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Construction Programs & Results Inc

We Like to See The Good Guys Win!

Your Markup Isn't Fair!

by Michael Stone

We got a call last week from a company whose customer had arbitrarily decided that the markup used on their job wasn't fair. This was a Time and Materials job according to the contractor. He didn't tell the customer what his markup was, but their complaint was that he shouldn't charge them a markup on materials purchased for their job. I'm sure they expect him to be responsible for all materials, both before and after installation, but for free.

It is easy to point fingers here and claim foul by the customer. The truth of the matter is that this wasn't being treated as a real Time and Materials job because there weren't regular meetings to review the job and pay the bills, and the labor rates and markup percentages were not specified and in writing. The contractor doesn't really understand how a Time and Materials job is supposed to work, and is not making his presentation in a manner that will eliminate this nonsense. He left too many things unsaid or unspecified.

The lack of good contract language let this customer believe they can arbitrarily change the terms of this agreement whenever and however they want. You know I don't like Time & Material jobs - they are okay for small service jobs, under $2,500, but jobs larger than that should be done on a lump sum, firm price quotation basis only. And don't tell me you need to use Time & Materials to protect against "surprises or unknowns" on a job. That is what a Demolition and Discovery contracts is for (available with the books, "Markup & Profit Revisited" and "Profitable Sales, A Contractor's Guide").

But if you are going to do a Time & Materials job, make sure your customer won't have any surprises. Let them know exactly how you work, what you will charge and put it in writing. And don't let the final price be a surprise, or you might be surprised by a refusal to pay.

 

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