Customers who would never dream of bringing their own amalgam to their dentist or their own steak to a restaurant have no compunction about bringing their own materials to a contractor's job site. I don't get it.

Sometimes it's unclear as to what is being provided by the contractor and what items the contractor expects the HO to purchase directly. For example, in this year's remodel, the electrician provided LED recessed can lights, but wants me to provide under-cabinet lights for the kitchen.

At this point, the cost of the remodel plus my purchase price (28 years ago) exceeds the equity in my home, even though the average price of similar homes in my area has tripled since I purchased my home. The remodel updated my home but did not add square footage.

That's why I'm questioning all the "add-on's, such as an $1800 fee (+20% for contractor fee) for changing my mind on the paint color in the living room after they had painted the first coat on one wall. I kept the paint - but had it diluted 50% - so this is a fee for the labor, not materials. The problem with choosing the paint color was that the painter added a tint to the primer - making it more difficult for me to decide on a paint color. After that, I bought my own sample paint colors for the other rooms and painted them against a white background.

Customers who would never dream of bringing their own amalgam to their dentist or their own steak to a restaurant have no compunction about bringing their own materials to a contractor's job site. - Another bad analogy. You are not a dentist and the services that a contractor provides are not in any way similar to a dentist. Many restaurants are happy to work with the food that customers bring, it is really not that unusual. People often bring their own fabric to a tailor, can you believe that. The idea that a contractor shouldn't sometimes work with materials provided by a customer is farcical.

The price for additional painting labor seems way too high. Is it for more than one additional coat?

Cost plus is a flat tax. On everything. Of course it applies to upgrade and even customer supplied materials.

That's not quite accurate.

In this case, the "Fee" of a "Cost of the Work Plus a Fee" contract is explained in the contract as calculated by multiplying an agreed upon % times all expenditures by the GC required to build the project excluding overhead for facilities and staff not on site and tools, equipment and materials not used up by the project.

Materials specifically agreed upon in the contract documents as being supplied by the owner would not be included in the GC's "Cost of the Work" and would therefore not incurr a Fee.

In short, the GC can only mark up costs for materials and labor for which he can provide receipts marked paid.

Agree with bry911 ... that dentist analogy is completely ridiculous

"Agree with bry911 ... that dentist analogy is completely ridiculous"

mike0814: Please, tell us how so.

The funny thing about your analogy is that it is both ridiculous and wrong. First, you aren't a dentist or a doctor and pretending that working on a person is the same as working on a house is crazy. The two fields couldn't be any further apart in training, goals, fees, etc. If anything a contractor would be closer to a custom mechanic or body shop, but those don't work as analogies because they often do install customer supplied items. Second, amalgam is really a supply where the OP talks about supplying fixtures...Bad news, because dentists often work on and install fixtures (bridges, dentures, etc.) that you bring with you. I have a bridge, I was born without eye teeth, by the time I was 15 I had a Maryland bridge (a resin-retained bridge) which I kept until I was close to 30. It would fall out once every few years and I would go to a dentist and get it put back in. I assure you, I carried it to the dentist in my pocket. I had that thing put back in like 10 times before I got a permanent bridge, and since I traveled a lot I had dentists from Dubai to California fix it.

Sanford W.,

Are you saying that my GC is required to provide me with receipts for all materials marked, "paid?" I've been asking him for more details on how much I actually spent. So far, he's provided receipts only for doors and windows. I have an estimate of what GC estimated I would spend on materials and labor for various categories, such as demo, framing, painting, electrical, plumbing, tile installation, roofing, as well as details on the overages. I have no idea how much totally was allocated to each category. He's told me that he's paid the subcontractors, but I have no receipts to show they were paid. I'm holding off on final payment until I know that everything is in order.

