The Players' Roles
Contractor's Role: How contractors make money
In a cost-plus job, contractors make money by charging the owner a mark-up (usually 20%) on the amount they actually pay for subs, labor (employees) and materials. This amount covers both their actual costs and their costs of doing business like trucks, tools, offices, insurance, and profit.
In a fixed-price job, contractors make money by estimating their actual cost to do the work, and submitting a bid that includes that cost plus enough extra to pay their expenses and earn a profit.
Since subcontractors are typically the single largest expense on a project, contractors make the most money on jobs with a lot of subs (more mark-up). This is why it may be hard to interest a contractor in a small project that requires just a few subs. Contractors are essentially managers, the more people they manage, the more money they make.
Contractor's Role: Should I be my own contractor?
Probably not. Unless you posses the contractor's key value- an understanding of the entire project and solid relationships with all the subcontractors. If you are contemplating doing your own contracting to save money, you may be disappointed. The subs you hire will charge you a higher rate than they would a contractor (and be less reliable). They simply have no long term interest in providing you with good service, since you are unlikely to remodel your house every year. That's not to say that you don't have a great plumber that always returns your phone calls and comes out on Thanksgiving evening to unclog your pipes- but do you also have an electrician, tilesetter, plasterer, insulator, etc.?
Contractor's Role: How to hire a contractor
Many of the criteria are similar to hiring an architect. You'll want to consider their personality (you'll be in a relationship for awhile), professionalism, business structure, and experience (see what to expect from your contractor). One of the advantages of working with an architect is that s/he will help you select from a pool of pre-qualified contractors. Typically, the architect has either worked with the contractors directly or interviewed them and inspected a completed project to evaluate their workmanship. You should also determine the type of contract you would like to use, to make sure the contractor is comfortable working that way. Also, discuss your schedule with prospective contractors. Use an extensive interview process and reference check to be sure of your choice- this is the most important decision you will make!
|
