Cost-Plus Building

While building a custom home several years ago, as we neared completion I realized I had overbid the project by over $20,000. At that point, I changed to cost-plus building, reducing the price of that home by that amount. Fortunately, I hadn’t underbid by $20,000.

There are many drawbacks to building a house for a fixed amount.

• It creates a tension between the builder and client. The builder has figured his cost and added his profit margin, and added in an insurance factor to cover any unforeseen costs, problems, or underestimates. His goal during the course of the project is to maximize his profit, and minimize his expense while keeping the client satisfied. If the builder has experienced problems or unforeseen expenses, he might be tempted to make compromises in his materials or workmanship to minimize his loss or increase his gain.
• During construction, it is typical for many changes or additions to occur. In a big house, there can be as many as 100. With fixed fee construction, each change requires a change order which must include the cost in both money and time to complete the change. These must be signed by both the client and builder. This process is both time-consuming and irritating for everyone.
• When a client gets competitive bids, many builders will try to specify cheap materials in order to have the lowest bid. Then if they get the bid, they may upgrade through change orders, or simply use the cheap materials.

McCanse Builders, Inc. builds most of our custom houses on a cost-plus contract. We communicate extensively with our clients to determine the quality and type of materials which will go into the house.

We then draw up an estimated budget based upon this information. The budget will include all materials and labor to complete the house, with no hidden costs or surprises.

Added to this estimate is a percentage to cover the costs of construction management. This is added to all materials, labor, and sub-contractors. The client receives all our discounts.

Throughout the process, we work in partnership with the clients to make decisions and choices which will result in the best home for the money. The end result is that our client gets the best home for a fair price and the builder makes a fair profit. The final price is as low as it can be without anyone getting cheated.