Why does Brecan place such an importance on Fixed Price Contracts?

 

There are a few reasons that builders continue with building under a cost-plus system:

 

Firstly, as we have said elsewhere, they are unwilling to take on the risks of fixing a contract price because they know deep down they cannot make it work. Think about the motivation of some of their sub contractors....the longer they take the more they earn. A cost-plus builder is less likely to back off  risk through using fixed price sub-trades.

 

Secondly, they don't have to so why would they? If there are sufficient clients who are willing to accept the cost-plus scenario, then why would you as a builder offer fixed-price?

 

Thirdly, and you may need to take a tough look at yourself for this one - you may be the type of client that cannot define what you want, you will make constant changes, the builder may not want to work for you because you do not value their work, their judgements or think you know better.

 

In that instance the easiest way for a builder is to produce a simple estimate and see whether they win. Why would a builder go to the trouble through a full cost estimate to work with a really tough client and also expose themselves to risk? Building a home is a partnership, and the builder should be judging your credentials just as much as you are judging his. The best builders won't work for poor clients, or if they do, they will make them pay.

 

 

Suggestions:

 

 

If a builder is unwilling to provide fixed-price, work out which of the three reasons it may be...he is unlikely to tell you.

 

If it is the first reason, you probably don't want to work with them period; if they cannot plan for costs they are not proficient in managing costs and unless you are happy to be paying over the odds you will likely have to end up in court or at least have a thoroughly testing experience.

 

If the builder feels they don't need to go fixed-price, then perhaps educate them or look elsewhere - or at least threaten them that you will look elsewhere. If you really want to use them (they are a friend/they are the only ones available/you are locked in) you could also work with them on some hybrid contracts that fix what can be fixed and leave with clear estimates what they cannot fix or shouldn't be fixed due to unknowns (e.g foundation wall depths/soild bearing capacities).

 

If  you realise that it is the third reason....you either don't really know what you want, or you want to be able to make constant changes as the project evolves then try to minimize those factors. Narrow the potential scope creep, reduce the variety of material selections, and/or try to fix the materials pricing  to drywall stage and leave the customisation and changes to the finishing stages.

 

If you are a potentially problematic client then please speak to friends who have been through the process and try to understand how important it is to:

 

value the builder's knowledge

 

carry out a thorough design process

 

define a realistic budget

 

be willling to compromise form, function, scale and specification to get the best balance.

 

At least if you are aware of your shortcomings a good builder will respect honesty and humility and will work with you to generate a process that minimizes the opportunity for conflict and provides good mechanisms for discussion and clarity.

 

Most importantly, if you are a potentially difficult client it is probably more important to clearly define what it is you want. Canadians are a very polite bunch and are frequently unwilling to straight talk until it is too late, don't allow politeness to get in the way of a clearly defined project.

 

Brecan is experienced in working with both clients and builders. We have a good understanding of the likely issues to pre-empt problems, we are happy to assist our clients in getting the process off in the right direction.

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