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Old 09-21-2008, 11:55 PM   #1
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General contractor charging 32% for T&I - is that fair?


We recently bought a home that was a new construction. It was finished by the time we first looked at it, but after closing, we had the original developer do some additional work for us. We figured it would be too complicated and time-consuming for us to look for reliable carpenters, electricians, plumbers, and plasterers if we wanted to do this on our own, so we went the easy route. He said he'd charge time and materials plus 15% for his services. He estimated 15-20K for the job.

The final number came to 34K. We looked at the hours and the invoices from Home Depot and everything seems fine, so we don't have an issue with that.

However, it turns out he's invoicing not just time and materials plus 15%, but also an additional 32% for "T&I". We presume that's tax and insurance.

Concurrent to the work the developer was coordinating, we had hardwood flooring put in by a separate contractor. He charged a flat rate for labor per square foot, and there was no mention of T&I.

My questions are:

1. Is T&I commonly tacked on to labor costs? Are we required to pay it if it was never mentioned in the original negotiations?

2. Is 32% a fair/common number? We're in the Boston area in Massachusetts.

Many thanks for your help!


Last edited by dragonness; 09-21-2008 at 11:57 PM.
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Old 09-22-2008, 12:47 AM   #2
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General contractor charging 32% for T&I - is that fair?


I certainly hope you signed a contract. Otherwise it is your word against his. T&I is probably tax and insurance. It should have been figured into his labor rate.

Buyer beware. You should NEVER, NEVER, NEVER enter into a non-contractual verbal agreement with a contractor. You should never pay them by the hour, you should have a set price for the entire job before you begin. Any overages on the contracted job should be out of their fee unless extenuating circumstances spelled out in the contract occur.

If you don't have a written estimate for the job, a contract, or anything else, I don't think you have a leg to stand on. He can charge you whatever he wants.

Better hire an attorney if you can't get him to take the additional 32% off.

I can assure you that tax and insurance is INCREDIBLY expensive for contractors. But, he should have disclosed his fee up front.

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Old 09-22-2008, 05:29 AM   #3
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General contractor charging 32% for T&I - is that fair?


Know that workers comp rates for the trades you mentioned are in the 32% range +or- 5%.

Do you feel you did not receive $34k in value? Is the problem the formula used to compute the invoice? Have you asked the contractor to sit down with you to explain his invoice?

It sounds like you authorized a cost plus contract verbally.
In Florida verbal contracts in construction are allowed by law up to $100K.

Do you have anything in writing? Are there any witnesses to your verbal contract?

Best practice for all on a cost plus project is to put the invoice formula in writing and have it signed by all parties.
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Old 09-22-2008, 05:51 AM   #4
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General contractor charging 32% for T&I - is that fair?


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Originally Posted by Big Bob View Post
Know that workers comp rates for the trades you mentioned are in the 32% range +or- 5%.

Do you feel you did not receive $34k in value? Is the problem the formula used to compute the invoice? Have you asked the contractor to sit down with you to explain his invoice?

It sounds like you authorized a cost plus contract verbally.
In Florida verbal contracts in construction are allowed by law up to $100K.

Do you have anything in writing? Are there any witnesses to your verbal contract?

Best practice for all on a cost plus project is to put the invoice formula in writing and have it signed by all parties.
Bob makes some vaid points here.

We are not privy to the actual conversations between the builder and you. Tho, I too am in MA, and Licensed in MA, I cannot make any comments to the situation. Workmans Comp is in the percentage ranges listed, dependant on the worker categories. Should this have been laid out in more detail prior to the work? It would have been nice. Did you insist that the work get started, and the details worked out later? That goes back to the conversations comment I made. We don't fully know, and will never know, what terms were laid out verbally. The charges may be his standard work process...again, we don't know.

A written contract would have been the route to go, and would have been according to the required laws in MA. Remember that I am licensed in MA, and I know that a written contract is required with both parties signatures, for the scope of work listed.

Go and try and hash things out with the builder. He did you a favor. Try and work it out....that's my 2 cents.

Last edited by AtlanticWBConst.; 09-22-2008 at 05:53 AM.
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Old 09-22-2008, 08:44 AM   #5
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General contractor charging 32% for T&I - is that fair?


Thank you for your responses. We did have a contract in writing, I will paste it below. I will also list below the hourly rates used.

I want to do the right thing here, and if that means paying the T&I then so be it, but I just need to be sure.

