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I'm in the process of getting bids for a home renovation (about
$80,000). Some parts of the bids I've received have allowances for
materials depending on what level I chose. My question is: should I ask
for a clause which restricts the cost of these items to what the
contractor actually pays less any rebates (supplier or manufacturer) or
other tyes of credits? I want to avoid paying list price for things I
could buy on my own at a discount. I don't mind the contractor making
his profit, but I;d like to know what I'm paying for.
Thanks for any comments,
Dennis Diskin
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I'm in the process of getting bids for a home renovation (about
$80,000). Some parts of the bids I've received have allowances for
materials depending on what level I chose. My question is: should I ask
for a clause which restricts the cost of these items to what the
contractor actually pays less any rebates (supplier or manufacturer) or
other tyes of credits?
You can *ask*, but I seriously doubt that any qualified contractor would
agree if it caused a reduction in price. Rest assured, the contractor
expects a certain level of profit, and if you try to squeeze him on
materials, it *will be* made up in some other way, such as raising the cost
of labor, or shaving in some other area. This doesn't even involve fraud- it
would be in the original bid, *if* the clause was disclosed *prior to the
bid*. If you want to add it to the deal now, you can expect a lot of
contractors to walk away, because legitimate customers don't try to change
the deal afterwards without being willing to pay for it. There is nothing
wrong with a contractor telling you he's going to make X profit on the job,
which means if you get tight on the materials, you'll have to pay more for
something else, or lose something.
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I'm in the process of getting bids for a home renovation (about
$80,000). Some parts of the bids I've received have allowances for
materials depending on what level I chose. My question is: should I ask
for a clause which restricts the cost of these items to what the
contractor actually pays less any rebates (supplier or manufacturer) or
other tyes of credits? I want to avoid paying list price for things I
could buy on my own at a discount. I don't mind the contractor making
his profit, but I;d like to know what I'm paying for.
Thanks for any comments,
Dennis Diskin
If you want to purchase the materials on your own, put that in the contract
and indicate that you will supply the materials and ask for a rebid. They
may not like that because it lowers a source of profit for them, but it will
also make it less likely someone can file a lien against your property if
you buy the materials.
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diskin wrote:
I'm in the process of getting bids for a home renovation (about
$80,000). Some parts of the bids I've received have allowances for
materials depending on what level I chose. My question is: should I ask
for a clause which restricts the cost of these items to what the
contractor actually pays less any rebates (supplier or manufacturer) or
other tyes of credits? I want to avoid paying list price for things I
could buy on my own at a discount. I don't mind the contractor making
his profit, but I;d like to know what I'm paying for.
It's your contract so try to make it as favorable to your side as you
can. The other guy will either agree or not. He may not because of the
bookkeeping hassle - not necessarily because he's going to cheat you.
Heck, you can also make the contract for labor only and you buy all the
stuff keeping these rebates for yourself.
If by rebates, you mean kickbacks, sure, put that in the contract, but
you'll never find them even if they exist.
The right way to look at your refurb is if the money is worth what you
get. If you start worrying that, even if you paid a fair price, the
contractor made more profit than *you* think he should have, you'll
never enjoy your house improvements. Look at the value, not the cost.
-paul
ianal
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My question is: should I ask
for a clause which restricts the cost of these
items to what the contractor actually pays less
any rebates (supplier or manufacturer) or
other tyes of credits?
It's perfectly legal. In fact in some contexts it's customary (if you
have a "cost plus" contract.)
It's probably not a good idea, though. The profit from buying materials
and reselling them to you is one of the revenue streams your contractor
would (normallY) be counting on. The contractor will simply make up
the shortfall in revenue somewhere else--- e.g., by billing you for
materials he's not actually using.
On the other hand, why not take this a step further and refuse to pay a
labor rate any higher than actual wages plus payroll taxes (less any
credits he may be getting)? After all, you don't want to pay more for
the labor than you could pay by going out and hiring your own crew :-)
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The contractor will simply make up
the shortfall in revenue somewhere else--- e.g., by billing you for
materials he's not actually using.
That would be *fraud*. The better way to make up the "shortfall" is to
simply tack on a bigger profit number, and do that up front, i.e., the
profit from the job will be the greater of $X or Y%, and that is the same
whether the contractor can mark up the parts or not (X includes the amount
that would have come from marking up materials as well as the profit from
labor).
Hey, if the customer wants to change the terms the bid was based on, the
contractor can also change those terms before signing the contract.
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