Small Project Design

This message has been cross posted to the following Discussion Forums: Small Project Practitioners and Residential Knowledge Community .
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We're building our own home and expect wholesale pricing from the contractor, because the end product showcases both our work. Our contractor proposes marking-up his supplier's already marked-up prices, 'to receive deliveries, chase down missing parts etc.' Fair enough, or is it? Appreciate some feedback and thanks.


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Heather Johnston AIA
Principal
Heather Johnston Architect
La Jolla CA
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20 years ago we built our house, and took on most of the GC responsibilities (in order to meet budget); the general / bidder's crew did some of the work, we hired many subcontractors and suppliers that he had good quotes from, etc.  Yes, we saved his markup, but we earned every dime.  If you have the time to source odds and ends, the ability to be there to receive deliveries and secure them against theft, exchange defective items, and if you can think your way through the whole project to cover the costs and installation of each piece, go for it.  All of the handling and arranging and ordering does take time and costs someone. 

And, there are cash flow issues which come up -- some suppliers require payment when you place the order, and the lender will pay you only after the item is installed.  (Cabinet shops may require payment for the cabinets when you order, and then bill you for the installation when complete, but the bank wants to see/will pay for only those items that are physically attached, are thus part of the real estate, and thereby secured by your loan.)  If the contractor is responsible, (and if your contract with them says so), you can point out to them that the lender hasn't paid you yet, but you will pay as soon as you can.  If you already have your construction lender selected, attach their payment schedule to the construction contract - this will give you some relief.

Strive to be fair with the contractor.  Remember that how this project goes for them is also a marketing experience for you -- they may recommend you to others, not only because of the quality of your design, but because you treated them decently.  Good relations during construction will make any call-back work easier.

And, be aware that there are several levels of pricing.  Retail - you shouldn't have to pay this very often; "Contractor", "wholesale", "trade", etc.  You may need to establish a contractor's account at one or more local building supply outlets; ideally the sales tax will be taken care of there .... The whopping 20% "architect's" discount you might be offered, off of retail, might pale in comparison to the 40% or so that the electrician gets for the same light fixture, just because the electrician is a repeat customer and you are not.  We got a great price on most of our lights by ordering directly from the factory, but I spent an afternoon at the freight company unloading the monster shipping box, since their trucks were too big for our driveway.  Yes, we came out ahead, but it would have been nice to have been able to have logged that time on my timecard.
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Joel Niemi AIA
Snohomish WA

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Ten years ago, in conjunction with a new wife, we rebuilt my house. I hired an excellent carpenter who did most of the work and was paid T&M although I purchased most of the material. The plumber and electrician were hired by me as individuals, not as a company. Again, I bought most of the material except for the wire and pipe. There was a slight problem with coordination which caused slight delays but nothing serious. Since we were designing and redesigning as the construction progressed, a fixed price was not possible. If you are willing to spend the time on the job, this is a good method of making sure the results are the way you want them to be. Of course, the costs will always be more than was expected.

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Mitchel Abramowitz AIA, FARA
Mitchel Abramowitz, AIA
Roslyn PA
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Original Message:
Sent: 11-21-2011 02:23
From: Joel Niemi
Subject: Architect's Own Home/Contractor Pricing


20 years ago we built our house, and took on most of the GC responsibilities (in order to meet budget); the general / bidder's crew did some of the work, we hired many subcontractors and suppliers that he had good quotes from, etc.  Yes, we saved his markup, but we earned every dime.  If you have the time to source odds and ends, the ability to be there to receive deliveries and secure them against theft, exchange defective items, and if you can think your way through the whole project to cover the costs and installation of each piece, go for it.  All of the handling and arranging and ordering does take time and costs someone. 

And, there are cash flow issues which come up -- some suppliers require payment when you place the order, and the lender will pay you only after the item is installed.  (Cabinet shops may require payment for the cabinets when you order, and then bill you for the installation when complete, but the bank wants to see/will pay for only those items that are physically attached, are thus part of the real estate, and thereby secured by your loan.)  If the contractor is responsible, (and if your contract with them says so), you can point out to them that the lender hasn't paid you yet, but you will pay as soon as you can.  If you already have your construction lender selected, attach their payment schedule to the construction contract - this will give you some relief.

Strive to be fair with the contractor.  Remember that how this project goes for them is also a marketing experience for you -- they may recommend you to others, not only because of the quality of your design, but because you treated them decently.  Good relations during construction will make any call-back work easier.