My questions are:

1. Given the hourly rates below is it fair/common to add 32% on top for T&I?
2. Why does the builder charge T&I for some of the workers but not others - eg. the carpenter but not the electrician?

The hourly rates used were:

$30/hr for the carpenter (the foreman)
$15/hr for his assistant
$22/hr for the painter

The electrician, plumber and plasterers were just given checks for their part, and no mention of T&I was made there.

This is what we had in writing when we started out the project:
"Below is the scope of work you wish <company> to do for you at <address>. Our contract is very simple: I have agreed to do this work at time and materials plus 15%. This means all my direct costs will be passed on to you (no mark ups) plus a 15% profit to <company>. Also included will be a $50.00 per hour charge for my non clerical time. This should be minimal as I have encouraged you and my foreman to discuss daily the activities and progress.

Given the nature of the work I cannot give you a specific amount of the costs. My best, noncommittal estimate is I believe we are probably looking at between $15,000-$20,000. We’ll do our best to come in less if possible.

Please acknowledge this memo which will be our agreement.

SCOPE OF WORK

1. Install wall in 2nd floor bedroom, redo entry to 3rd floor
2. Install new entry foyer
3. Install enclosure with steel door at bulkhead
4. Install 2 sump pumps
5. Install finish closet in basement
6. All affected areas of construction to be totally finished and refinished
This includes plastering, painting and floor patching."
At our request four additional jobs were added on to this in the course of the project: installing two sets of straight oak stairs and staining them (the stairs were originally only finished sufficiently to allow them to be carpeted), installing marble thresholds on three bathrooms, and removing wood floor in a 300sq ft area (we needed cork underlayment for noise).

In the course of the project the builder issued two invoices, which we duly paid. Hourly rates and daily hour logs were provided to us, and T&I was also mentioned.

We did not review the numbers closely because they were still within the estimate. It was when the third and final bill arrived and we saw how much over the estimate the project had gone that we started examining the numbers more closely and the T&I stood out as something we hadn't agreed on.
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Old 09-22-2008, 09:34 AM   #6
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General contractor charging 32% for T&I - is that fair?


Thank you for posting the above information.

The hour rates you posted for the trades are very close to the rates paid in the "low cost south" The #'s look like the workers wages and adding T&I is certainly a required cost to the contractor.

The other trades sound like sub-contractors and they would have included
T&I in their price. (If I had to manage the subs, I would have asked for 15% on top of their invoice).

Really sounds like your contractor was trying to be very fair with you.

Pay the bill and include some Red Socks tickets.

The developer/ builder you picked may not have had a lot of remodel experience and was guesstimating your project using new construction type pricing. There is a big difference. The projects you added might account for a good portion of the final price tag.

sit down with your contractor... You will be glad you did.
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Old 09-22-2008, 10:05 AM   #7
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General contractor charging 32% for T&I - is that fair?


Thanks for your reply, Big Bob, and for taking the time to read all that. We are indeed paying 15% on top of the sub-contractors' fees as well.

I feel better knowing what you've told me.

I'd love to hear confirmation from someone local about the rates and then we can cut the check with a clear conscience. :-)
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Old 09-22-2008, 02:06 PM   #8
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General contractor charging 32% for T&I - is that fair?


Bob covered things well. Thanks Bob.

Comment from someone local: Those are very reasonable rates (charges from a professional Builder). Sounds like he did you folks a "solid".

Congrats on the new home, and enjoy it...
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Old 09-22-2008, 02:17 PM   #9
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General contractor charging 32% for T&I - is that fair?


Quote:
Originally Posted by dragonness View Post
Thanks for your reply, Big Bob, and for taking the time to read all that. We are indeed paying 15% on top of the sub-contractors' fees as well.

I feel better knowing what you've told me.

I'd love to hear confirmation from someone local about the rates and then we can cut the check with a clear conscience. :-)
It sounds like the contractors on here are protecting their own. When the builder gave you the labor rates, he should have given you the rate that you were going to be billed. What he pays them out of that and what expenses he was going to incur is his concern, not yours. I can see the 15% as being totally reasonable, but adding expenses that should have been covered in the original quote isn't. You said that T&I was mentioned. Was exactly was the deal, and what was put on the written contract?

Last edited by jerryh3; 09-22-2008 at 02:20 PM.
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Old 09-22-2008, 02:37 PM   #10
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General contractor charging 32% for T&I - is that fair?


