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Discussion Starter · #1 ·
I am about to sign a time and materials contract for exterior home renovation in the North East, semi-rural area. The house is old and in poor condition. The work will be to the roof, gutters, windows, walls. The contract has a 10% markup over cost for materials and a per hour rate for: Supervisor/Foreman; Carpenter; Apprentice; and General Laborer. What should I pay for these workers?
 

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Civil Engineer
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One of us does not understand your contract. On a time and materials project, you pay the contract all of his costs for labor (time) and materials, plus profit. You have stated that in this case the profit is 10 percent. The contractor is obligated under this form of contract to furnish you with full details about how much he (the contractor) paid for his labor and his materials, and you are obligated to pay him that amount plus 10 percent (his profit). You do not directly pay his labor or his material cost. He tells you up front what his laborers are going to cost you per hour. If you think his rate is too high, you get another bid. If you are concerned that the cost may exceed what you are willing to pay, you may want to consider a lump sum contract, or a cost plus fixed fee with a not to exceed limit.
 

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Discussion Starter · #3 ·
The contractor proposes to charge certain hourly rates for the labor with no markup on those rates (no profit markup or any other type of markup). The proposed rates are $25 for Laborer; $30 for Apprentice; $38 for Carpenter; $42 for Supervisor/Foreman. My question is: are these reasonable rates under the proposed arrangement?
 

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John Doe
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The contractor proposes to charge certain hourly rates for the labor with no markup on those rates (no profit markup or any other type of markup). The proposed rates are $25 for Laborer; $30 for Apprentice; $38 for Carpenter; $42 for Supervisor/Foreman. My question is: are these reasonable rates under the proposed arrangement?
WOW! We are doing business on the wrong coast! Can't say much for the East, but to us Westerners that seems outrageous. $25 an hour for a grunt seems high. Our laborers over this side make about $12-14 an hour. I'd call around and see what the going rate is. Also, you might be able to look up the prevailing wage for your area and get an idea of what those job classes are being paid. Just an idea. Check the newspaper under the "help wanted" section and call the labor jobs--ask the starting pay. Check the "work wanted" section and find out what those people are charging. I'd investigate it further before I dropped $25 an hour on a laborer.

Carpenters here are making about $18-$22 per hour. If I was hiring work done on my house, I would pay my roofers by the square. I pay my grunt workers between 10-12 an hour and my roofers about 15-18 an hour. But again, I'm on the West Coast.
 

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The contractor proposes to charge certain hourly rates for the labor with no markup on those rates (no profit markup or any other type of markup). The proposed rates are $25 for Laborer; $30 for Apprentice; $38 for Carpenter; $42 for Supervisor/Foreman. My question is: are these reasonable rates under the proposed arrangement?
Those are very reasonable rates. What Homestead doesn't understand, is that those rates include the:
1) Employer tax burden paid per employee
2) Works Comp insurance
3) Administrative costs associated with having employees
4) Overhead on a per employees basis
5) Profit on a per employee hour basis

It is very clear that the contractor is not going to pay his digger $30/hr, but that is what his final cost to the contractor is. Just like Hero bills his laborers out for much more than $12/hr.
 

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John Doe
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Those are very reasonable rates. What Homestead doesn't understand, is that those rates include the:
1) Employer tax burden paid per employee
2) Works Comp insurance
3) Administrative costs associated with having employees
4) Overhead on a per employees basis
5) Profit on a per employee hour basis

It is very clear that the contractor is not going to pay his digger $30/hr, but that is what his final cost to the contractor is. Just like Hero bills his laborers out for much more than $12/hr.

I read the question as "No other markups". My "markups" on my painters are 21%. So, $12.00 per hour, plus 21% and that covers all my tax obligations and it costs me virtually nothing in admin costs. That's why our motto is "Making Home Improvements Affordable Again."
Even at a 25% markup for taxes, that would mean the laborers are making around $18.75 per hour.

Anyway--Like I said, call the Labor Ready type place and ask. Do your homework and investigate. You can find great service from the small business owner. Small business owners usually have fewer operating costs and will often be cheaper. You can also hire several different companies to do the work. Hire a roofing company to roof, and so on. If you're the contractor, you call the shots.
 

