Budd writes: I am building an addition to my home. My contractor is charging me a 22% markup, which is fine. However, in his contract, he states that if I find someone outside his business to do part of the work (like put in flooring, for example), he will still charge me 22% of what the flooring guy is charging me, since he says he is still in control of the entire job.
Is this normal or out of line?
Steve Bliss of BuildingAdvisor.com responds: There’s no such thing as a standard construction contract, although some terms and conditions are more customary than others. Also, I don’t know what is typical in your area. Ideally these sorts of things are discussed and negotiated, and put in writing, before the job begins. If you agreed to these terms in writing, then you don’t have a strong negotiating position.
If you did not agree to these terms, but the contractor had included the flooring in his estimate and contract, and during the course of the job, you decide you wanted to use someone else to do the flooring — or do it yourself — you’ll need to negotiate terms with your contractor. In that case, your contractor has a reasonable claim that he has already spent time estimating, selecting, and perhaps ordering these materials. He may also claim that having this work done by another may throw off his schedule or cause problems with other parts of the job for which he is responsible. For example, if you hire someone else do the roofing (or do it yourself) and the roofing leaks causing problems to the contractor’s work, who is responsible? For these reasons, a contractor has some justification for charging some overhead for work done by others, but not “profit” in my opinion. Also he is likely to exclude this work and any damage it causes from his warranty.
A good way to carve out certain portions of the work to do yourself as an owner-builder, or with a different contractor, is to have the other work done before or after the main contractor completes his portion of the job. Then simply exclude portions of the work from the scope of work in the main contract. This is often done with things like interior painting, and other finish work. The contract simply states something like “All interior painting excluded from this contract.”
I would avoid a contractor who would not allow this type of flexibility. But it is common for general contractors to discourage or not permit other tradesman doing portions of the work that might affect their schedule or overall job quality.