"He's told me that he's paid the subcontractors, but I have no receipts to show they were paid. I'm holding off on final payment until I know that everything is in order."

swguru:

He can say anything he wants, but before you make final payment, have him bring you a wavier of lien signed by subcontractors and materials vendors. If you fail to do so and in fact they haven't been paid, they can sue YOU to get their money.

OK, so I understand that it's customary for the GC to tack on his 20% fee (AKA profit) to materials and labor for subcontractors - the rationale being that the contractor gets a discount on the materials and that he is "supervising" the subs.

But I'm questioning some of the other items that have a contract fee attached to them: city permits and architect fees.

At the beginning of the project, I wrote checks directly to the city for permits and a check to the architect / engineer for plans. The city required adjustments to the plans for items that did not meet city code. The GC billed me for the engineering revisions, additional fees to the city for permits, and for the architect to make structural observations on site. He tacked on his 20% fee for all these items. Is this customary?

Is it customary for the GC to tack on a fee for the city permits? That just seems wrong to me! The same for the architect's plans. It was the contractor who brought in the architect - but they are separate entities.

While I don't know the answer and probably shouldn't comment...I find it very odd that a builder would add a percentage to architect fees. A builder would not want to place himself in front of an architect's liability. The fee would arguably, make him responsible for architect errors. It seems a bit crazy to me.

swguru:

I've got a prospective deck job. I've had to apply to the Coastal Commission at the state capital before I can even apply to the local division of inspection for a building permit. I've got to be paid for all this time-consuming administrative work and have told my prospective clients as much. They're attempting to have their condo management company shuffle the papers. We'll see how that goes.

So the best way to think about a cost plus contract is to extend it out into its full name "contractor's cost plus contractor's fee." In its original intent a cost plus contract would not include an up-charge on any item that the contractor didn't pay for. This is often modified for customer purchased fixtures, the idea being that customers can reduce selection time, make better budget decisions and be happier with the purchases. So the net result is a lower end cost to the customer than having the contractor buy those items for the customer.

I would think that "the time consuming administrative work" for permitting would be part of the overhead that is already a part of the cost plus fee. I assume that Joseph works on a time and material and that would be different than the arrangement under cost plus. I can't see any reason that a fee would be added to checks written directly from a customer to an architect, nor for that matter from the customer to the city. I would object to those items as an exception to "contractor's cost."

This is further complicated, by the assurance implications from the charge. Items a builder adds fees to, become at least in part, his responsibility. It can blur the line from agent of your interest to a service he provides. That implication of provision makes him a party to a lawsuit. Essentially, if something goes drastically wrong with the architect or permitting he may now be a party to the lawsuit. In the case of the permitting he would likely be the only party to the lawsuit.

Now none of this means a lot without reading your contract. While the arrangement seems atypical to me and a perversion of the original intent, it could well be industry standard. I would not allow them in my contract, but that doesn't mean you didn't allow them in yours. You really need to read the contract.

One last thought, remember it is about net expenditure. If the builder's price after all of these charges is still good, it is still good. Charging 12% on $500,0000 of costs is the same as 15% on $400,000. In the end, if a $60,000 fee is good, then it is good regardless of how you get to it. My builder said he would do fixed price, cost plus or price per square foot if I really wanted. He just has to calculate changing one into the other.

I've reread the contract. It specifies that the homeowner is responsible for reimbursement of various costs (materials, labor, supervision, equipment, subcontractor, and overhead costs). The subcontractor costs include permits, engineering fees, and consulting fees. Nothing in the contract is specific to contractor fees and where they apply.

The job was initially bid at $50K but quickly grew into a major renovation, with a final bid of $250K. I expect the final construction cost will be double this amount, not counting the cost of materials I purchased directly (tile, plumbing fixtures, lighting fixtures).

Some of the growing costs were related to unexpected issues: dry rot, termite damage, and leaky pipes. Other extra costs seemed to come out of thin air or were just double the estimate.

A competent contractor makes sure he isn't the one paying for costs that seemed to come out of thin air.