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Framing Contractor
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The contractor proposes to charge certain hourly rates for the labor with no markup on those rates (no profit markup or any other type of markup). The proposed rates are $25 for Laborer; $30 for Apprentice; $38 for Carpenter; $42 for Supervisor/Foreman. My question is: are these reasonable rates under the proposed arrangement?
Wrong place to ask these questions. You will never get an answer here. You don't like the rates ...call in another contractor and get his rates. You cannot come on the internet and ask these questions and expect to get an answer because everyone has different rates all over the country.
 

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you are paying the company owners billable rate not what he pays his employees, there is a big difference because it costs money to run a business.

How old is this house? is the contractor RRP certified?
 

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Super Moderator
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What kind of exterior renovations are you talking about Roofing, Siding, Windows, Fences, Decks?

I’d be Leary of getting into a T&M agreement for any of this stuff.
 

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Too Old
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I think you should get a bid for the work from start to finish like a normal job. it sounds like a big job for doing labor and material and it will cost you more then you think.
How many days is this for?
Is every person on the job all day or just when needed?
You will have a lot of standing around time trust me. Get a bid to have the work completed for 1 price from start to finish. You may have extra's that show up but as long as you see what the extra is and agree on a price you will get a better job and it will be cheaper.
 

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Tileguy
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Are they union?

You are going to be pissed and fighting with this contractor before this is over. You would be way ahead of the game if you were to have him "lump sum" the job. You can not micro-manage this job either so don't even think about that. If you guys agree to T&M that is exactly what you will find yourself doing...micro-managing the job.:)
 

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Too Short? Cut it Again!
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Are they union?

You are going to be pissed and fighting with this contractor before this is over. You would be way ahead of the game if you were to have him "lump sum" the job. You can not micro-manage this job either so don't even think about that. If you guys agree to T&M that is exactly what you will find yourself doing...micro-managing the job.:)
Yup!:thumbsup: It sounds like your contractor is concerned by the condition of the house---poor shape as you admit---and no doubt fears surprises he cannot see or anticipate. I would phase the project in this instance. Pay him, lump sum, to tear into this thing only far enough to see what you really have to start. Be careful not to go so deep you end up with a stripped shell of a project open to the elements of course or totally uninhabitable. Patch up if need be and then request lump sum bids to proceed with restoration. Hopefully if you have already checked the contractor and his work out, you will stick with each other. If after seeing what you are up against you decide you are not a match? At least you find out on the front end of the project.

The micro-management risk is real too. And, you will be coming add it without the knowledge or experience base to pull it off in anything but a totally annoying manner. No offense. Just the way it works. You will be on this site every other day asking what you should be paying for wire nuts, sweated copper fittings, etc.

As for establishing labor rate reality for you from here or by calling Labor Ready? Cannot do it. I will say places like Labor Ready do have some great resources for basic labor but I have never hired a finish carpenter, tile person, electrician, or plumber from such a place. I tended to have pools of common laborers I could tap that always sent good people too. Not saying in this economy you cannot find good people short on work there but I wouldn't risk the client exposure without checking people out and looking over some past work. I tended to use people over and over again and they tended to be busy and more expensive. Well worth the money to know they all had respect for the client's rather expensive homes in many cases and that I didn't have to hover over them to make sure things were being done correctly or in a manner that would pass inspection.
 

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Cost plus or T&M is a fine way to do a job, with the caveats that it takes a knowledgeable crew and homeowner, a degree of trust and a hard working crew. The pitfalls which SDS and others speak of are very real, but can be avoided.

The micro-management risk is real too. And, you will be coming add it without the knowledge or experience base to pull it off in anything but a totally annoying manner. No offense. Just the way it works. You will be on this site every other day asking what you should be paying for wire nuts, sweated copper fittings, etc.
As for establishing labor rate reality for you from here or by calling Labor Ready? Cannot do it
I wouldn't take any advice from Homestead here, even though she has the Lord on her side, I think she's doing a little "book cooking".

