What is cheaper...Pay by the hour or by the job?

[gamecock43]

I'm finishing up some renovations in my home (for now) and have felt 'misled?' by the contractors price quotes.

Contractor gives us a price to do a job "you buy the flooring we will install it for $2.50 sq ft"...but failed to tell us they will need to rip out the toe molding and we need to buy new molding for $25 plus $100 to install it until after the floors are in and our walls are ripped up.

Contractor tells us we can have our plaster re-spackled for "a couple hundred dollars" and after 3 days of 1 guy working hard presents us with a bill for $510."

We tell contractor about several projects we want to do and get informal estimates on each project. We leave it at...please start with replacing the siding on the house- maybe there are other things we want to do too." Contractor comes back about a week later with a written estimate of $2800 "for everything you guys wanted to have done"...we can no longer even remember what projects we had wanted to have done. There was no listing of individual projects on the estimate.

We tell him to first replace rotting siding (about 25% of the house siding). Then he tells us he will charge us by the hour because "charging us $70 hr is cheaper than charging us by the job." So we say ok. They then take 3 days to replace siding and charge us $2100...leaving it all unpainted...we are now paying another one of his men $15 an hour to prime and paint the siding. This guy has spent 2 full days priming & painting and still wants to come back for "a few more hours to add a 4th coat of paint."

Is it really cheaper for me to pay by the hour or pay by the job? Is there anyway to find out all these 'hidden costs' with these jobs...like finding out after the job is complete you will be paying to replace molding...or paying to get the work painted?

One more thing...the men do EXCELLENT work. There's no immigrant laborers here on the site just doing whatever to get the job done (no offense to immigrants work ethics- I think they actually do great jobs)- but the people on this crew are skilled and educated about their field. AND- the contractor is getting to know us more and inviting us out to hang with him and his family...so a confrontation would be awkward. I just want to become better informed so I can negotiate as slyly as he seems to withdraw cash from our wallets.

[boosami]

Get a detailed, formal estimate next time! Otherwise you will always be charged more than you expect.

[PrincessPerky]

Well you agreed to let him work 'for a couple hundred' and 510 isn't far off, you might want to nail down real numbers for real work before you sign him up.

Try telling him you want to know if you can afford it, and ask for firm numbers, a couple hundred is way to open, technically anything shy of 1K is a couple hundred.

As for by the hour, ask if you can have 'either or' ask for by job price, then ask for estimated hours to work, and ask for a rebate if he takes longer than estimated by a significant amount.

[simpleyme]

I find that contractors do a bad job at a big price so me and DH just do it all ourselves, saves us money and our sanity

[gamecock43]

"As for by the hour, ask if you can have 'either or' ask for by job price, then ask for estimated hours to work, and ask for a rebate if he takes longer than estimated by a significant amount."

ooohhhh! good idea! I think that will do the trick next time! And I will get firm numbers in writing next time to.

[tripods68]

I got tricked once. I had what I thought a broken pipes underneath our kitchen sink. I called one off the yellow page. They came over and just screwed it tight, no broken pipes. They even said had I inspected little be closer i could have done it myself for free. It cost me $100 (per job). That was an expensive lesson I learned.

[DayByDay]

Next time ask for a detailed, written quote with complete line by line descriptions and prices. My husband (a contractor) makes sure to list every minute detail so there are no misunderstandings. Your contractor obviously should have mentioned the molding, painting, etc. in his quote.

Bid prices include an extra $ cushion to cover unexpected costs and labor that the contractor may run into and helps ensure that the contractor doesn't end up losing money or making very little in the deal. If the job goes smoothly, he makes a bigger profit than if he would have charged by T&M (time and material). The advantage to the customer is knowing exactly what the project will cost.

Charging by T&M can often be cheaper for a customer. The risk of the contractor losing money or making very little money is eliminated for the contractor, and so the customer doesn't have to pay a $ cushion amount. The disadvantage for the customer is not knowing what the final price will be. It requires trust and, if you don't know your contractor well enough to trust him, requesting a detailed bid price is the way to go.

[disneysteve]

I don't think it matters if you are paying by the hour or by the job if the contractor is honest and the initial estimate is accurate. The key is to get a detailed written estimate of what he will be doing and what it will cost. "A couple hundred" is not an estimate. "A few hours" is not an estimate. "It depends what we find" is not an estimate. You want it detailed and in writing.

[skydivingchic]

I work on a construction management team on municipal capital improvement type projects, so what I do is not directly applicable to home renovations, but a lot of the principals are the same. The most important thing you can do is to have work tasks spelled out clearly. Next time you get an estimate for a job it needs to say "Replace siding from point A to point B and paint with 1 coat of primer and 2 coats of paint to match existing. Customer to provide siding material, primer and paint." Or something similar. The work tasks need to be clearly defined as to their limits; anything the Customer needs to provide needs to be specifically stated; quality and/or brands of products to be used need to be stated if the Contractor will be providing them (ex. 2000 psi concrete, Sherwin Williams paint, etc); if there is work such as painting which requires multiple passes, the number of passes needs to be listed; if there are deadlines that the Customer needs to meet (i.e. Customer must provide X square feet of siding by a certain date) or the Customer is requesting a particular completion date, that needs to be stated along with penalities for not meeting those deadlines. Before the Contractor puts the estimate together, you need to do your homework and at least have a decent understanding of what is typically involved in the type of project you are proposing. When you are talking to the Contactor to get the estimate, you can then ask intelligent questions about work that may need to be done in conjunction with the project and get those things included in the estimate (for example, if the Contractor is hanging new drywall, do you also want him to texture the walls? paint them?). It protects both parties to have things spelled out clearly in the estimate as to what work is included and what is not. It also allows you to get multiple estimates and be reasonably sure that you are comparing apples to apples. I can't stress this enough. The biggest arguments and problems ensue when work is not clearly defined.