Typically, a competent contractor doesn't underbid by half.

Before starting the remodel, the GC had told me that he did not know what he would find when he opened walls. The contract was for about $25K more than the last estimate he provided before presenting the contract. I had thought the increase (between estimate and contract) was a "contingency fund" to address repairs or to allow for underestimating by the subcontractors, but I don't know what happened to the "contingency fund."

There was some miscommunication on the work the subcontractors were bidding. For example, the GC brought in two cabinet builders to give bids. I chose the less expensive sub, but found out later that he was bidding only on replacing existing vanities in the bathrooms - not on the additional built-ins that were planned as part of the remodel. The first cabinet builder had understood what was wanted and included it all in his initial bid. I had similar issues with bids from the electrician and tile installer.

I had to pay for "redo's" that I considered were the GC's mistakes, such as moving a lighting fixture that was installed in the ceiling below the shower drain.

As work progressed, the GC suggested "improvements" beyond the scope of the initial work. At first, I liked his ideas and accepted them, but the cost was at least double, if not triple, what he proposed. Each "improvement" incurred hidden costs. For example, I agreed to replace the kitchen cabinets, but this also meant work for the plumber, dry wall, tile, fabricator, and electrician, without changing the layout of the kitchen. (I had gutted and remodeled the kitchen two years ago.)

I rejected his suggestions once I realized that I could not pin him down to a price, as in "Would adding X be closer to $10K or to $50K? I deleted several items from the initial bid and dropped projects I had considered adding to the renovation.

I am happy with the quality of the work - it took twice as long as was proposed - but I'm OK with that.

OTOH, I've had to postpone additional repairs that are needed on the house, but were not planned as part of this renovation. I cannot afford to go with another cost-plus contract for the remaining work. I'm struggling to find the resources to finish paying for this renovation.

I think you are going to have to take it to your attorney. What is the change order process spelled out in the contract? I don't think it even sounds like a cost plus contract, it sounds like a time and materials contract.

Cost plus should have few surprises. You should rarely be hit with a bill that you didn't approve before the work. There are times when the work is so variable that you will not know anything more than a range but you should be aware of the range before approval. The changes should generate change orders that you are given to approve.

Again, the contract you signed may spell out entirely different procedures. So all this talk about what should happen really only helps if your contract is written that way. I really suggest you find an attorney with construction experience and ask him to look at it.

"I really suggest you find an attorney with construction experience and ask him to look at it."

That's throwing good money after bad, especially when swguru is "struggling to find the resources to finish paying for this renovation" and "overall I'm happy with the quality of the work."

What's a attorney going to do, besides charge for advice? There certainly is no lawsuit here, in fact there's not enough to even rattle the contractor's cage.

When someone is as confused about their contract as the OP is, paying the $300 for a half hour's review of that contract won't be a wasted expense. I'm with Bry on this. It is starting to not sound like either a cost plus or a fixed fee. And the OP needs to understand exactly what they've gotten themself into. Knowledge is power. Get smart about construction, and construction law by doing your own research. But don't skip seeing a professional simply because it will cost money. That's short sighted and can cost more in the end.

@ Joseph Corlett, LLC

Joseph I think you are probably a damned good and probably fair contractor. But you give the most ridiculous and frankly dangerous legal advice. I do believe that most contractors are like you. However, we don't hear about most contractors. All consumer driven discussion boards will draw far more negative experience posts than positives, so instead of assuming the contractor did nothing wrong, lets just admit that there is a perceived problem here. Sometimes that is all it is, a perceived problem, but other times there is an actual problem. Take the blinders off, seriously.

Now on to your point.

