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April 17, 2018  |  by Jake Kostelyk

Contract Talk: Cost Plus vs Fixed Price (Hint: there’s a massive difference)

If you are considering a renovation or home building project, you will face a choice between two very different contract structures employed by contactors and design/build firms. 

The first contract structure is commonly known as “Cost-Plus”. As suggested by the name, these contracts are structured to charge you the cost, plus an agreed upon markup percentage. The markup is applied to every trade, building material and finishing product/material used in the performance of the work. Additionally, the contract will also outline separate hourly rates for work performed by the contractors carpenters, site leads and project managers. In this model, the contractor is assured of a profit. However, you have no contractually specified price because the “cost” in the “cost plus” equation is not set. Indeed, the final cost of the project is revealed only a few months after project completion has passed, and the contractor has finally received all trade and supplier invoices. You are billed on a periodic basis, typically monthly, with a list of incurred costs and labour hours consumed with the markup applied. For example, if the drywall invoice that shows up is $20,000 and the contract you signed is a “Cost-Plus 24%”, you will pay $24,800 plus applicable taxes. Pretty straight forward, right? 

Peering under the hood of this commitment, however, reveals some concerns that are the basis for so many HGTV shows. Using the drywall example, what happens if the contractor’s preliminary budget estimate of $250,000 for the entire project assumed $15,000 in drywall charges, but the invoice comes in at $20,000? You are still charged $24,800 based on the terms of the contract ($20,000 plus the 24% markup). In addition, the contractor has enjoyed an additional $1,200 in profit, due to the additional markup. Not only do you have no firm commitment to the total project cost, the contractor has a perverse incentive to allow costs to escalate. The contractor shoulders none of the risk and pockets all of the upside.

This is the root cause of many of the challenges that confront homeowners working with cost-plus contractors; artificially lowball estimates, poor disclosure of construction risks, vague definition of the work, misalignment between the designer and contractor, deferment of key decisions until well into construction, cost placeholders for unselected products that seem inadequate and limiting, multiple change orders and, ultimately, a total project cost that is significantly higher than what was expected and discussed.

Simply put, there is no contractually defined project cost and certainly no accountability to achieve any numbers “discussed” during sales or design. The project will “cost what it costs” while the contractors profit is assured by the only binding term of the contract; the markup. You shoulder the entire risk without any contractual protection. That is a huge leap of faith. 

The alternative contract structure is “Fixed Price”. (full disclosure; this is the one we firmly endorse as serving your best interests). Once again, the name says it all; the exact price of the project is contractually defined BEFORE construction commences. Rather than a contract only outlining the profit percentages, and hourly rates, it simply agrees to the total amount to be paid. The work to be performed for that fixed price is exhaustively defined in supporting drawings, written scope and written specifications. If there are unresolved decisions or risks, those too are documented along how these undisclosed risks will be reconciled.

You may be wondering how this number may be known before work is performed and trade, material invoices start to flow. The honest answer is -  it’s not easy. It demands a great deal of experience and a design journey that includes thorough assessment and disclosure of risks, complete and accurate scope and specifications right down to the colours of grout, and advance involvement from all trades and suppliers. Why? Because a 100% fixed price contract requires a thoroughly completed and documented design and planning phase.  

This is the “heavy lifting” side of design work generally absent from cost-plus experiences. A detailed, completed design provides you with clear targets and reliable information to inform decisions as design progresses. Fixed price contractors still seek to make a profit, and lets assume that the markup is exactly the same percentage as the cost-plus contractor. The fixed-price contractor shoulders the full weight of cost overages or estimating errors, which is where it should be, as they’re the one’s who are being hired as the trusted professional for your renovation or home building project.  If the invoice submitted by the drywall trade exceeds budget, the variance erodes the contractors return. Due to this level of accountability, it’s in the contractor’s best interest to accurately scope the work, brief the trade and secure a firm written quote. This applies across the board; electrical, plumbing, framing etc. Better planning leads to lower risk.

The entire experience with a fixed price contractor differs markedly from cost-plus; there is a shared incentive to thoroughly design and plan each aspect of the project ahead of time, as the result will be a project completed on time, and on budget. While a “higher than expected” drywall invoice will profit a cost-plus contractor, it will hurt the Fixed-Price contractor. For this reason, the Fixed-Price Contractor wants to ensure design is thoroughly completed before construction starts to ensure they won’t be absorbing “surprise” costs. The Fixed-price contractor is motivated to figure out site access and drywall delivery details, as well as debris removal instructions, heating and water requirements, and even how many days on site will be required, as these will all affect the the price from the drywall contractor. 