The other thing I would recommend is that you budget 10% for changes above and beyond the clearly defined estimate, more if the estimate is not clearly defined. Changes happen and there is nothing anyone can do about it. There will always be some unforseen or unknowable circumstance which needs to be addressed. For instance, maybe they tear off the siding and discover that there is other damage behind it which needs repaired. Municipalities do this all the time by setting aside a contingency fund which is some percentage of the bid.

If I was a Contractor there is no way I'd agree to the proposed either/or scheme. A decent, experienced Contractor should be able to give you an estimate to complete the job if the parameters are clearly defined and he should stand by his estimates. The either/or scheme pushes all the risk onto the Contractor without compensating him accordingly.

There are advantages and disadvantages of both methods of bidding a job. For a lump sum, the Contractor is taking on the risk that he underestimated hours and/or materials. The customer has the advantage of having a predefined lump sum, but takes the risk that the Contractor built unreasonable amounts of "padding" into his bid. Because the Contractor is taking most of the risk in this case, his overhead and profit (which he will have built into the estimate one way or another) would be higher. Doing things on a Time and Material basis significantly reduces the risk to the Contractor since he will get paid for every hour he works and his overhead and profit should therefore be less. The customer is taking the risk that things will take significantly longer than expected. So when the Contractor said that charging by the hour is cheaper than charging by the job, he may have meant that the labor rate he charges for lump sum work is more than the labor rate he charges for hourly work in order to mitigate the extra risks he is taking with lump sum work. Personally, I would generally prefer to get a clearly defined lump sum because I don't like the unknowns of time and material work. Again, the Contractor may agree to T&M work and say "I expect it to take 40 hours," but you as the customer take the risk that his estimate is low in this case since you agreed to pay by the hour.

By the way, I live in San Diego and work on a jobsite which pays "prevailing wage" rates. That means that the workers get paid union wages rates plus benefits (so pretty decent wages) whether or not they are union workers. Including all union benefits, payroll taxes and insurance, AND 20% overhead and profit, most wage rates are at or below $70/hr, even for the highest paid workers on the job. So for $70/hr, you should expect some top-notch work.

[Ima saver]

my husband has been a licensed contractor. When we take on a remodel job, I keep track of all the bills and pay them. I then turn them over to the customer so that they can see what things cost. We try to keep costs low, but do not use inferior materials. My husband gets paid for his work, directly by the hour. (which by the way is less than half hourly wage that you are paying.)
I meant to say (first sentence, my husband has been a licensed contractor for 25 years) He is considered by all the realtors to be the finest builder in the area. He does all the work himself because it has to be perfect. ( I am not bragging; it is very hard to live with a perfectionist)
So, I would suggest that you pay by the hour and ask for bills on all the materials.

[DayByDay]

"It depends what we find" is not an estimate. You want it detailed and in writing.

Sometimes additional problems are revealed that the contractor could not have noticed before the demolition stage. If it wasn't included in the detailed, original estimate, then it's not covered in the original price. The contractor should make the customer aware of this possibility.

[segmond]

by the job is always cheaper, but you have to understand exactly what it entails. get a detailed quote like others have informed you.

if you go by the hour, they can take their sweet time.

[disneysteve]

Sometimes additional problems are revealed that the contractor could not have noticed before the demolition stage. If it wasn't included in the detailed, original estimate, then it's not covered in the original price. The contractor should make the customer aware of this possibility.

Yes. I didn't mean that the original estimate can't be modified to add unforeseen work. I meant that the whole job shouldn't start with saying, "let's see what we find." There should be a written estimate with the understanding that if something turns up, there might be additional charges.

[zetta]

Get to know your neighbors and find out from them what work they've had done and how happy they were with their contractor. Word of mouth is the best way to find a good one!

Also, for big jobs (say over $2k), we like to get written estimates from 3 separate contractors. It gives you an idea of what the price range really is for the job.

[srblanco7]

A few ideas -

Invest some time and effort up-front to develop a written scope of work for the Contractor to perform. Obtain multiple bid and tell the prospective Contractors that you are obtaining multiple bids for the project. Before selecting a Contractor, have them back for a second walkthrough and ask them to walk you through how they will execute the project (sometimes this can be eye opening). Ask them what unforseen problems they've encountered on similar projects - this will give you an idea of what level of "contingency" monies may be necessary and the level of experience the Contractor has with the type of work you want performed.

No Contractor should start work on a project until you have an agreed upon scope of work and price. You should also have an agreed upon payment schedule for the work (tie it to certain completion milestones so that the Contractor doesn't get too much of your cash up front).

Other ideas - Make sure you have a copy of the Contractor's insurance certificate and if the project is big enough, have them sign a Contract.

The approach to pricing (hourly vs. project pricing) depends on the type of project. Generally, it's about who's accepting the risk - if you ask the Contractor for a lump sum price, he's accepting risk (for inclement weather as an example) and there will be a price premium associated with the acceptance of that risk.