Posted by: jeb1 | February 10, 2012

JEB Design/Build: Why Cost-Plus is Great for the Contractor & Bad for the Homeowner

  1. Some homeowners who’ve had a bad experience in the past have used a cost-plus agreement. Many times the result in the home owner’s frustration over poor quality, long schedules and cost overruns. At JEB Design/Build we believe the best agreement is a fixed-cost agreement.
  2. Here are some reasons why cost-plus is a bad choice for homeowners:
  • Many times cost-plus results in financial surprise and poor planning and estimating by the contractor. When there is a cost-plus agreement there is little motivation for the contractor to accurately estimate the final cost.
  • Cost-plus agreements lack planning on the contractors part because projects are started before they’re fully planned
  • Many times when homeowners agree to cost-plus there are additional costs, poor quality of work and lack of a schedule. Why should a contractor plan and schedule if he already has your money?
  1. Many times uninsured contractors propose a cost-plus agreement because they can often estimate a lower price to bring clients in.
  2. When using cost-plus, some subcontractors pay the general contractor a “finder’s fee” or “commission” which goes towards the cost of your project.
  3. Material costs usually go up with cost-plus because the homeowner does not know where materials go. Often time, materials “leave “the job site and any materials purchased come out of the homeowner’s pocket.
  4. Cost-plus agreements often have hidden costs and surprises. This is due to lack of planning and scheduling on the contractor’s part.

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