My "markups" on my painters are 21%. So, $12.00 per hour, plus 21% and that covers all my tax obligations and it costs me virtually nothing in admin costs. That's why our motto is "Making Home Improvements Affordable Again."
Lets look at a real example from the Port Gamble, Washington area, very near Sequim WA.

Carpenter-laborer:
Base pay $14.50
WA L&i $3.50 (per hour repair and remodel code 0516-2)
Liability $00.65 (per hour)
FED $3.00 (per hour, approximate)
Bond $00.26 (per hour, pro rated from 2000 hour year)
State - exclusive of L&I $1.20
Total $23.09

Markup = 60%
This is exclusive of any health, pension or profit sharing the company and employee may participate in, and does not include administrative costs, other overhead and gross profit margins on a per hour basis. So when Homestead claims a cost of $12.00 /hour plus 21% on a "painter", she clearly isn't speaking of any painter who is anyone's legal employee. She probably is not speaking of a legal sub-contractor either. Her costs are based on the Home Depot parking lot, and 1099'ing her "sub". This is common throughout Washington, but is not legal, removes the "employee" from a degree of industrial protection they are entitled to and exposes the homeowner to liability.

So, to the OP, when people throw out stupid cheap prices like Jayne at Homestead did, be aware that there may be underlying reasons for this.

I believe the prices quoted to you by your contractor are fair when you examine all the costs associated with having employees or true sub contractors legally working under the general
 

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Too Short? Cut it Again!
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Her costs are based on the Home Depot parking lot, and 1099'ing her "sub". This is common throughout Washington, but is not legal, removes the "employee" from a degree of industrial protection they are entitled to and exposes the homeowner to liability.
Excellent points. That 1099er is unlikely to have liability or contractor insurance of any kind so check with your insurance agent/broker and make sure you are carrying enough and that it does not rider out use of such help. Million dollar umbrellas are not expensive when attached to your homeowners and in our litigious society seem a necessity to me. And they may not provide enough. Contractor insurance will hopefully cover anything that goes horribly wrong in working through your project. Your 1099er will not be able to offer any such protection.
 

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Labor Rate Questions for Family Contractor

Hello,
I was reading the previous posts and they were helpful to me. Let me explain the situation. I have been hiring my cousin for different home improvement jobs and he has done a great job at a cost of course. I have just purchased a foreclosure home on the river in Delaware County in New York State. The house needs a new roof, new siding, new windows, interior and exterior doors as well as a new kitchen and new bathroom and new drywall in the family room and new ceilings in kitchen and bathroom. I have been reading on-line that a reasonable per square charge for roofing is between $200 and $250. I am assuming that charge would be the same for the siding. He mentioned that it would be $75 per window to install 8 windows. He wants to charge me about $10,500 for the roof, siding, windows and doors. Then he wants to charge me hourly for the interior jobs at $25 per hour for him, $18 per hour for 2 additional workers. Now here's the rub--I am paying for the materials out of my pocket. He has no insurance and no overhead. He also likes to "add stuff he forgot" mostly in the form of extra hours.

How would you all handle this situation?

Oh, the house is a ranch with a 2 car garage and about 1,500 square feet. On the materials list he has requested 27 square worth of materials for the roof and 28 square for the siding. When I asked him how many squares the roof is he replied 17. What would be the amount of squares on a roof and siding on a house this size?

The way I have it figured out is 34 square total at $290 per square=$9,860. I was going to round it up to an even $10,000 because he is building a little porch on the front of the house as well.

What bothers me is that I keep hearing from family members that he is overcharging me. I am supposed to be getting the "friends and family" rate. I don't think I am getting that rate. In addition, he and his workers will be staying in our cabin next door which is significantly nicer than the homes they live in and has cable TV and wireless internet. They have neither. Also, when we are down there, we always pay for their meals as well. I have even given him gas to get there. It is 2 hours from where we live.

Please advise me!!!!
 

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Too Short? Cut it Again!
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If your cousin is fair bidder and a licensed contractor, and you like his work? Contract, hire and pay him honestly.
 
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