General contractors, also referred to as GCs, may have different structures of fee for different project stages or project types or one way of charging you for their work. You may commonly come across the following fee structures. For your information, if you are seeking a general contractor for a construction-related project, you can also visit www.grabacontractor.com and search for GCs in your area.
This is precisely what it sounds: you pay the GC for the time they, and sometimes their workers, spent on your project. Prices between $50 and $100 for each hour for GCs are usual. Charging on an hourly basis is more common in the pre-building phase compared to the construction stage.
Preconstruction Services Contract
House owners hiring a contractor in advance tend to sign this agreement, to cover that GC’s hours spent on cost estimating and planning. This contract may have a flat charge, ranging between $3,000 and $20,000, according to the GC’s market niche and the region. Or they might charge an hourly price for the project.
Fixed Price Contract
Before we talk about the specifics of such an agreement, it is important to know how GCs earn money. It is normal in the construction sector to increase both the labor and materials cost. Markups on labor and individual products may range between 10% and 45% on an average, depending on the economic conditions, the GC’s practices and the job aspects that are marked up.
Homeowners should know whether the agreement is cost-plus or fixed-price. In the latter type of agreement, the general contractor presents bottom-line prices, but they do not break down the markups for you to see. Pricing might just be as unspecific and generalized as one all-in rate for a project, like, for instance, $364,000 for a home remodel. Or the contractor could specify it according to category, with sums for carpentry, plumbing and demolition. They may not show the markup separately but will include it in these line items.
The agreement language may state the proportions of overall construction expenses the GC charges for insurance, overhead and profit. Bills to you the house owner will not sort out the raw expenses from the price increases.
Unlike the abovementioned agreement, this one specifies the markup and raw costs. Billings as per such an agreement should also give you an idea about both.