A Discussion About Our Contracts

Design Agreement / Services Agreement

After assessing our business overhead and having in-depth discussions with other remodeling professionals, we determined that one of our largest overhead items involved free estimates. We concluded that design work and product selections had to be relatively complete in order to accurately prepare the project estimates.

It became apparent that these services were free only to the prospective clients. They were actually costing many man hours, sometimes three to four weeks for a complex custom project, which added up to tens of thousands of dollars annually. These costs were included as company overhead and became part of the mark-up on all the projects we were awarded. In other words, our clients who hired us were paying for the people who chose not to hire us. We felt that this practice was unfair to our clients and have been charging for our professional services ever since.

The Design Agreement/Services Agreement clearly outlines what services will be provided for a fee to the owner. The design and estimating services provided by our company offer significant value to you, the owner.
  1. Based on a precise measurement of your house, our design team will create a conceptual plan, with consideration for your sketches and library of ideas.
  2. We will coordinate product selections, organize project specifications and prepare accurate budget parameters.
  3. We will work out solutions to design problems like traffic congestion or attaching a new addition to an existing floor plan.
  4. We know the limitations of the project based on local deed restrictions, zoning laws, FEMA regulations and building codes.
  5. We are experienced in residential work and are able to recognize areas that can help save money on your project.
This practice, called value engineering, looks at each aspect or component of the project and strives to find the method or material with the highest value and lowest reasonable cost. All designs, specifications and budgets developed during this phase are the property of the Owners.

The Construction Contract

Once the plans, specifications and budget are agreed upon, it is time to execute the CONSTRUCTION CONTRACT. The purpose of the contract is to carefully identify the scope of work and the terms and conditions of construction. You also need to anticipate the variety of problems that can arise during the course of construction and to carefully address their resolution. Although every remodeling project is different, our company has a standard contract agreement that will be modified to clearly define the requirements of your project. It represents the rules by which we agree to conduct business. This agreement has several purposes.
  1. It will provide a written definition of your project, including all details.
  2. Beyond the legal ramifications, a contract formally expresses terms mutually agreed upon concerning scope of work, responsibilities, price and materials, as well as other important items.
  3. It specifies how payments or draws will be scheduled, invoiced and paid.
  4. It addresses how change orders are to be handled.
  5. It assigns responsibility for providing particular items and specifying which items are not included in the scope of work.
There are two types of Construction Contracts we utilize, the LUMP SUM and the COST PLUS format.
  • Lump Sum contracts specify exactly the scope of work on a project and provides for a stipulated sum for the work.

    The owner agrees to pay the price upon completion of the work according to a negotiated payment schedule. In developing a lump sum bid, the contractor will estimate the costs of labor and materials and add to it a standard amount for overhead and the desired amount of profit. If the actual costs of labor and materials are higher than the contractor's estimate, the profit will be reduced. If the actual costs are lower, the contractor gets more profit. Either way, the cost to the owner is the same. All other requested or incidental work is addressed as change orders, with full contractor markup, payable up front.

  • Cost Plus contracts provide for a project where only the actual costs to the contractor are charged to the owner plus the contractors percentage fee.

    The contractor's profit is set at a fixed percentage amount. If actual costs are lower than the estimate, the owner keeps the savings. If actual costs are higher than the estimate, the owner must pay the additional amount. The great advantage of a cost plus contract is that, generally speaking, the project will result in the building that was envisioned, even if costs run high. This type of contract benefits the owner when all of the specifications and scope of work have not yet been completely defined, or the owner would like to have the flexibility of altering the work or adding to the work without project delays that result from identifying all of the change order costs beforehand, as in a Lump Sum contract .