F.A.Q. - John Fuchs Properties: Construction & Real Estate

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WHAT IS DESIGN/BUILD?

Sometimes, when people come to us to remodel an existing house or to build a new residence, they already have a complete set of plans, and occasionally they may even have secured a building permit. But quite often, they have only progressed as far as general ideas, depicted by sketches or magazine illustrations. To help these folks, we offer design/build services.

The design/build concept means that we take their ideas and aims, and through proposals, discussions and refinements, we produce a set of working plans. The working plans will then describe the project in detail and will also be used to apply for a building permit. The process typically begins with a phone call, during which we put together the very basic information—the scope of the project, the budget, time and schedule constraints and most important of all, the desires of the clients. Then if the project seems feasible, it’s time to get together.

We try to have our first meeting at the site of a proposed new building or at the home to be remodeled. At this point, we’re aiming to get a more precise and detailed outline of the proposed project. We want to develop very general cost estimates. We’ll discuss timing, scheduling and other significant aspects of the project. From this information we get a better idea of the best approach. There is no fee for this initial meeting.

When we agree to proceed, it’s time for a discussion of fees and billing practices. Billing for the actual costs of construction is pretty straightforward—we send invoices at significant points of progress and/or on a periodic basis. With every invoice we always include copies of our supplier’s bills, so clients can see exactly what the actual costs are. Our overhead costs are included in each line item and the contractor’s fee is specified and listed separately. Design fees are somewhat more difficult to calculate and will usually have to be tailored to suit the particular situation. Sometimes it’s appropriate to calculate fees on a straightforward hourly basis. In other cases, that doesn’t work and a fixed fee might fit the circumstances better. Often times, design costs will be calculated using a combination. Occasionally, it makes the most sense to use hourly fees with fixed minimum or maximum amounts. Whatever the arrangement is, it will be clearly explained in the design agreement.

After the working arrangements and the fee basis have been established, we begin work on turning ideas and concepts into a specific plan. One of the very first steps is research. We must insure what we’re intending to do is feasible, practical and permissible (or more accurately, “permittable”). We’ll be checking building codes, county or city requirements and finding out if there are special considerations at the building site. After these factors are clarified, we’ll begin work on the specific plans and working drawings.

First, we’ll make conceptual proposals, presenting them for discussion and evaluation. This continuing process will lead to improvements and refinements until we have an approach pinned down and can produce the working drawings, apply for a building permit and finally get on with the construction phase.

Of course, the need for design assistance doesn’t stop with the production of working drawings. Before and during construction, there will be a number of decisions that can be made only by the clients—selection of the specific appliances and fixtures, identification of and arrangements for delivery of products and materials, as well as the textures and colors to be used. The answers to many of these questions are routine and incidental to the building process, and we can work these out with minimal effort required on the part of the homeowners. It is vital to get selections made in a timely fashion with sufficient lead-time so they can fit in to the schedule so as to avoid delay. In order to ease the process and to organize things better, we will furnish a listing of the product selections that must be made, as well as the all-important deadlines—the dates by which we must have the items or face a delay of the job.

To help as much as we can, we’ll also pass on the location of suppliers, showrooms and any other contacts or information. We’ll try to provide samples and examples so choices can be evaluated. Without trying to overly influence choices and decisions, we will continually make available what experience and accumulated knowledge have taught us. This assistance is incidental to the job and is included in our regular fees. When additional or exceptional time and effort are needed, any additional design fees are charged on an hourly basis. If selection decisions get really tough or complicated, we have expert design and decorating consultation available.

This whole process sounds lengthy and complicated, but we’ve been expediting and streamlining these tasks for a number of years. With the cooperation of our clients, we know we can build what they want in an efficient and even enjoyable manner. 

GUESSTIMATES AND ESTIMATES: PRICING YOUR JOB

What's it going to cost? This is a question we know will come up, in one form or another, near the beginning of every project. This is a very important factor for everyone involved, so we try to give the best answer we can, usually in the form of a preliminary calculation-aka, the “Ballpark Figure”, the “Guesstimate” or just the “Rough Estimate”. Whatever it’s called, this figure will affect all the planning decisions. It may even determine if there will even be a project! So it’s important to understand how this figure is derived.

Here’s how we go about it. First of all, there is no “one-size-fits-all” estimating method. So many things affect cost that the only all-purpose answer is: “Well, that depends.” And it does depend on the time frame, on the site, on the location, on the difficulty of the construction, etc. But we need to start somewhere and the best place is with the basics.

Right from the git-go, we need to be sure we’re all aiming for the same results. This means getting a pretty firm idea of what we’re going to build, identifying the factors that affect the project, and deciding how we will work with or around these factors.

