Unlike most contractors that employ either cost-plus or fixed price agreements, we work primarily with a project management style of contract. A project management contract charges a fixed fee to manage the project, and all the other costs are billed to the customer at cost. We don't charge any mark-up on labour , materials or any direct jobsite related expenses. All of our profit and overhead is built into the project management fee, which usually represents about 10-20% of the cost of the project. This fee is static as long as the scope of the project remains within the defined parameters. You may choose to upgrade your countertop to marble, but this will not affect the cost of the project management fee which remains the same.
This arrangement is beneficial for a few reasons. For one thing, the contractor is not incentivized to expand the scope of the project. We make the same fixed fee regardless of whether or not you go over budget on the actual costs of the project.
Another benefit, is that you save 5% GST on the majority of the costs of the project. This is because in a cost-plus or fixed price contract, you get billed twice for GST, once when the contactor pays their subs/material suppliers, and again when they bill you directly. In a project management contract, because we are billing everything to you at cost, we are not required to charge you GST a second time. Given that the project costs can represent between 70-90% of the entire cost of the project, this is considerable savings! If your project costs come in at 100k, this saves you $5,000 in GST.
A project management contract can also be preferable to a fixed price contract when it comes to budgeting for, and conducting your renovation in a timely manner. In order to provide a fixed price contract, the contractor would need the entire scope of work so that they can price out every little detail. This is not often practical because project details are constantly changing. Also, if you're looking at buying a house, it would not be possible to create a complete scope of work while only having limited access to the house. This is where a project management agreement is beneficial. It allows the customer to get some clarify on budget and pricing, even if the entire scope is not ironed out yet.