There certainly is no lawsuit here, in fact there's not enough to even rattle the contractor's cage. - This is a perfect example of an unlicensed practice of law, and oddly enough it is not legal. If someone doesn't like you, all they now need to do is report you to the Florida Bar (and no, I am not going to). There is absolutely no way to know if there is or isn't a lawsuit here. You can't know, you can't even hazard a guess without looking at the contract. Anyone who has even taken an undergrad business law class would answer this question, "I can't know until I look at the contract." In most states you may advise someone of the law, or you may advise someone of your specific legal experiences, you can usually even say I personally wouldn't bother, and you can advise them to see an attorney. You can't say "you don't have a case," or "you will not win," or "you shouldn't bother."

Edit: I find it ironic and very hypocritical that you constantly advocate for hiring a licensed contractor for construction, while constantly advocating against hiring a licensed attorney for legal matters.

What's a attorney going to do, besides charge for advice? - In a standard cost plus contract checks written by consumer directly to vendors can't be marked up. The fact that the architect fee and the permits had a builder's charge added alone is probably enough to pay for the attorney. The procedures the OP is describing are not someone doing business in a standard manner. The OP says they couldn't find evidence of these charges allowed by the contract so, therefore, if they are reading the contract correct, those fees will be reversed. If they are not reading the contract correct, then an attorney is the best person to read over the contract to advocate for them. Those are both examples of concrete benefits an attorney will provide. Let's not even mention the non-standard change order. If that isn't there then the savings could be quite large. The cost to have an attorney look at the contract will be minimal, and the cost savings could be significant. This is a no-brainer.

overall I'm happy with the quality of the work. - Doesn't mean overall I'm happy with the value of the work. I drive a decent car, overall I am happy with the quality of the car, that doesn't mean they should charge me $250,000 for it.

bry911:

You response is so typically lawerly. And subsequently misguided.

One of the first things you must learn is that life is unfair and that you're going to get your a$$ kicked occasionally. Most of us learn this by the 3rd grade or so, but some make a living making people believe that they can somehow get them "justice" for their perceived wronging. Maybe they can, but they can't do it cost effectively. I am not an attorney and I don't play one on forums, but I can safely say there is no way any lawyer anywhere, short of a brother-in-law that owes you money, that the OP is going to cost effectively get "justice" here using an attorney. This is so obvious it belongs in the cliched "no brainer" category.

I got a letter from the IRS once telling me I owed them $35,000.00. I took it to my lawyer and he suggested I immediately hire a lawyer specializing in taxes. I disregarded his advice and invested about 15 minutes and .40 in a stamp to tell the IRS they had mistakenly been sent a 1099 by Lowe's for me that should have gone to the guy to whom I sold my business. I proved in writing that all the taxes had been paid. Several months later, I got a 2-page letter from them saying "Nevermind."

I've got plenty more anecdotal evidence where my business and life experience has saved my checkbook from the legal profession. When it comes to the letter of the law, many of you are great. When it comes to common sense and/or cost/benefit analysis, a great many of you fail miserably. If you're wondering if you can sue, speak to your lawyer. If you're wondering if you should sue, speak to your accountant.

Florida

“State ex
rel. The Florida Bar v. Sperry, 140 So.2d 587, 591 (1962) Many courts have attempted
to set forth a broad definition of the practice of law. Being of the view that
such is nigh onto impossible and may
injuriously affect the rights of others not here involved (bri911: This
would be my 1st Amendment rights to free speech that they are
talking about here), we will not attempt to do so here. Rather we will do so
only to the extent required to settle the issues of this case.

It is
generally understood that the performance of services in representing another
before the courts is the practice of law. But the practice of law also includes
the giving of legal advice and counsel to others as to their rights and
obligations under the law (I did no such thing) and the preparation of legal
instruments, including contracts, by which legal rights are either obtained,
secured or given away, although such matters may not then or ever be the
subject of proceedings in a court (that would be nu-uh, nyet, and hym-hym, in
no particular order).

We think
that in determining whether the giving of advice and counsel and the
performance of services in legal matters for
compensation (Unless personal satisfaction constitutes “compensation”, I’ve received nothing)...