On a typical project, we visit the site, take a good look around and then sit down with the homeowners. At this stage we need as complete a picture as possible of what the finished project should be. If there are plans or sketches, we review these and then we go over them together. If appropriate, we might suggest alternative ideas or approaches.

But what if we're not really sure yet? If there are no formal plans, we can offer help with the planning process. Much of our work is design, which means that we propose conceptual ideas and designs and then work with the homeowners to refine and improve them. When these concepts are finalized and approved, they will be the basis for working drawings that will be used in applying for a building permit.

So what's the bottom line? Whether we develop the plans or work from plans prepared by others, we still need to get a good overview of what’s going to be involved. With that background, we can furnish an initial rough estimate. This will be very preliminary. As we work out more specific details, we can refine this figure. How can we keep this in the ballpark? Some of what we will be doing will be pretty cut and dried, since it involves basic stuff, like compliance, but there are ways to realize significant savings.

A great opportunity for controlling costs is in fixtures, appliances, custom finishes and other discretionary choices, because these are the things that cost the most. For example, when selecting ceramic tile, unique counter-top material or special floor coverings, careful choices can make a huge difference, not only because of the initial costs, but because installation costs vary a lot. When you consider that kitchen cabinetry is calculated at hundreds of dollars per linear foot, it’s obvious that these selection decisions can make or break a budget. So we try to identify high cost items and, if appropriate, suggest materials or methods to get similar results at lower costs.

To pin these costs down, we get firm bids from the vendors or subcontractors who may furnish substantial services or materials. Where does the money go? We continually refine and update the figures, starting at the planning stage and continuing through construction. Unexpected cost increases are always unwelcome-to say the least –and we work hard to avoid them. Our aim is to keep everyone informed of current progress and especially to warn of possible overruns or budget-busters. To help with this, our billings and periodic status reports are designed to make the latest information available to everybody involved. If something isn’t clear, we are always available for clarification and discussion.

That's all there is to it? No, there’s a lot more to any job than that, but we try to take care of as many of the routine details as we can. Like every other conscientious craftsman, we take a lot of pride in doing a job well. The satisfaction of knowing that we’ve completed a successful project is one of the benefits of this line of work that we savor. Besides, it’s good business. We know that our reputation is our most valuable asset as a builder and that if we produce good work, the word will spread. If we don’t do good work, that’s pretty obvious, too. -It’s hard to overlook something the size of a house, and the results of our work are right out there in front of everybody. After all, we are your neighbors. | TOP |

CONSTRUCTION CONTRACTS

There are basically two types of construction contracts: Lump sum or costs plus. What are they and what are the pros and cons of each? This can be a lengthy discussion and sometimes a half-day seminar at trade shows. We will try to offer you the Reader’s Digest version.

Lump Sum: Do the specified work for the homeowner for a fixed price (a lump sum). This is probably the easiest to understand, simplest to fashion a payment schedule from, and provides a reassuring sense of certainty to the budget process. Those are definitely it’s strengths. Unfortunately, it doesn’t always work out that way. Rarely are jobs so well specified that they lend themselves to this level of certainty. It seems that for this reason and the inherent nature of construction, that many if not most of the line items become “allowance” categories. This opens up that dreaded can of worms called the “change order.” So what started out as easy, simple and certain can end up a little messier.

Cost Plus Percentage Fee: This type of contract sounds more complicated but can actually be very easy to understand and offers some real advantages. In this arrangement, we bill all of the work at our cost and then we add a mark-up for our profit and overhead. Contractor overhead consists of expenses related to insurances, licenses, tools and equipment, administrative staff, office expenses, etc. Profit represents my wife and my wages. In a cost plus arrangement, we provide the same detailed line item cost breakdown that we would for a lump sum contract. The only difference is that at each billing period, we provide the client with a copy of every invoice, bill, or time card from our subs, suppliers or employees. In addition, we update all of the current and projected costs for each line item. If all of this seems complicated, it’s really not. Working together, the homeowner and the contractor can really control the course and the cost of the project. Most of our clients prefer this process.

In any case, we are happy to work with our clients in either contractual relationship. Lump Sum or Cost Plus…you choose!

OWNER-SUPPLIED MATERIALS

“I can get it cheaper….” Occasionally, homeowners will propose that they supply some materials, appliances or fixtures directly instead of the usual process where they select the items, which we then purchase, and install. Sometimes this is because they want to use special items, but more often, it’s because they believe they can save some money. They see that even at the same cost, there would be a savings since this material would not be subject to the “overhead” and “contractor’s profit” surcharges.

