Asking for invoices on a cost plus system and getting second quot

ShmomeyJune 1, 2012

We are building a house on a cost plus system with an 8% mark up. Is it common for me to view invoices? Also, can I request or obtain second quotes on work that went over budget?

I actually deal with commercial vendors. I often obtain at least three quotes for any project over $10,000. I then will compare and pick a vendor based on cost savings and reputation etc..

Our original quote for the septic and well system was quoted at $12,000 for septic and $6000 for well. The bank approved our loan based on this quote. He then increased the price by $7,000 due to the fact he did not know how deep the well was going to be. Now he is asking for a check separate from the bank loan. Is that common? He told us he could not a real number on the well until it was measured. I guess it goes down 180 feet. He told us he did not realize it would have to be that deep. Thus I am wanting the builder to get secondary quotes.

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You should always receive invoices. As far as work that has been completed, I don't think a second quote will help you. The tradesman is due to be paid and you will subject yourself to a lien if you don't pay the person who did the work.

As far as wells go, they are just estimates (like excavation). They don't know what they will get into until they start drilling - at least in our experience. If you have certain water requirements, they may well have to drill much farther than they estimated to get these requirements.

    Bookmark   June 1, 2012 at 8:26PM
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ok my wife and I are confused. This will sound crazy .. I know that..

I think we are on cost plus. She says we are on a fixed price contract. The builders invoices include an 8% mark up. The quote states not to exceed quoted price unless extras are included (i.e.) generator or additional fixtures. The septic well system went $7,000 over budget. He wants a separate check un-related to the bank loan draw. Apparetnly he qouted too low due to the depth of the well. If it is fixed.. does he eat the costs.. versus cost plus at a basic 8% mark up? Why can't he draw from the loan and we make up the difference after the house is complete?

    Bookmark   June 1, 2012 at 8:59PM
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You might have a "Cost of the Work with a % Fee" contract with a Guaranteed Maximum Price (not to exceed amount).

In such a contract the builder would offer you alternative prices for each major work category and if you chose a price higher than the lowest one, the GMP would be increased by the additional cost.

When the GC thinks any part of the work exceeds the original scope, he must submit a Change Order for your approval before the work is started. I can't tell if the additional work for the well is a legitimate scope increase or not; it would depend on the design documents listed in the contract and any clause about additional costs for subsurface conditions, etc.

I don't know how a bank would view legitimate Change Orders but either they or you should have a contingency fund for work that was not able to be included in the contract.

    Bookmark   June 2, 2012 at 10:40AM
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Thanks .. what you noted makes sense... If I had to this over again. I would have priced and speced out everything priot to the initial build. It is very stressfull..

    Bookmark   June 2, 2012 at 3:28PM
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