But the practice of law also includes the giving of legal advice and counsel to others as to their rights and obligations under the law - That is exactly what you did when you said. "There certainly is no lawsuit here, in fact there's not enough to even rattle the contractor's cage." - and again here - I can safely say there is no way any lawyer anywhere, short of a brother-in-law that owes you money, that the OP is going to cost effectively get "justice" here using an attorney.

Telling someone they don't have a case, or making a judgement on their maximum award is legal advice. Most importantly, it is bad legal advice, without reading the contract you can't know any of this. The contract obviously has issues. Even if the contractor is on the up and up, an earlier check of the contract language by anyone knowledgeable should have helped inform the OP. I don't play lawyer on the forums, but having graduated from law school, I often inform people of the law. The reason I so often tell people to get a lawyer, is that is the problem with contracts, I can talk all day long about standard contracts, I didn't read theirs. You didn't either, stop pretending you did.

I can play the anecdotal story game too, but why? If you are signing a contract that is upwards of a half million dollars then get an attorney to read the thing. If, for some reason, you didn't in the beginning, then do it now.

Common sense - 1 vs. Anecdote about the IRS - 0

Edit: As for your anecdote - It is almost as bad as your other anecdote - the IRS has nothing to do with a contract dispute any more than a dentist has to do with a contractor. They are totally different parts of the law.

Edit 2: I didn't read both posts in their entirety before I responded. Here is what the court set forth as the test...It is the really important part you left out. . . .if the giving of [the] advice and performance of [the] services affect
important rights of a person under the law, and if the reasonable protection
of the rights and property of those advised and served requires that the
persons giving such advice possess legal skill and a knowledge of the law
greater than that possessed by the average citizen, then the giving of such
advice and the performance of such services by one for another as a course
of conduct constitute the practice of law. If you think telling someone, whose contract you have never seen, that they don't have a case is knowledge of the law greater than possessed by the average citizen, I would say it is knowledge of the law greater than possessed by all but psychics.

bri911:

Obviously you missed class the day they studied the Bill of Rights. You also missed the fact that my "legal" opinions weren't directed at anyone specifically, therefore there is no "someone".

Joseph - I doubt you can even explain what the Bill of Rights is, without looking it up.

This tangent obscures the problem, I really don't care if you give legal advice or not. The biggest problem is that the advice is tragically bad. If anything tragically bad is too easy, a mortal sin against common sense barely covers the shortcomings of your advice.

When dealing with contracts - size matters. When contracts are small in scope and consideration, then not spending extra money on an attorney can be a completely rational choice. Even as they approach a median amount there may be reasons to avoid seeing an attorney without a triggering event (indications that one of the parties isn't trustworthy, or there is a disagreement). However, when the contract is large seeing an attorney simply makes sense.

Another way to think of it is like this: $500 to have an attorney look over a contract for a $5,000 renovation increases the cost by 10%, The same $500 fee to look over the same contract on a $50,000 renovation only increases the cost by 1%, and for a $500,000 renovation it adds only one thousandth to the cost.

I was in a business once where part of my job was signing contracts. I have signed well over a thousand commercial construction, renovation, leases and purchases of building and equipment. I can't remember a single time that our attorneys didn't modify a contract in our favor. I am sure there were some but they were definitely the minority. Most times, our attorneys would identify some concerns and put language in the contract to mitigate them.

At this point in the OP's situation there has been a triggering event to see an attorney, on a contract so, I am of the opinion, see an attorney. Joseph asked why, and I gave the reasons you should more than once now. Read both cases and then do whatever you think is best.

bri911:

I suggest you go back and read the swguru's original post as I just did. We're talking about an $807.00 dispute here. Please explain to me how one could cost effectively engage the services an attorney to recover $807.00.

Quote:

The job was initially bid at $50K but quickly grew into a major
renovation, with a final bid of $250K. I expect the final construction
cost will be double this amount, not counting the cost of materials I
purchased directly (tile, plumbing fixtures, lighting fixtures).

