"open book" builder contract?

mymedi

Hi everyone,
If I could pick your brains on the following:
One of the builders we are considering for a fairly large refurbishment job has offered to go "open book" - whereby they account for all materials used, man hours worked, overheads, profit, etc, but we pay only for the work that's actually done. As opposed to a fixed price quote which on a job like ours would involve building into the quote an allowance for unforeseen problems (for which there is a huge potential - old period property...).
My understanding is that effectively in the open book arrangement we are taking the risk of a lot of extra work needing done, while in the fixed price scenario they are taking this risk, but we are paying them for it at least partially...
Maybe someone has used this arrangement before? As either the builder or the client? What would be the benefits/drawbacks in your view?
Thanks!

southcoastrgi

NO NO NO NO, are you crazy you might as well just sign all the chqs & let them fill out the amounts they want, if they are any good they should know the pitfalls with a period property & should be able to quote you accordingly if they can't then they aren't the right builders for the job.

baldelectrician

This doesn't normally work for small contracts, it does work for larger government contracts

This model is now adopted by the Scottish Government, where there is an open books policy and they agree a guaranteed margin to the contractor.
This makes the contractor have a viable contract, but prevents excessive profits.

This is used as an alternative to PPI /PFI and has resulted in the following (quoted from wickipedia)

During 2009-10, the Scottish Future Trust saved the Scottish taxpayer £111 million, which increased to £129 million in 2010–11.
In 2011-2012, SFT helped deliver £131 million of net benefits and savings to infrastructure investment which were independently validated by Grant Thornton LLP and academics from the London School of Economics and Political Science

So to sum up- unless you have people in the know running things steer clear

(apologies for getting a bit political)

vaio

"costs plus" places no obligation/enthusiasm on the contractor to work or buy materials efficiently, if anything, it has the opposite effect.

Run away unless you have the experience & project management skills to keep a very close eye on what is going on & make sure you aren't being robbed.

Actually, if you do have the above mentioned experience & skill set then also run away and project manage it yourself.

tony6403

Agree absolutely with posts 2 and 3 , if you don't want to get shafted on "a fairly large refurbishment job" I would recommend a written contract checked by a solicitor.

Furts

An indirect reply would be; what can you do to minimise the risk with the unknown works? Some opening up and investigating? A Chartered Building Surveyors report? Etc.

diywhynot

mymedi wrote: »

Hi everyone,
If I could pick your brains on the following:
One of the builders we are considering for a fairly large refurbishment job has offered to go "open book" - whereby they account for all materials used, man hours worked, overheads, profit, etc, but we pay only for the work that's actually done. As opposed to a fixed price quote which on a job like ours would involve building into the quote an allowance for unforeseen problems (for which there is a huge potential - old period property...).
My understanding is that effectively in the open book arrangement we are taking the risk of a lot of extra work needing done, while in the fixed price scenario they are taking this risk, but we are paying them for it at least partially...
Maybe someone has used this arrangement before? As either the builder or the client? What would be the benefits/drawbacks in your view?
Thanks!

If you feel you have the time/ability, project manage yourself. Get the trades in on full spec.fixed price quotes for each aspect of the works.

teneighty

I agree with everyone above.

Its all very well having an agreed labour rate but what if his trades take twice as long? Unless you have someone on site every day checking progress and signing off time sheets you will end up paying far more than you need too. Same for materials, no incentive for builder to get best discounts etc.

To cover the unforseen items allow a healthy contingency, between 10% and 20% depending on the extent of works but keep close control of it otherwise the contractor will just assume it is an extra bonus for them.

I assume there is no schedule of work, specification or drawings so you are rather at the mercy of the builders from the outset. Keep your fingers crossed that you employ an honest one.

vaio

teneighty wrote: »

I agree with everyone above.

Its all very well having an agreed labour rate but what if his trades take twice as long? Unless you have someone on site every day checking progress and signing off time sheets you will end up paying far more than you need too. Same for materials, no incentive for builder to get best discounts etc.

To cover the unforseen items allow a healthy contingency, between 10% and 20% depending on the extent of works but keep close control of it otherwise the contractor will just assume it is an extra bonus for them.

I assume there is no schedule of work, specification or drawings so you are rather at the mercy of the builders from the outset. Keep your fingers crossed that you employ an honest one.

I agree about the contingency but if the bit in bold is right then I predict tears before bedtime.

At the very least there should be full schedules of work, specifications & drawings and on an old building I'd also want a comprehensive schedule of rates to help with valuing the inevitable extras

warmhands.coldheart

I've done a major re-furb recently on a house I bought (nearly 100 years old) Ended up spending about 50% more than we'd expected..... however we did end up doing a lot more than we set out to do as we found a lot of extras were needed (ok not necessarily "needed" but the Boss ...i.e the OH.. wanted them done)

Sit down with a good builder and go through everything you want done with him. draw up a full schedule of works and as said before, if you now own the house, rip things up a bit to see what you're dealing with. List all possibilities of Extras that may accur and get it all priced up. get it all written down.

Even the small things...... a bit of cornicing repair here and there, change a few door frames, replace a few floor boards, bit of damp proofing, bit of rot or woodworm treatment.... it can all add up

ian103

vaio wrote: »

"costs plus" places no obligation/enthusiasm on the contractor to work or buy materials efficiently, if anything, it has the opposite effect.

Run away unless you have the experience & project management skills to keep a very close eye on what is going on & make sure you aren't being robbed.

Actually, if you do have the above mentioned experience & skill set then also run away and project manage it yourself.

couldn't agree more. your job will be paying almost list price for materials, it'll be the dumping ground for spare labour as you'll be paying. avoid unless you are on site managing and have the skills / knowledge to oversee the works, otherwise you need to employ suitable people which will drive the cost even higher.