"Cost Plus a Fixed Fee" Pricing Guide in the world of construction, the bidding process is the most common method for selecting a builder, although this method is less desirable for you. This is why.

In traditional bidding, a general contractor gives you a bid to build your home, which means they agree to build it for this price. Their bid includes their estimate of the subcontractor fees, supervision, profit, overhead. Because they are in business to make money, as we all are, and because they know that there are always a few unforeseen costs in building a custom home, contractors add a substantial "fudge factor" to their bid to cover any and all unplanned, additional costs. This "cushion" ensures that they will make a profit on your home whether the job runs smoothly or not.

At worst case, for the contractor, this extra money is used to fix mistakes or pay for delays; and this happens! At best, for them, they add the cushion to their profit and buy themselves a new pick-up on you! In any case, the cushion comes out of your pocket.

Builders end up making a lot on some houses and very little on others. The better they get at avoiding mistakes, the more they make, by keeping more of their cushion.

Cost Plus A Fixed Fee....A Better Way

We use a "cost plus a fixed fee" pricing structure for building our homes, which we believe is the best approach for everyone. What this means is the price you pay for your home is simply the amount each subcontractor charges (which is their labor, materials, profit and overhead) plus our standard supervision fee with a fixed amount for overhead and profit. Some builders take a percentage for their fee instead of a fixed fee. This gives them an incentive to drive the cost of the house up during construction to increase their fee. Since our fees are fixed from the start, we have no incentive to drive up costs.

We arrive at our fixed fee amounts by using a percentage formula. Since we track cost estimates on your home as we proceed through design, by the time your plans are complete we have a very good idea of the final costs of your home. Using these estimates, we calculate our fixed fee using the following formula:

For homes below 1800 SF we charge 19 % of the total estimated cost. For homes in the 1800 to 3000 SF size range the fee is 17 % and homes 3000 SF and above, 15 % of the estimated total cost. These numbers can vary slightly, depending on the exact size and complexity of your home but the vast majority of our homes fit in this formula.

We have several subcontractors we hire regularly because we trust them and like the quality of their work. When choosing subcontractors, we base our decisions on their workmanship, price, job site location and their current availability. With our method, a fixed fee gives the builder no incentive to run up costs because our fee is not a percentage of the total cost of the home. With a fixed fee, it's in the builder's best interest to complete the home efficiently and in a timely manner so they can move on to the next job. It's in being efficient that this builder makes money, by being able to build more homes in a year. Problems cause delays, so a cost-plus-a-fixed-fee builder attends to the projects to prevent this from happening. The owner pays just what the materials and labor really cost. The "cushion" is eliminated, saving the owner thousands of dollars. The builder and subcontractors are happy because they are getting paid a fair wage for their work and have eliminated the roller coaster salary.

Once you've studied the differences between these two approaches and the advantages to the cost-plus-a-fixed-fee method, it becomes clear that it is the most ethical and fair choice. The reactions have been very positive. We think it will only be a matter of time before consumers universally insist on this approach and the bidding method will become a thing of the past.

Open Book Policy:

We have an open book policy with every client. A separate checking account is set up in the name of your project and every dollar you pay goes into this account while every dollar spent is recorded there. This way everyone knows exactly where the money is and where it is going.

Cost Estimate Worksheet:

We have developed a way of estimating the cost of your custom home before it is designed (and even before you become a client) that is much more accurate than the common cost-per-square-foot method. We ask you several questions about ideas for your new home, then run the information through our specially designed spreadsheet to determine if the type of home you have in mind will fit your budget. If it doesn't, we can help you discuss options. We continue to use this worksheet throughout design to keep your project in budget from the beginning.

Turnkey Home Costs:

Since every home we build is totally custom, our prices range depending on the specific components and design. Most fall in the range of $65 to $95 per square foot. This is for the cost of the completed home alone, without land or site improvements.

One advantage of the pricing of our homes is its modular concept of the frame, and MEP (mechanical, electrical and plumbing) design. This insures a labor lean construction with quality control built into the design and production of the component packages. 

Very truly yours