Your quote - managing your Costs effectively
All our quotations include a full breakdown of the schedule of costs that make up our price for delivering the project.
Using this approach our clients reimburse Dick Whittington Design & Build for all costs incurred at the price they were purchased, plus an addition 15% mark-up to cover our overhead and profit. With "cost plus contracting" a client pays only the cost that is incurred and no more.
A clear and simple approach ensures certainty
Our method of working forms part of our commitment to collaborative working and offers complete transparency to our clients; every receipt is published, each cost is detailed, all discounts (which nearly always exceed our 15% mark-up) are returned to the client and the overhead/profit is declared. Nothing is hidden.
Given that a significant percentage of the cost arises from major capital items, these costs are identified, secured and fixed from the start. The balance of the remaining works are managed to ensure that the work stays within the agreed budget.
We work with our clients to identify and manage their budget. All decisions are made with the benefit of an informed position. We make savings where we need to, and spend where the client would like to.
How does a Fixed-price contract work in reality?
Fixed-price contracts supposedly offer a client certainty in respect to end costs. However, that is very rarely the case. The reality from day one, is that fixed-price contractors are consumed with one thing - making money on the job. The way they maximise their profits is by hedging profit from things like reducing the specification, dropping scope or more commonly, bombarding clients with claims for additional costs. These “additional costs” are more often than not charged at inflated rates. It’s were the profit comes from and it’s how the industry has always worked.
According to Price Waterhouse the average price overrun of a construction contract in the UK is 88%.
Examples of additional costs include:
- Omissions: These are items "accidentally" left out of the estimate.
- Wrong assumptions: These are items that you assumed were covered under a contractor’s bid.
- Inadequate allowances: Estimate from a contractor or subcontractor with a material allowance that’s too low - a very common problem.
- Price changes: Material cost or labor costs may rise between the estimate and the project.
- Novel materials/techniques: Every new material or building technique has a learning curve. Even allowing a little extra time, you may find that it takes a lot longer than planned.
- Unclear or incomplete plans and specifications: The absence of clear plans leaves much room for disagreement about what, exactly, was bid on. This can lead to change orders and extra costs.
- Job-site surprises: Hidden conditions which in some cases could and should have been detected by more diligent investigation, or were purposely not acknowledged by the contractor.
- Construction/design errors: If you build something wrong, have to tear it out and build it again, you may be able to get someone else to pay – the architect, a sub, a supplier – but most likely the client ends up paying for it twice.
- Owner changes: The client may decide to use better windows, roofing, flooring, etc., during the
meeting expectations for quality, time and cost
It is our experience that the best outcome in terms of quality, time and cost, is when a client is fully engaged with working collaboratively with the contractor. And that includes managing the budget that meets with the clients’ expectation for their project.
It is better to work together. Simple.