“What's wrong with this picture??” This seems like a pretty straightforward arrangement, doesn’t it? This way, the homeowners could save money just by exerting a little extra effort in locating the material and getting it to the site. As the contractor, we would spend less time and effort on their job and could get on to the next project where we would make up for any lost revenue.

On the surface, it sounds like this would work to everyone’s advantage. Sometimes, it does work out but more often than not, the results are disappointing and everybody is frustrated. Here’s why: “This can be one humongous mess!" A construction project, whether it’s a remodel or an entirely new building, is a complex process involving a multitude of interrelated happenings, each one of which can (and probably will) affect other facets of the work since nearly every task has to be done before, during or after some other task. To keep this organized chaos under control, it is vital that the workers, the sub-contractors along with their materials, fixtures and appliances be continually coordinated.

Murphy’s Law (which says that if something can go wrong, it probably will!) is in full force on every construction site. For instance, when parts or material are defective, wrong or missing, the job stops until someone solves the problem, (and that someone is almost always the contractor). We can remember (how could we forget???) many times when, with painstaking preparation, we have prepared for a particular task: cleaning-up, doing prep work, assigning particular workers to the job, making sure the subcontractor is on hand with the right material and tools, only to find that some essential element is missing. Then, either we all stand around running up costs, or we reschedule everyone affected and go through the whole drill again! We almost always encounter delays and conflicts before everyone gets back together.

“This has to work some of the time!!!” There are some bargains out there, which we wouldn’t ordinarily find and we’re happy when our clients can benefit from them. On a day-to day basis we consistently strive to get them the best return for their money. For instance, when we get a “contractors discount” from our suppliers (because we have a history of prompt payment and scrupulously maintained credit), we pass it along. Our clients will see this reflected in the copies of the original supplier’s invoices that we include with our billings.

“So, what's the secret???” Of course, there are times when everything goes as it should. This is most likely when there is a clear understanding of all facets of the process, a willingness to shoulder the responsibilities for getting it right and taking the heat when it doesn’t. If we can come to that understanding, it relieves us of responsibility for things that we can’t control. For one thing, we wouldn’t have to spend the time and effort to get the best price, or to make sure that the selected items fit in with the framing, plumbing, and electrical and other prep work. We would also be relieved of the requirement to make sure the right amount of the right stuff is delivered in useable condition at the right time. Nor would we be expected to help resolve difficulties or enforce warranties for the materials supplied by owners. Those are the things we expect to do in the normal course of a project and it’s what we get paid for. Our function is to control the building process to produce the best possible result at the most reasonable cost in the most effective time span. This is still a daunting task, even though we can rely upon the skills, experience and training earned by over thirty years working in the building trade.

“So what do we do now???” Because there is such a potential for delays, for increased costs and reduced quality of work, we use the attached form* to clearly outline the responsibilities and liabilities involved. As you can see, it’s a very nit-picky document and in a perfect world, we wouldn’t have to inflict it on our clients. But this arrangement can have such a major effect on a job that we feel we must explain the possible consequences in great detail. These reminders and this agreement are to make sure that everyone understands who is responsible for what.

DISCLAIMER OF RESPONSIBILITY FOR OWNER SUPPLIED MATERIALS John Fuchs Properties accepts full responsibility for all materials and labor that we supply. Naturally, we cannot do this for materials you choose to supply. In order to avoid any misunderstanding, please be aware of the following obligations you assume if we work with materials you furnish:

     *As the supplier, you must assume responsibility for ordering the correct type, the correct quantity, and for receiving and inspecting all of your materials.

     *If there are missing or damaged components, or if the wrong material is ordered or delivered, or there are any other problems concerning your supplied materials or products, you must assume full responsibility and liability for returning and exchanging them, as well as negotiating any refunds or other resolution of the situation.

    *As the supplier, you must be sure that all materials meet applicable codes and ordinances.

      *You must assume responsibility for assuring all preparations are adequate, including in-wall “rough-in” items such as framing, electrical and plumbing.

     *You must assume full responsibility for all guarantees and warranties pertaining to these products. You shall hold the contractor harmless for any product or system malfunction related thereto.

     *You must accept that there may be other factors relating to such materials, which could delay work or result in increased job costs. I have read, understood, and I agree to the above terms and conditions.

__________________________ NAME AND DATE __________________________ NAME AND DATE *Actually, we have never used this form, but we hope its existence drives home the point. This form seems so unfriendly and this is not our style. The bottom line is that we work with our clients on a case by case basis to make sure the process is fair and everybody is happy.

“What about buying on the Internet???” As you’ve probably experienced, internet shopping can be a real mixed bag. We’ve definitely seen some savings, but we have also seen our share of frustrations. As always, these types of things are best handled on a case by case basis.


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