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Optional Work

Part of this job involved having the gas company install a line to the house so the owners could install a gas range. The gas piping in the house was done by the heating contractor, who included an option to replace the existing electric water heater with a 50-gallon power-vented gas unit in his price. I didn't allow for this work in my base price, but I informed the owners that this work could be done for $940 - the amount my sub had quoted to me. I didn't discover my mistake until the owners decided to add this option. On top of the heating contractor's additional work, the plumber had to connect hot and cold water lines, and the electrician had to abandon a 240-volt supply line and install a 120-volt outlet for the power vent and condensate pump. I also incurred the cost of patching the siding around the power-vent flue outlet, and coordinating and supervising the extra work. Luckily, I didn't pay the full price for this error. The owners were willing to accept a change order to pay for the plumber's work, and the extra electrical work got folded in with the rest of the job. I only lost about $50, but it could have been a lot worse. The lesson here is that work included in options quoted by subcontractors actually has to be estimated as a separate small job. That's the only way to be sure that you get paid for all of the costs associated with optional work.

Labor

When I estimate labor for my own crew, I use historical records generated over a number of years that tell me how long it usually takes to do certain tasks that are common to most projects. For example, I know that under normal site and weather conditions we'll be able to install 21/4 sheets of wall or roof sheathing per hour. On this job, however, my siding price was too low. Some of the overrun was caused by the tie-in problems mentioned above, but I also underestimated overall siding labor by 15 hours, which cost me about $270. Why was I under-priced? The truth is that I don't always believe my own historical numbers. Too often I will look at the labor figures and say to myself, The crew cannot possibly be that slow - there's no way it will really take this long So I'll cut some time off my man-hour estimate for whatever task I'm considering. I always regret doing this, but I continue to make this mistake. I think it's because I forget that my carpenters will be doing the work, not me. I forget that any speed I've gained from years of experience won't make any difference if I'm not on site.

Contingency Fund

After totaling costs for all materials, labor, and subcontractors, I normally add 6% for contingencies. This is to cover the unexpected problems that always occur in remodeling. These include inclement weather, an existing structure that isn't plumb, level, or square, and paying subs to do work that I inadvertently omitted from the original scope. I've almost always spent every cent of my contingency fund. On this job, a 6% contingency would have provided about $3,600, but I reduced the contingency to 4% or $2,400. I figured I wouldn't need the extra $1,200 because the 12-year-old house would present few problems. I was wrong. Although one would think that a new house would be reasonably level, the floor of the house was 7/8 inch out of level over the 24 feet where the addition tied in. This also affected the fascia we had to join at both ends of the addition. These are not insuperable problems for an experienced remodeler, but they do chew up time. More important, unless otherwise spelled out in the contract, the customer cannot be expected to pay extra for solving these kinds of problems. The lesson here is that if a given level of contingency works over time, you should stick with it. All remodeling projects have unexpected problems and these problems eat up time, materials, and money.

Hidden Conditions

When I prepare a proposal, I choose from a list of standard contract clauses, including those that apply to the particular job. One clause deals with buried obstructions and says the following: "Underground Items: I will do my best to avoid damaging underground utilities during the course of construction. However, repairs to and/or rerouting of any such underground utilities will be an extra charge." Since there's no way to be sure what is buried where on a site, it's fair to charge extra for any repairs, providing you do your best to avoid damage.

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When we began excavating, we discovered that the side yard was full of buried pipes and wires (see illustration, above). We knew about the sanitary sewer and its cleanout, which would have to be relocated. We were also able, with great care, to avoid breaking the copper water main. Unfortunately, we were not so lucky with the PVC sprinkler pipes (broken in two places), the sprinkler control wires, the TV cable, or the rain drain from the existing house. Worse, when I checked the proposal for the underground utilities clause, I found that it was missing. Since there was no basis for a change order, I had to pay for the repairs myself. This included the TV cable and the sprinkler pipes, which were broken again later in the project. I calculate that all these repairs, in materials and time, amounted to $410 of work for which I wasn't paid. Another clause I use covers unknown soil conditions: "Excavation: The contract price assumes that the earth to be removed will be undisturbed and will be removable with equipment typically used for projects of this size and nature. If additional work is required due to the presence of fill dirt, rock, underground water, buried septic or fuel tanks, or other unforeseen problems, such additional work will be an extra charge." As luck would have it, this house was located on a hillside. The addition was to be built on the downhill side, which had been leveled when the house was built. However, when the excavation was complete and the form work for the foundation was in place, the building inspector noticed that the front outside corner of the foundation was still resting on fill.
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I was ordered to remove this down to the level of the natural slope. I ended up doing the work myself, but - you guessed it - the excavation clause was also missing from the proposal. This omission cost me $140 of my own time - 4 hours of backbreaking work with mattock and shovel on a hot summer afternoon. Why were these contract clauses omitted? Prior to this job, my procedure was to take needed clauses from my standard form and transfer them to the proposal. Now, I insert the entire list of clauses into the proposal, then delete those that aren't needed for the particular project. I'd rather include unnecessary clauses that do no harm than omit necessary contract language. This systematic approach will tend to prevent errors that occur when impatience and mental dullness set in toward the end of a long bidding and contract-writing process.

Underlying Causes

Most of the mistakes I've discussed stem from two possible causes. The first is the tendency to place production ahead of office work. When issues crop up on site - and they do, every day - they need to be resolved immediately, because workers are standing around waiting for answers. This makes it hard to prepare estimates and contracts during working hours, when we tend to be at our best mentally. The solution is a lead carpenter, system where a capable crew can resolve most problems on its own or with a phone call to the office. This lets the contractor spend concentrated, quality time in the office (see Working Smarter with Lead Carpenters, 12/97). The second problem is that, for most of us, estimating and contract writing are tedious when compared with actual building. After all, few of us got into building to be construction bureaucrats. The remedy here is a change in attitude. Construction office work is a discipline, one that has to be acquired and mastered in order to succeed as a contractor. Good discipline has its rewards: On the job I've been discussing, a more thorough and careful job of bidding and contract writing would have earned me many hundreds of dollars. That's a very high rate of return on the hours invested.