Some of the growing costs were related to unexpected issues: dry rot,
termite damage, and leaky pipes. Other extra costs seemed to come out
of thin air or were just double the estimate.

While the thread's initial complaint might have been for $807, later on he insinuates that there are a lot of other charges that he's questioning.

It's time for him to get a handle on what he should be charged for and what he shouldn't. Especially if this project isn't done yet.

A few hundred on a lawyer seems like a pittance.

"Joseph - I doubt you can even explain what the Bill of Rights is, without looking it up."

bri911:

I have personally spent tens of thousands of dollars defending the 1A; it's the single most important thing I've ever done so I kinda have an idea as to what it's about. That's just a bit too much thread drift for here, but if you or anyone else is interested, email me at loosedeckcannon@gmail.com.

I admit that my comments about the Bill of Rights were a trap dug in the ground waiting to be stepped in.

I never said that unlicensed practice of law was criminal. There is a reason that many courts let bar associations investigate, instead of doing criminal investigations. It is because the bar associations can, and do, bring tort actions against people and largely sidestep constitutional issues.

It is important to remember that the constitution and all amendments are essentially a contract between you and the government, not inalienable rights guaranteed you. To give some examples: your second amendment right to carry arms can be abridged by the simple placement of a sign at the door to a private residence or business, campus administrators can and do search student dorms with nothing more than a knock, and can remove you from the dorms for contraband found despite the fourth, I can tell my workers what to say and fire them with cause for not complying despite the first amendment.

There are a lot of gray areas in there, but the long and short of it is this, bar associations didn't sign the constitution, they really only have to prove that you acted improperly and that action led to financial harm. Courts have been pretty restrictive in improper action and pretty relaxed about harm, maybe because bar associations have been so restrained in recompense. Most times they just ask for an injunction.

Maybe you misspoke before or didn't realize that bar associations are not governmental, which really can be confusing because state bars are governmental, but the bar association is a professional organization. Before you go find an exception, and you may find many, there is a lot if gray area here.

>>>" Nothing in the contract is specific to contractor fees and where they apply."<<<

Well that sounds like a problem. swguru, I hope you get things sorted out (with or without a lawyer). Wouldn't it would be wonderful if everyone had friends who are doctors, lawyers, financial advisers, or contractors, etc. to help with just a little medical, legal, financial, or construction etc. advice? GW is great for some things, but I think in this situation you'd be better off getting help from someone who is able to review and discuss with you real-time. Good luck.

The only thing that is clear is that neither party understands how a Cost of the Work plus a Fee contract should work. Since it is impossible for us to help without reading the entire contract and a large sum of money is involved, your next best option is to hire an architect or lawyer to read the contract and offer advice.

Thanks. I have made an appointment for an initial consult with a lawyer. When I tapped into the forum, I was looking for feedback on what are typical contractor fees. I was not looking for legal advice. I'm hoping that consulting with an attorney will help me understand which items to contest.

The feedback from the forum has been helpful to me in confirming that I should be questioning some of the charges, and that the job was way underbid.

Also, I now realize some of my confusion stems from what looks like a mix between a cost-plus contract and a "time and materials" contract. At this point, I'm not sure that I understand the difference between these two types of contracts for construction and how they applied in my situation.

swguru:

I hope your initial consultation with your lawyer is free. Mine are with my clients.

@ swguru:

I am quite the amateur at this but will attempt to add a little clarity.

Fixed Cost - The contractor constructs the bid for you and gives you one price, he has nearly total control of the subs. So long as the house is built to the exact specifications of the original build, the money you pay the contractor is that price. You really have no need to know his material cost since the final cost is the only relevant number.

Cost plus - The contractor gathers the bids from multiple subs, you get to decide which bids are approved. The contractor then adds a fee to the bids somehow to produce his fee. There are several ways the contractor may add his fees and the most common are an added percentage or an added fee. Any savings from subs are passed along to you, thus knowing the actual amount paid to subs is important.