At first glance, the Cost-Plus and Fixed Price contracts may appear quite similar. The absence of a firm cost commitment in Cost-Plus, however changes every facet of your experience from the first meeting with the contractor to the final invoice after construction completion. There is no escaping the fact that Fixed Price demands more work up front, but that hard work will be rewarded with a project completed on-time, and on budget. Your home is a major investment, and the hub of your daily life. We believe that the combination of a thorough and collaborative design phase resulting in a 100% Fixed Price and Schedule Commitment provides the peace and mind that's needed in order to move forward with a renovation or new home building project. 

Have any questions about your project, or how our model works, email us at info@kenorah.com or call 604.371.1455!

November 15, 2017  |  by Rachel Ludwig

Fireplaces

A beautiful feature for many homes, fireplaces are often a key design element in your space and while they are usually found in main living spaces, they can also be found in bedrooms and master bathrooms as well. They add a cozy atmosphere, are a great focal point, and can also be an important part of heating your home.

We sat down with our design team to get some information, as well as tips and tricks for adding a fireplace, working with an existing fireplace, and more!

 

Wood Burning vs. Gas Fireplaces

Wood burning fireplaces are known for their ambiance but are becoming increasingly rare for a variety of reasons, including: city by-laws, safety, pollution, heat conductivity, efficiency, ease of use and more. 

Most, if not all, local jurisdictions no longer allow wood fireplaces in newly built homes, with recent news indicating that Vancouver will have more fireplace regulations between now and 2025. However, some older homes still have them and they can be an integral part of the structure of a home. If you love your wood burning fireplace and want to keep it when you renovate, then we recommend checking with your city to determine the by-laws surrounding wood burning fireplaces and what you need to do to meet those requirements (ie regular maintenance, cleaning, etc).

Traditional wood burning fireplaces usually have poor heat conductivity and are not very efficient to heat your space as there is a lot of heat loss through the chimney.  Often our clients choose to decommission wood fireplaces and add a gas insert. Sometimes this means keeping the existing stonework, but depending on the renovation, may involve removing the fireplace surround and hearth also. You can also add a modern wood burning insert (again, check with your municipality on bylaws), which often include a built in fan or heat exchanger, making them much more efficient and effective.

Gas Fireplaces

Our number one tip when it comes to gas fireplaces, is to do your research on the venting and clearance requirements. Each fireplace is different, and these two areas will affect many aspects including the depth and height of the mantel, proximity of built in cabinetry, placement of the fireplace and more. 

A zero clearance fireplace means that you will be able to place the fireplace next to combustible materials. This will give you more installation options as the fireplace will require less space, won't require a hearth or stone and tile around it, and gives more options when it comes to placement.

Designer Tip: If you're adding a brand new fireplace to your space, you should ask your fireplace and/or HVAC professional if there will be make up air requirements needed to ensure that you won't have a negative air pressure and carbon monoxide issues.

Features and Accessories

Built in thermostats and remote controls help make using your gas fireplace efficient and easy to use. Ask your sales rep what options are available for the various makes and models you are considering.

Outdoor fireplaces

Vancouver has a relatively long outdoor season due to our mild climate, but you can expand the time you spend in your outdoor living space (especially if you have a covered patio or deck to stay dry under!) by adding an outdoor fireplace. It creates nice ambiance and the extra heat is welcome in the shoulder months of Spring and Fall. There are some great two-sided indoor/outdoor fireplace options if you don't want to build a new wall or structure.

You could also choose a natural gas or propane fire table (in Vancouver and most municipalities in the Lower Mainland, outdoor wood burning fires are not permitted). There are many different types available for built in or freestanding tables, with similar choices to indoor fireplaces (different types of media like lava rock, stone or glass) and various styles, sizes and shapes. 

Designer Tip: Ensure that the cladding you choose around your outdoor fireplace is both weather and heat resistant.

Our top tip when it comes to fireplaces, is to ensure that you are meeting the appropriate codes for where you live and to hire a professional installer for your fireplace! We work with Dale at Urban Fireplaces and they are up to date on all current regulations, styles and will be a great source of information if you're shopping for any type of fireplace. A special thank you to Dale and Amy for helping us with the details for this article!

 

September 27, 2017  |  by Rachel Ludwig

Flooring - Part Three - Carpet, Carpet Tile, Vinyl and Concrete

Welcome to the third and final installment in our Flooring series! We've already covered hardwood and tile flooring, and for this post we will go into a little more detail on carpet and vinyl flooring, as well as carpet tile, and concrete.

