Aquatic Technology Pool & Spa, "Creating Water as Art."™

Aquatic Technology Pool & Spa, "Creating Water as Art."™
Pools as an art form - the way it should be!

Tuesday, April 1, 2008

Fixed Price is not always the "Best Price"

A commissioned salesman works on just that... a commission. They have a "book price," the price schedule that is established by their firm which is the MINIMUM that they can sell items from their "menu."

If the salesman thinks that he can gouge you for some money above the book price of your project, that gets figured into the project as "overage." The salesman gets to split the overage with the company 50/50. Problem is, you don't get to see the "book price," just the bid.

Now, if he under bids the project & the property owner has signed a contract, then they dumb down the project as much as they can to increase their margins to come out profitable.

Working on a "cost + % gross mark-up" basis is fair to both the consumer & builder. The property owner is guaranteed a quality job and the builder is guaranteed a fair profit. The builder is not forced to "pad" the job for unforeseen items or for minor cost overruns.

The builder then has no excuse for not properly supervising the project, following proper installation techniques, or allowing the sub-contractors to perform quality work. This process also allows the builder to take proactive steps to correct issues, before the property owner raises them.

Out of the builders' gross profit, they will be expected to cover insurance (general liability) and their general & administrative overhead (office staff & expenses, advertising, vehicle expenses & insurance, management salaries, travel expenses, etc.). What is left over is their "net profit." Gross profit can run from 25-40% depending on the overhead associated with a project. Net profits in construction companies are usually around 10-15%.

Expect to pay on the higher end of the scales for "boutique" or "premium" builders. They usually take on fewer projects, deliver higher levels of supervision, quality & craftsmanship. They posses a higher level of construction skills and are more readily available for their clients. This equates to a smoother project with less hassles, and a finer finished product.

Another method, is to hire a "consultant" to manage local contractors, who in turn actually builds the project. In this scenario, the property owner needs to be prepared to actually pay more than if they contracted directly for the project. The property owner needs to be prepared for a lot of conflicts and to "back the play" of the consultant.

Constant conflicts arise, because the local contractor (and their subcontractors) do not possess the skills to build the project on their own. The consultant ends up having to "teach" the local contractor how to waterproof, set tile, place concrete - basically how to build a pool properly. This is where the conflicts begin...

The local contractor (who is working on a fixed price contract) refuses to perform aspects of the project as specified, and insists on "doing things the way we have always done." This is because they are not familiar with all of the various industry trade standards - and they bid the job, based upon their own evil ways. When they are "called on the carpet" the feud begins, change orders appear, owners get upset, and the project budget gets blown out of the water.

Isn't this exactly why the local pool builder was not a "direct hire" in the first place... because the owners did not have faith in their abilities, knowledge, and skills??

Paolo Benedetti - Aquatic Artist
"Creating water as art."™

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