Time and materials - The contractor establishes a rate of pay, typically hourly, materials are also typically marked up by the builder. The total cost of the work is simply the materials plus labor. Usually mechanics work on this type of arrangement although they call it parts and labor, the bill includes parts at retail (or markup) and number of hours worked x the amount per hour, so if you have ever had your car worked on you probably have some experience with a time and materials type arrangement.

If you consider a project that is built exactly to the specifications spelled out in the contract then a cost plus theoretically becomes a fixed cost contract. You know the sub prices and the builder's fee thus you know the entire cost. This is not the case for a time and materials contract, but it is not necessarily a bad deal either. Bids are sometimes padded to ensure profitability, but with a time and materials profitability is essentially guaranteed, thus need no padding. Conceptually, an efficient contractor and subs could bring a project in cheaper with time and materials, but these are again elusive savings, most jobs tend to go over and not under.

Ideally a cost plus contract passes sub savings along to the consumer but this is a blurry line as sub savings may be fictional. Without experience to judge the quality and efficiency of a sub's work it is hard to make a real determination of value.

The problem with everything above is: just because there are standard terms and ideas doesn't mean your contract has to conform to any of them. Really they only require an agreed upon exchange of consideration and that all parties entered into the agreement in good faith. So unlike other law matters there are few rules that can't be waived away.

As far as lawyers go:

I would call the local bar association and briefly describe what is going on and ask for three referrals. They are probably in the best position to evaluate your needs and match you with an attorney.

As for free consultations, I don't really care if an attorney has free consultations or not. Often good attorneys don't need the client's bad enough to deal with clients who are fishing. Also, the type of law they deal with dictates a lot. I am not a huge advocate or opponent of free consultations. An attorney who deals in construction contracts is going to require payment before really diving into the contract. He might glance over it and give you initial thoughts for free though.

Bry is generally correct but it is important to use terms that don't contradict the nature of the particular owner-contractor contract.

Fixed Cost is usually called Fixed Price or Lump Sum in order to avoid suggesting that the contractor's cost will be revealed for anything other than allowances, and changes in scope. Otherwise, cost is not normally revealed except possibly in a Schedule of Values that is only used for determining appropriate progress payment amounts.

Cost Plus is an abbreviation for Cost of the Work Plus A Fee. Approval of subcontractor bids is usually required only when there is a Guaranteed Maximum Price where if the owner doesn't choose the low bid the GMP is increased by the difference. I've rarely seen owners approve sub selection (other than to exclude a sub) for single family houses since it requires a pretty sophisticated level of project management so it is often advisable to have an experienced architect on board. When I've been involved it took a lot of my time to keep the paperwork current with the work progress

Time and Materials should only be used for small projects where the scope of work is not fully known. It is usually only used for a house for certain specific portions of a house contract with unit costs stated in the contract.

Most contracts contain a little of all of these contracts. In a Fixed Price contract an allowance is treated as a separate cost of the work and sub surface irregularities are usually treated as time & materials. Both must therefore be incorporated into the Fixed Price with a Change Order.

Unfortunately, many house construction contracts are not well written or are at least incomplete thereby forcing the parties into unnecessary disputes. If the contact is really bad a lawyer won't be able to help much. But I know nothing about this contract and can only speculating which I don't think is very helpful.

Time and material contracts aren't legal in 6 states.

I don't know if the project is in one of those states but all that is needed to use a Cost of the Work Plus a Fee contract is a clear description of the work and a Guaranteed Maximum Price with allowances, alternates and unit prices listed where applicable.

I had to delay my meeting with the atty.

I'm in California, where time and material contracts are illegal; although the GC's low-voltage guy proposed a time & materials contract - I was confused by the bid, I thought he was saying he could get the work done in one hour.