Carpeting

Overall we are seeing a declining interest in carpet over the last several years. As designers, we have been receiving more requests for hard surface flooring throughout our clients' homes. This is due to a variety of reasons, but primarily allergies and hygienic reasons. However, carpet is often less expensive and can still be a great option for some areas of your home. Depending on the needs of our clients, we recommend carpet for bedrooms, theaters and basements. Carpeting stairs can be a great option for safety, as well as easier for kids and pets.

There are a few different types of carpets, and the most common choices are synthetic and wool, which both have pros and cons.

Wool Carpet

As a natural fiber, wool is a more natural eco-friendly option and tends to wear well. While the initial cost of wool is higher, it tends to last longer than synthetic. It also is naturally fire-retardant. On the downside, It can shed and be more difficult to clean, so keep that in mind when choosing wool. We usually recommend a low pile Berber if you're choosing this option.

Synthetic Carpet

Synthetic carpet is usually less expensive than it's wool counterpart, which makes it the more common choice for those choosing carpet. It is more stain resistant and easier to clean with steam cleaning and spot treatment. However, synthetic carpet will emit more VOC's (gasses) so it isn't as environmentally friendly. If you are sensitive to that, consider giving some time after installation for some of these VOC's to dissipate.

Carpet Tiles

Carpet tiles have been gaining popularity, and can be a great option for areas of your home like a home gym (vinyl or rubber tiles are also great options), rec room or playroom. They can be fun and colorful, and fairly easily replaced if they become stained or damaged. These are also popular in larger commercial spaces like offices.

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A few other flooring options that we haven't covered yet, are vinyl plank which has been increasing in popularity and concrete which is not used as often in homes, but can be a good fit for some spaces as well.

Vinyl Plank

Vinyl plank or vinyl tile are great cost effective alternative to either wood or tile flooring. It's durable, great for high traffic areas, and can stand up to moisture as well, which makes it great for areas like mud rooms, basements, etc. As a matter of fact, we have vinyl plank flooring in our Kenorah offices and we love it!

Some of the vinyl flooring even allows grouting, so if you want to still have the look of tile but the cost and convenience of vinyl, you can create that effect by adding grout. You can also add in-floor heating beneath vinyl flooring. With a glue down installation, you even have the option to easily replace damaged areas if needed. 

Concrete

Concrete flooring can be great look for a modern industrial look. There are a lot of options including adding color, polishing and grout lines. A few things to keep in mind is that concrete can crack, and if you choose a color it can be difficult to achieve a consistent look over a large area. It can also be quite cold, so consider in floor heating or rugs to warm up the space. As concrete is heavy, if you're adding concrete on top of a sub floor (versus on grade), you will need to ensure that it can bear the weight. Alternately, consider a light weight concrete option.

Designer Flooring Tip
If you are having different types of flooring that meet in a space (ie carpet and tile), consider transition strips so that the transition is as seamless as possible.

We hope you enjoyed this series on flooring! Feel free to leave a comment if you have any questions. Thanks for following along!

September 20, 2017  |  by Reuben from Vandenberg's Landscape Design

Fall Cleanup Tips

A big thank you to our friends at Vandenberg's Landscape Design for providing some helpful tips for tackling your fall yard cleanup! 

3 Simple tips for making your fall clean up easier!

Fall is once again sneaking up on us, and that means it's about time for that dreaded fall yard clean-up. To ease your pain this year, here are a few quick tips.

#1 Beat the branch

Save yourself from having an overload of fallen leaves blanketing your yard and suffocating your grass, and just beat the branch to it. Before the leaves start to fall, have a look around your yard to see if there are any damaged, unhealthy or dead branches on your trees and shrubs. Removing these branches before they drop their leaves is a simple way to spend less time and energy later on.

#2 Buy the right equipment

Everybody hates trying to maneuver their way in-between plants to be able to reach that one annoying pile of leaves in the tightest imaginable corner. The easiest way out of this situation is to find yourself a nice leaf blower. Blow the leaves out of your garden to spot where you can collect or even mulch them with your lawn mower afterwards. Although it may be a large initial investment compared to buying a rake, you will not regret it when you’re sipping a hot cup of joe watching your neighbors squeeze through their gardens.

#3 Tarp your trimmings

As you work your way around your yard, pruning and weeding for that last time of the season, be sure to keep a tarp in a central location. Throw all of your trimmings directly onto the tarp after cutting them. This will save you from having to make ugly piles of trimmings on your lawn, or making dozens of trips back and forth to your green waste bin. Once the tarp gets a fair-sized pile, fold it up and drag it over there instead.

Hopefully these few tips help you to keep your yard looking it’s best, and if it still doesn’t seem like something you want on your list of things to do this fall, then don’t forget trusted tip #4: Call a professional!

Happy Gardening!

Categories: landscaping

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