Demolition: Is fixed price the standard?

Answered by Jeffrey ~ March 9, 2011 ~ No Comments

The estimate does not label anything as either T&M, or FP, but he gave me t he hourly wage requirements up front, and asked me to pay material vendors directly. Which led me to believe this was obviously a T&M situation. I feel that paying him another 5K is essentially him stealing from us. Which of us is right?

Gina G. ~ Wilson, New York

Jeffrey Anderson

Hi Gina. I realize this is like closing the barn door after the horses are out, but this is a classic example of how not to work with contractors. When a contractor asks a customer to purchase their own materials, that should be a huge red flag that there may be a problem with the contractor. Most contractors like purchasing the materials as they often get a small discount from the supplier and can add a small percentage of profit when they are included in their estimate to the homeowner.

When a contractor wants the homeowner to purchase the materials it may mean that the contractor has been cut off by their suppliers due to not paying their bills or they can't get credit to begin with. While this may not mean they do poor quality work, it is still a situation best avoided.

No project over several hundred dollars should be started without a contract that has been signed by both parties. The contract should spell out the scope of work and the responsibilities of both the homeowners and the contractor including payment terms. A cost estimate is not a contract.

There are may types of contracts used in the construction industry. Some are fixed price, some are time and materials with a ceiling, some are costs plus a percentage, and there are a few others. I personally would never enter into a straight time and materials contract without a ceiling for a large job unless I knew the contractor very, very well as you are opening yourself up to exactly what has happened to you and your husband...a job and costs that go on forever.

I can't really say how legitimate the contractor's costs are and whether the $5,000 payment is justified. The amount the job may total when complete sounds like a lot, but I don't know how involved the demolition was, what the job site conditions are like, or how elaborate the garage is. The $60,000 figure could be completely ridiculous or it might be very much in line for the scope of work.

What I do know is that now that you have this contractor dispute it should be resolved prior to moving forward and with the amount of money involved, it might be wise to consult an attorney. I would not make any more payments until the situation is under control and I wouldn't be in too much of a hurry to bring in replacement workers or you may end up paying for the same work twice.

I am not familiar with the laws in New York which is why I recommend consulting with an attorney. I do know that I would not allow another nail to be hammered until the situation is resolved. If you are already aware that the project is going to be way over the original budget, it sounds to me like you don't have anything that says the garage couldn't end up costing more than your home. I don't see any moral obligation involved at all. I would get a contract with the original contractor stating exactly what the garage is going to cost instead of leaving it open ended.

If your attorney recommends firing the original contractor, make sure you get a contract with the replacement contractor stating exactly what it will cost to finish the project. No matter how elaborate your garage may be, it shouldn't be that difficult for a competent contractor to give you a contract for a fixed amount. Contractors do it every day for projects as large as hospitals and schools.

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