Instead, I hired a friend for low voltage, who gave me a realistic bid. GC thinks I should pay him a contractor's fee on the labor and materials for low-voltage. I disagree because my friend went to the trouble of getting me discounts on my surround sound system - so why should I pay a 20% "tax" on my new stereo components to the GC who had nothing to do with selecting and purchasing the components?

We really can't help you without reading your contract.

But the reason that the GC wants 20% on all installations is because he is still responsible for for the overall work. It will be easier if we use tile as an example...Suppose your friend installs a lovely tile that you pick out. Then a structural problem causes the GC to have to remove the tile to get to a mistake a different sub made, the GC is then responsible for replacing the tile.

That is the nature of the GC, if you wanted to be your own contractor then don't hire a GC. Typically, all the GC does is supervise and warranty subcontractor work. Just because you saved on the subcontractor doesn't mean that he isn't indirectly on the hook for the work and he still has to arrange for it, and probably double check it.

As for the illegal contract, personally I think it is a load of garbage. Making time and materials contracts illegal protects people from bad contractors and makes good contractors overbid. In the end, 9 out of 10 people will pay more to protect the 1 out of 10 who did no due diligence.

"We really can't help you without reading your contract."

Exactly, yet you keep working and hiring and potentially digging your hole deeper. As Brian stated depending on YOUR contract you very well may owe him 20% as at the end of the day he is responsible for the entire job as he is the General Contractor.

You don't hire a GC so then you can go out around him and hire subs yourself. That would make YOU the one 100% on the hook for coordinating, quality control, and corolarly damage. He's probably earned more than 20% on this job. He's got all of the risks, and all of the headaches too. And a client who wants their cake and to eat it too.

Here's a short follow-up on this thread that I started regarding my "open checkbook" GC. I want to thank the posters who suggested I seek legal advice.

I met with an atty whose practice focuses on construction defects. He described my GC as a "crook" but said it would be too expensive to litigate.

I am now working with a contracts atty, who has described my GC as a "scum bag." He says that these type of cases usually settle because the GC does not want to risk losing their contractor's license for flagrant violations.

I hope these two characters, so prone to off-handed characterizations, know more about construction contracts than the contractor and the owner.

" He described my GC as a "crook"". A lawyer calling a contractor a "crook". That is rich.

Here is one of the issues - there are many more issues that would raise eyebrows at the California Contractors State License Board.

Before starting the job, I told the GC that it was important to me to have licensed contractors working on the job and to have permits from the city.

He is licensed as a GC "B". He brought in subs to perform some of the specialty work, such as electrical, plumbing, drywall, and painting, and he performed some of the specialty work himself, for example, he received a bid from a framing contractor, but did the framing himself, with his assistants.

When I recently asked him to provide me with a list of the subs and their contractor licenses, he replied, "They don't need licenses. They are independent contractors working under my license."

The California State License Board states that:

"In California, anyone who contracts to perform work on a project that is valued at $500 or more for combined labor and materials costs must hold a current, valid license from CSLB...

General engineering and building contractors usually oversee projects and coordinate the specific licensed subcontractors for a job ...

A general building contractor also may contract for specialty work, but must hold a specialty license for that work or actually have a specialty contractor do the work."

I am going to take the OP's side on this one. This contractor screamed crook to me, without even reading the contract. Charging a 20% fee on architect fees and permits that he didn't pay for is not only unscrupulous, it is a terrible idea. He is making himself a party to all architect and permit disputes. Suddenly he can be brought in on any lawsuit against the architect.

@ Joseph

There are certainly a lot of attorneys out there who I can't stand. But one could point out that the construction industry is at the very top of lawsuits. On a per client basis construction lawsuits top all others by a long shot. So while an accountant can maybe make fun of an attorney for being a crook, I am not sure a contractor should. I don't know if it is true but I had a professor once say that about 1 in 5 of all construction projects involve a dispute that requires a consultation with an attorney.