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

[Dave Jones]

fixed cost all day long.

 

you will be bent over royally paying day rate. trades arriving at 9 gone by 3 etc.

 

they wont care a jot once your budget is spent and there is still 30% of the job still to be done.

 

Do it like the professionals, get the build professionally QS'd. agree the QS with your builder. Pay to the QS in arrears. Zero to go wrong.

[Tony L]

21 hours ago, Dave Jones said:

... get the build professionally QS'd. agree the QS with your builder. Pay to the QS in arrears. Zero to go wrong.

 

Thanks, @Dave Jones.  For this, I guess I need the bill of quantities to be presented in order, with sub-totals for each stage.

 

Some self builders have shared their BC/construction drawings, & this has been invaluable to me in enabling me to tell my architectural technician where he's gone wrong.  I can't find an example of what you get when you've paid for QS, anywhere.  If anybody would be willing to send me a copy of their reports, I'd be very grateful.

 

Are mybuildestimate.co.uk a good example of a professional QS company, or are there superior professional QS companies out there?  Any recommendations would be very welcome.

 

Do these QS companies get almost everything right the first time they issue their reports, or is there often much work required by the client to get them to do their work properly, as has been my experience with my BCO/construction drawings?  

[saveasteading]

2 hours ago, Tony L said:

Do these QS companies get almost everything right the first time

What do you mean by 'right'?

It is a list of work with quantities. That should be reasonably accurate.

 

If you expect them to forecast the build cost then that is rather different.

4,5, or 6 builders could prepare estimates using the identical boq and present dramatically different quotations. Which one is right?  

[Tony L]

11 hours ago, saveasteading said:

What do you mean by 'right'?

It is a list of work with quantities. That should be reasonably accurate.

 

 

That's good to know - thanks.  I've never seen a BoC, & I was concerned there may be pitfalls to look out for.  I am very wary because, although I'm still in the early stages, I have been let down very badly by many of the people who have worked on my project so far & this has caused thousands of pounds of extra spend & months of delays.

 

Yes, I will buy a cost estimate add-on as part of the QS work.  I may make some changes to the design or specification, based on the QS cost estimate.  & your point about the estimates is well made, although I will be asking for quotations, rather than estimates.

[saveasteading]

1 hour ago, Tony L said:

I've never seen a

1. There are very formal methods  so that nobody can argue about clarity. That could be hundreds of pages and thousands of items.

A QS puts that together for the client, from the drawings provided,  at great expense.

2. Anyone can do their own system

Build house as drawing

Quantity 1.

Rate. £300,000

Total £300,000.

 

Flippant, sorry.

But that's the principle.

 

From a drawing a builder will work out materials, labour and plant schedules and price it their own way, or get an Estimator or QS to do the graft.

They can present it how they choose.

 

Eg

Clear site

Build foundation

Walls

Etc

Allow for overheads

Allow for profit

Total

 

In your case, this is what to expect. If you engage multiple contractors, then you must expect  interface costs which neither allows for.

 

 

 

[Mike]

8 hours ago, Tony L said:

I've never seen a BoC, & I was concerned there may be pitfalls to look out for.

It's not an exciting topic, but here's a YouTube video that illustrates, in detail, how a Bill of Quantities is prepared in accordance with the common NRM2 standard: https://m.youtube.com/watch?persist_app=1&app=m&v=nshlJXDRZds

 

23 hours ago, Tony L said:

Do these QS companies get almost everything right

The BoQ reflects the architects / engineer's drawings, so it will only be as right as they are. If they change / have items missing / don't reflect actual conditions on (or in) the ground, then they will no longer be right.

 

Based on the BoQ, a QS can use their experience to provide you with an indication of the expected cost of the work. If they have recent experience of similar projects in the same geographical area, then the chances of them being in the right ball-park are fairly good (except when market conditions and prices are rapidly changing), but they won't be 'right' (spot on).

 

It's also worth knowing that small contractors may not be used to pricing BoQs item-by-item due to the time and money it takes, so may not do so; they may normally price from drawings alone. If they give you a lump sum instead (or anything less than a fully priced BoQ) then the BoQ will be less useful (perhaps not useful at all) in assessing the value of work undertaken (for payments) & the cost of variations once construction starts. On the other hand, if you do get fully priced BoQs from more than one contractor (3 are typically asked), then you or your QS can usefully compare them and also sport potential errors in pricing.

 

And, as @saveasteading says, if you get different contractors to price different parts of the BoQ, rather than going to a single contractor for the whole, then there will be items that fall through the gaps. Not to mention that any delays by one contractor that impact another will likely result in additional costs - and the same if it's you that's causing the delay.

 

So using a QS isn't a panacea, but can be useful - particularly if you plan to choose a single contractor.

[Tony L]

Thank you @saveasteading & @Mike.  I got about half way through the video.  You're right - it's not at all exciting.  I'll watch the rest tomorrow.

 

It hadn't occurred to me that a QS might help me evaluate the builders' quotes.  There's a lot to think about here.  Asking about the BoQ & cost estimate has raised more questions than I expected.  I probably ought to leave this for now & focus on getting my drawings completed.