 4 offices, 2 baths. SBA loan is already secured as well as the tax exemption with the state. I have also done the building permit with the city.

We have a couple of local guys who are actually insured and bonded who have done work for us in the past. They are NOT the cheapest but do good work and keep things neat and clean!

They have been very interested in this project from the get go and have put in a LOT of time already in this project just answering questions and talking to our architect and structural eng. However, they also do not feel comfortable bidding the job and have requested we do this on a cost plus basis. I asked them for a contract and they stalled, so I obtained an AIA cost plus contract with a GMP at my own expense. They sort of shook their heads at it but have not totally said no! The other issue is that I have already done a great deal of the GC'ing myself on the project, by obtaining quotes and signing contracts with the subs...all with these guys knowledge. They have been busy trying to finish up a bunch of smaller projects in preparation for this one this spring and haven't had the time to devote to this. Keep in mind these guys do all the work themselves.

I know you all hate talking specifics on the contractor forum and I may get blasted for this, but here goes. Their labor rates are pretty reasonable $30/hr for themselves and $20/hr for the hired hands (one guy who's > 60 and a couple of high school kids that will be helping them for the summer). They keep stalling me about what they really want for the mark up and want to know what I am willing to pay.

The rub is that they are nice guys and I want this all in writing so we can leave on good terms when all is complete. I have told them I dont feel it is fair that they charge me for the subs I have already contracted with other than to coordinate their work. I have suggested a fixed fee and they came up with a number that was a little higher than I was thinking. I countered with a slightly smaller number but with a bonus (that made up the difference) if the project was completed by Oct 1st. The conditions were that they took over and did the GCing from here on out and I would help them if needed but that they were responsible for getting this thing done on time.

I am really at a loss of how to write this contract and be fair to both parties. Is it fair that they get a % on top of their own labor? Do they charge me for the time and labor when they are overseeing the subs or is this included in the % markup? I am well aware they need to cover expenses on tools and equipment so I really am trying to be fair to both of us. It's just that they have no idea what they are getting into and I am trying to help educate them and not screw either of us.

With a cost plus contract they are assuming little risk while I am taking a huge gamble with them!

I know I'm a little vague on specifics of the project, so feel free to ask questions.

Thanks in advance!

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Old 03-29-2009, 05:05 PM   #2
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I'd be speaking to a contract lawyer myself.
Ron

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Old 03-29-2009, 05:09 PM   #3
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I'll have a lawyer draw it up, but am trying to hash out the details before hand.

Last edited by pharmboy; 03-29-2009 at 06:54 PM.
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Old 03-29-2009, 08:34 PM   #4
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Anyone else?
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Old 03-29-2009, 09:08 PM   #5
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I work as a commercial general contractor / construction manager, so I can offer a few comments.

You will want any contract that is drafted up to be reviewed by a lawyer. I work mainly on a cost plus basis, but with a guaranteed maximum price. The most common contract I see is the AIA A121 (when doing cost-plus work). Your architect and/or contractor should be able to get you a generic copy along with a current copy of the AIA 201 general conditions document. These two documents outline all the basics. Any decent contractor shouldn't be afraid of this contract.

Your contractor would have a legitimate gripe about not getting markup on subcontractors you may have awarded already. In most cases, I end up managing most of these "owner direct" contracts. Instead of making an issue of this to the owner, we usually adjust our fee (up) to account for the extra headache of managing these contracts that I don't get a direct markup on.

Marking up labor rates is pretty normal - it's how we keep the lights on. The markup percentage and labor rates all need to be defined in the contract.
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Old 03-29-2009, 09:13 PM   #6
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What does this have to do with doing it yourself?
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Old 03-29-2009, 09:34 PM   #7
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Tscarborough- I know this isn't your typical DIY question, but up to this point I feel like I have been GC'ing most of this project. I didn't want to post this on the contractors forum because I am not a "professional" and didn't want to break the rules. I am open to any suggestions you might have if you have a more appropriate forum for this sort of question.
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Old 03-29-2009, 09:48 PM   #8
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I think every DIY person should know the importance of a contract & what should be included
We can't always DIY
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Old 03-29-2009, 09:49 PM   #9
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Stubborn1- Thanks for the insight! I really am trying to be fair with these guys. The subs I have contracted with have all been either based on their recommendations or with their approval!!! Like I said, they have not had the time to deal with this and I wanted to be breaking ground by now so I jumped in and helped with a lot of preliminary work. Having said that, would it still be appropriate for them to realize a full mark up on that sub? I know they will have time organizing and supervising their work and should be compensated for this.

No complaints here about marking up labor rates. I know they pay the kids $10/hr and are charging $20/hr for unskilled labor! I'm okay with that. My question is should they charge me $30/hr for their time "supervising/orgainizing" the subs when they are already getting the mark up on it?

I guess what I am asking is that if you would normally mark up a job 10 - 20% how much of that is due to dealing with the headaches of finding subs, submitting building permits, presenting samples for the HO to view, communicating with architect and SE, etc....and if your swinging the hammer do you charge for your labor as well as the GC fee?

Thanks Again!

Rob
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Old 03-30-2009, 08:55 PM   #10
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It sounds like the main issue is the contractors time spent planning and coordinating and not physically putting work in place. For smaller projects (relative) like yours, I would think you could negotiate that all the planning and coordinating hours are part of the markup. If they insist on billing the time, set a capped amount (ie 100 hours at $x/hr) that they can bill against and not exceed.
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Old 03-30-2009, 09:35 PM   #11
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Thanks again for all of the wonderful insight!

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