Are you considering Contracting for a new construction Project? Or maybe already under Contract for a Project? Concerned about the costs spinning out of control? If not, you should be!

  • NCHCC Specializes in Managing Cost-Plus Fee Construction Contract Costs
  • Unique Services, Unique Qualifications
  • Enjoy Convenience and Peace of Mind - Let us monitor your Project costs for you!

With Cost-Plus Fee Contracts, who is ultimately responsible for ALL of the construction costs, whatever they end up being?

You are.

You’re given a proposed Budget or Estimate meant to cover those costs with your Contract. What is that Budget based on? What good is a well-negotiated Fee if the Budget it’s based on doesn’t hold water? What motivation does the Builder have to actively work to control those costs and save you money as the Project moves forward?

The SWFL Construction Industry is inverted – there is more work than there are Qualified Subcontractors to perform it – make no mistake, the tail wags the dog.

As fewer Tradespeople enter the workforce and more of the Skilled age/retire, it will only get worse. Builders struggle to find and retain professionals for their own companies. Quality Administration personnel, including Estimators and Purchasing Agents, in particular, are scarce. Consequently, poor, inconsistent communication and weak, confusing reporting are the norm. Your Builder is competing for all of these resources. How can you know where your Builder stands in this Subcontractor market? When navigating the market, they must consider all of the Projects they have under way. How do you know that they are prioritizing YOUR Project?

The answer = you can’t.

The Industry is also highly networked - from the Builder through the smallest Subcontractor.

There are long-standing relationships in place that were there before you came along, that are intended to still be in place long after your Project is complete. Builders foster these relationships to try to maintain their leverage in the inverted market. In doing so, they become averse to obtaining competitive bids from different Subcontractors for the work to be done. How can you be certain that your Builder is doing all they can to control the costs that ultimately get passed on to you?

The answer = you can’t.

A Perfect Storm.... for the Builder!

Cost, quality and schedule/duration are the (3) main concerns with regard to every construction Project. For each one, Builders are tasked with striking an optimal balance between them. Quality isn’t so much a variable. It is defined by the Plans and Specifications.
If it’s THEIR Project (a Fixed-Price Contract, Model or Spec home), you can be sure that cost will be the priority. But YOU have a Cost-Plus Fee Contract, absolving the Builder of cost risk.

So, your Project is to be built in a market that dictates that premium costs be paid for all of the work to be done on it, by a Builder who likely has higher-priority Projects than yours, struggles with Estimating and Purchasing and who, Contractually, need not be too concerned about what those premium costs for the work are anyway!

In this scenario, how can you know that the total, “end-of-the-day” costs for your Project will be anywhere near the Estimate or Budget that you were given, or are considering, now?

The answer = you can’t.

Don’t take my – or anyone else in the Local Construction Industry’s
– word for it!

Ask your friends and neighbors. Most people are reluctant to talk about personal financial matters and nobody wants it to seem that they may have “struggled” to pay for their Project. Yet, specific numbers need not be discussed. The questions are:

  • As a rough percentage, how much did their Project’s end-of-the day costs vary from the original Budget they agreed to?
  • Did they expect such a Variance?
  • Were they clearly and consistently informed of, and asked to approve, all of the cost increases along the way?
  • Was that process smooth and to their satisfaction or inconsistent and frustrating?

Surely most Local Builders are trustworthy and effort to be transparent about costs. You will like and feel comfortable with many of them. However, ALL of them – no matter how reputable – must contend with these varied, market-driven circumstances. You can’t know or control how they choose to do that. You can, however, be empowered to “push back” against the prevailing circumstances…