Open Book (cost +) vs Fixed Price

[Nickfromwales]

11 hours ago, Mr Blobby said:

I reckon if I ran the project myself and engaged the trades directly they would be more likely to take the piss.

Yup

[charlieroper]

Thank you for everyone's thoughts and advice - I thought I would let you know that we have decided to go ahead on the cost+ basis with the builders in question.

We know there is an inherent risk with this but as many people have said, given the age of the building invovled, the fixed price alternative  was highly likely to have variations added on without the transparency that cost+ enables. Our builders are pretty slick and have a portal for all invoices and time sheets which are updated daily to give a running picture of what has actually been spent and given we are living on site we will have a good idea if these are honest or not.

Thanks again for all the advice and I will keep you updated as  to how things progress!

[Dave Jones]

your overthinking it.

 

If you have it QS'd thats the price for the work. Not QS + another 30 or 40% because they had long tea breaks a couple days. Fix the quote to the QS and pay to the QS in arrears monthly.

 

Have the chap who did the QS do the visit each month and give you a report of what you need to pay. 

 

Fair to everyone and you all know from the start where you stand.

[saveasteading]

4 hours ago, Dave Jones said:

If you have it QS'd

by an independent QS then it is likely to have some contingency built in. Not for the contractor, but to ensure you aren't being given an over-optimistic quote.

I'm speaking from seeing a few peoples BOQ's that had some big extra lumps in them. 

And as an Estimator the risks have to be allowed somewhere.

Our joiner had our work measured and costed by a QS and I found almost everything was over-measured.  But perhaps that is OK as long as the builder doesn't also look for wastage.

 

If the builder provides you with such a BofQ then that would be a contract document to measure all works done. 

It doesn't have to be detailed. Our habit with clients was to summarise a project, regardless of value,  into about 20 items.  Then you simply agree that eg half the site clearance and 30% of the footings are complete, etc.

 

 

If he is clever he will front load it slightly , but that can be fair as they do have start-up inefficiencies.

 

I don't think what you're doing is wrong, as the builder will hide risks in any lump sums. If you are taking the risks out  of his pocket and into yours, , then just make sure you are on top of it all.

[charlieroper]

Thought I'd update on how this is going and I'm pleased to report it's going really well. We have had no issues haggling over prices or extra costs, anything that has come up has been transparently broken down into component parts with time sheets and corresponding invoices. Moreover the builders have worked really hard to make savings wherever they could. There have been a few surprises in the build - roof was in much worse condition than we thought and had to be replaced (re-using the tiles) and a few of the walls needed a bit more TLC than anticipated but all in all we'r really happy. Into the home straight now!

[Hasteron]

On 10/04/2024 at 15:45, charlieroper said:

much a bigger downside risk here as it is more open ended but we're hoping the detail of our drawings (architects and engineers), the surveys we have conducted, should diminish this risk somewhat. As above though if they find something catastrophic we will end up paying extra regardless of the option. Biggest risk is that everything cost a bit more than expected so the overall number get's much bigger and we have to swallow it. The upside here is that there is no hiding, we get full visibility of what everything costs which means we're less likely to get ripped off and there is some scope for making savings if things are better than expected. We are also going to propose some kind of incentive on the builders to bring it in cheaper by sharing a portion of the savings that outweighs the lost profit - by way of example:

 

 

Really keen to hear peoples thoughts on this and whether or not they have come across an incentive structure like this in the past?

By the way, in between crunching numbers and contract negotiations, I’ve found myself needing a bit of a break so I’ve been using https://mostbet.net.in/app/ to unwind. It’s surprisingly fun and offers a nice distraction without needing to leave the house.

---

I know this post a bit old but we did something similar on a rural renovation project — open book with a % fee (ours was 14%) and a shared savings model. Honestly, it worked pretty well, but only because we had good visibility and stayed closely involved. The big upside was flexibility and transparency (helped us avoid feeling ripped off), but yes, it requires trust and time to manage. We also capped the total cost to avoid things spiraling. Your idea of sharing savings with the builder sounds fair and could help align incentives. Just make sure you define the terms clearly upfront.

Edited June 13 by Hasteron
missed numbers