Schedule of Values
You pay what we pay plus a margin that covers your project costs (e.g. research, logistics, management, etc.) and a contribution to our company profit. Schedule of Values is also known as progress billing, “open book” or cost-plus. Bottom line, unless someone works for free or invents a new and better way, project pricing cannot be any more transparent. You’re billed, review all invoices and pay as work progresses. We shepherd so you stay within budget.
So your first question, “What’s the margin and how is it determined?” The margin will be stated in writing within both a detailed estimate and the contract, you won’t be caught off guard. We don’t start (or proceed with change orders) until you approve, in writing.
How it’s derived “depends” on your design and build selections unique to your project and any changes you make; there’s no cookie cutter, one-size-fits all. Because it’s based on invoiced costs per job, we cannot simply apply a uniform margin to every project and be able to meet our overhead and earn profit. Therefore the applicable and necessary margin for YOUR project is derived from an algorithm we developed that would induce slumber if dissected. Frankly, the margin is what it is, either you agree or we cannot accept your project.
Look at it another way, business-as-usual contractors mark up everything including labor, therefore some projects unnecessarily subsidize others to ensure the builder is profitable. We wouldn’t like this if we were a homeowner, we’d agree to pay a fair rate for top quality but we wouldn’t be so thrilled about funding the company’s annual deep sea fishing trip. So we decided to be as open and transparent as possible (without teaching a class on construction finance management) by showing the costs and our cut for performance.
Although our required margin may be different for your design-build than what we’re charging another seemingly similar project (even next door), each owner is paying based upon their unique job scope, the choices and changes made for everything, and for what we can profitably do the work. Beforehand you will agree in writing to the margin we propose, we’ll guide your budget and you will see and the architect will confirm all invoices to be paid at predetermined stages (draws) per the contract.
Lastly, if we seem too expensive for your palate, that’s fine; but, ask other builders to price similarly and share with you their invoices and margins. Unfortunately you won’t be able to compare quality of the finished product but regardless, see what they say when you propose this. We’re willing to bet it won’t be, “Super!”
Questions? Please email.