| Many home improvement contractors prefer to | | | | example, if it's a roofing job, exclude from the |
| work under time and material (cost-plus) | | | | basic agreement any removal and replacement of |
| contracts. And for good reason. Surprises are | | | | roof deck or flashing. Then quote a separate unit |
| common when remodeling or repairing an existing | | | | price per square foot or linear foot if deck or |
| dwelling. With a cost-plus contract, a contractor | | | | flashing has to be removed and replaced. |
| doesn't have to absorb the loss if there's a | | | | Contracts like that work fine under the law in all |
| surprise once work gets started. | | | | six of these states. But this isn't a true cost-plus |
| But there's a problem. Six states require that | | | | (time and materials) contract. It's a fixed price |
| home improvement contracts show a total cost | | | | contract with some extra flexibility. |
| for the work in dollars and cents: | | | | The second choice is to work for wages. Let the |
| California -- Business and Professions Code - | | | | owner buy materials. Simply invoice for your time. |
| 7159(d)(5). | | | | Of course, this is not construction contracting. |
| Illinois -- Compiled Statutes Title 815, - 513/15 | | | | And it leaves the owner with liability for payroll |
| Massachusetts -- General Laws 142A, - 2(a)(5) | | | | taxes and insurance, a burden most owners aren't |
| Nevada (residential pools only) -- Administrative | | | | willing to carry. |
| Code - 624.6958-2(f) | | | | There's a third choice that complies with both the |
| Pennsylvania -- Statutes Title 73, - 517.7(a)(8) | | | | letter and the spirit of the law in all six states. And |
| Tennessee -- Code Annotated - 62-6-508(a)(5) | | | | it's a true time and materials contract. |
| Call the Attorney General's office in any of these | | | | A Better Choice |
| states and you'll get the same answer: | | | | Base your contract on the cost of time and |
| Contractors have to quote a total cost for home | | | | materials - but also show a guaranteed maximum |
| improvement work. Time and material contracts | | | | price (GMP). The GMP qualifies as a total cost in |
| aren't legal and can't be enforced. According to | | | | dollars and cents for the purpose of state law. |
| the Attorney General's office, a contractor who | | | | Provide in the contract that cost savings (any |
| isn't sure how much work is required should bid | | | | cost less than the GMP) will be split between the |
| high enough to cover every contingency. | | | | contractor and the property owner. You decide |
| That makes little sense to contractors - and | | | | how cost savings will be split, such as 50-50 or |
| won't win many accolades among home owners. | | | | 80-20. Collect for the cost of time and materials |
| I get quite a few calls about this and usually | | | | at each progress payment. When the job is done, |
| describe three ways to around the problem. The | | | | subtract the total of all payments from the GMP. |
| first is to define the scope of work very | | | | That's the cost savings - to be split between the |
| precisely. Then list unit prices for extra work. For | | | | contractor and the owner. |