I have to agree with the above post by jerryh3.
Did you speak to the contractor about the T&I cost on the bill? What did he have to say?
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Old 09-22-2008, 03:10 PM   #11
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General contractor charging 32% for T&I - is that fair?


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It sounds like the contractors on here are protecting their own. When the builder gave you the labor rates, he should have given you the rate that you were going to be billed.
Umm, no, we are not covering for our own. I must say, that is a pretty presumptuous statement. We are commenting on what we know about, because we deal with it on a daily basis; Labor rates, Workman's comp, Taxes, contracts, other insurance costs, overhead, Home Owner interactions, Invoices, billings, etc, etc, etc...

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Originally Posted by jerryh3 View Post
What he pays them out of that and what expenses he was going to incur is his concern, not yours. I can see the 15% as being totally reasonable,
Yes it is a concern of the person that is being provided the services, because the services have costs, and T&I are part of that cost. Any contractor will tell you that those costs are worked into EVERY SINGLE job that is performed.

Quote:
Originally Posted by dragonness View Post
1. Given the hourly rates below is it fair/common to add 32% on top for T&I?
2. Why does the builder charge T&I for some of the workers but not others - eg. the carpenter but not the electrician?
To answer the OP's question: The most likely and logical reason for this is because not every subcontractor carries, or has, workman's comp insurance. If they do not, then the GC gets billed for their work, based on the percentage of what they are paid.

That cost is a huge percentage of our overhead expenses. We apply, or work that cost into all jobs, big or small (if a GC has employees or hires Subs that do not have their own WC insurance covereage).

With most jobs, that have a set price for the work, WC costs are worked into the overall project and relative contract agreement.
In the case of your situation, it looks like, that, instead of working it directly into the hourly wage of the workers, he itemized the charge seperately.

Last edited by AtlanticWBConst.; 09-22-2008 at 03:17 PM.
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Old 09-22-2008, 03:30 PM   #12
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General contractor charging 32% for T&I - is that fair?


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Umm, no, we are not covering for our own. I must say, that is a pretty presumptuous statement. We are commenting on what we know about, because we deal with it on a daily basis; Labor rates, Workman's comp, Taxes, contracts, other insurance costs, overhead, Home Owner interactions, Invoices, billings, etc, etc, etc...

Ok. That might have been a little snide, but you have to agree that this builder needs a little work in the business practices field. If you quote someone that it will cost x/hr to use his workers, you don't come back later and ask for (x+y+z)/hr.


Quote:
Yes it is a concern of the person that is being provided the services, because the services have costs, and T&I are part of that cost. Any contractor will tell you that those costs are worked into EVERY SINGLE job that is performed.
You're absoutely right. That's why all of that should have been resolved from the very start. If this builder intends on entering into contracts with homeowners, he should learn to be clear, articulate, and precise when quoting job rates/costs.

Of course, we are only getting one side of the story so there may be some details we haven't heard.

Last edited by jerryh3; 09-22-2008 at 03:35 PM.
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Old 09-22-2008, 03:32 PM   #13
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General contractor charging 32% for T&I - is that fair?


Thanks for your comments. Just to clarify, the labor rates were not given to us up front - instead, we learnt what they were when we got our first invoice.

Atlantic, would you say these are fair rates for MA when the 32% is added on top?
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Old 09-22-2008, 03:43 PM   #14
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General contractor charging 32% for T&I - is that fair?


I do not know what this builders T & R rates are.

As far as the rates of pay go. They can be all over the board based on a person's skill level and ability.

It sounds like the carpenter is also a foreman and a lead carpenter. $30.00/hr is right for such a person.

$22.00/hr for a skilled painter - Very experienced, sounds about right.

$15.00 (Assistant) or a laborer, with some skills, sounds right.

Last edited by AtlanticWBConst.; 09-22-2008 at 03:45 PM.
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Old 09-22-2008, 04:03 PM   #15
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General contractor charging 32% for T&I - is that fair?


Thanks, Atlantic. It sounds like the painter was overpaid, because he was actually incredibly slow and I would say not terribly experienced, but he made up for it by being very careful not to mess up.

Alright, so I think this is pretty much settled.

Thank you all for your input, it's been very helpful indeed.

In these kinds of situations a consumer feels vulnerable to being taken advantage of, so it helps to be able to double-check things.

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