And, be aware that there are several levels of pricing.  Retail - you shouldn't have to pay this very often; "Contractor", "wholesale", "trade", etc.  You may need to establish a contractor's account at one or more local building supply outlets; ideally the sales tax will be taken care of there .... The whopping 20% "architect's" discount you might be offered, off of retail, might pale in comparison to the 40% or so that the electrician gets for the same light fixture, just because the electrician is a repeat customer and you are not.  We got a great price on most of our lights by ordering directly from the factory, but I spent an afternoon at the freight company unloading the monster shipping box, since their trucks were too big for our driveway.  Yes, we came out ahead, but it would have been nice to have been able to have logged that time on my timecard.
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Joel Niemi AIA
Snohomish WA

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Heather,
I think you should not expect the contractor to give you wholesale prices.  Of course you will showcase his work--if he is good all his clients do that, and they don't get wholesale prices.  He will also be showcasing your work for you.  Over the years I have had a number of developers hope that I would design a house for them for nothing, or drastically reduced fees because they would "showcase it, and make me famous!"  I politely declined.  Pay the guy well and get him on your side because you want a relationship with him in the future.  And have fun building your own house!

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Robert Knight AIA
Knight Associates Inc.
Blue Hill ME
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Original Message:
Sent: 11-22-2011 12:13
From: Mitchel Abramowitz
Subject: Architect's Own Home/Contractor Pricing

Ten years ago, in conjunction with a new wife, we rebuilt my house. I hired an excellent carpenter who did most of the work and was paid T&M although I purchased most of the material. The plumber and electrician were hired by me as individuals, not as a company. Again, I bought most of the material except for the wire and pipe. There was a slight problem with coordination which caused slight delays but nothing serious. Since we were designing and redesigning as the construction progressed, a fixed price was not possible. If you are willing to spend the time on the job, this is a good method of making sure the results are the way you want them to be. Of course, the costs will always be more than was expected.

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Mitchel Abramowitz AIA, FARA
Mitchel Abramowitz, AIA
Roslyn PA
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Depends on who is bringing in the clients. If YOU are bringing him houses to build, maybe he gives you a break. If HE is bringing the clients to you, maybe not so much. If it is an open book arrangement where you can see all of the costs, then yes, I think he is entitled to some extras for miscellaneous running around. Any building project is hopefully a benefit for both parties. I don't think you have a unique situation here.


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Kevin Sullivan AIA
Architect
Boulmetis Architects
Cincinnati OH
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Heather,

It sounds like your contractor is not buying into the arrangement you sugguest in the first line of your post
" expect wholesale pricing from the contractor, because the end product showcases both our work"

A contractor's job involves  putting the pieces together, tracking down stuff and coordinating the work.  Somewhere this cost to the contractor needs to be made up. They don't work for free. 

Have you suguested a cost plus a fee type contract  or some arragement to  not mark up the "stuff"  and still get the coordination needed.

It all in the terms of the Contract that you both will agree upon.

Good luck,

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David DeFilippo AIA
Tsoi/Kobus Associates
Cambridge MA

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I tend to think that expecting contractors to provide discounts for architect's personal projects tends to cross some significant ethical boundaries - or creates the strong impression of doing so - and I am curious about the AIA's official position on the matter.  In our office it has been our unofficial policy not to ask for or accept such favors.  Favors are made with the expectation that they will be repaid.  A key element of an architect's credibility and value is in providing clients unbiased advice and guidance.  I never, ever want to find myself in a position where a client may interpret my position as biased in favor of a contractor who has granted me privileged personal concessions.  Rationalizing such discounts by the promise of the end product serving as a special showcase comes nowhere close to justifying the behavior. 

I hope that I am not in the minority at being more than a bit surprised that you to have the audacity and poor judgement to pose your question about the fairness of the discounts that you feel entitled to in such a public forum.

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Gregory Howe AIA
Architect
Searl Lamaster Howe Architects
Chicago IL
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Mr. Howe's reply is the only one which makes any sense at all to me. When we built our office as well as our house we were offered a variety of discounts and even free materials. Taking free materials amounts to a kick-back and in this state would likely be in violation of the Licensing Act. Likewise getting material "tax-free" is known as tax evasion in these parts.
We have structured agreements in different ways with different GCs for our own work, having to do both with their effort (time) and with their risk. One very pleasant arrangement is to stipulate a weekly or monthly fee for the GC, then have a T+M stipulation. 
As we wish for respect from the trades and craftspeople with whom we work, we also are obliged to take a respectful stance toward them, their time, their knowledge, their skill. Cheap is no bargain, actually.

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Jonathan Siegel AIA
Siegel Design Architects, LLC
Albuquerque NM
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Original Message:
Sent: 11-21-2011 10:52
From: Gregory Howe
Subject: Architect's Own Home/Contractor Pricing

I tend to think that expecting contractors to provide discounts for architect's personal projects tends to cross some significant ethical boundaries - or creates the strong impression of doing so - and I am curious about the AIA's official position on the matter.  In our office it has been our unofficial policy not to ask for or accept such favors.  Favors are made with the expectation that they will be repaid.  A key element of an architect's credibility and value is in providing clients unbiased advice and guidance.  I never, ever want to find myself in a position where a client may interpret my position as biased in favor of a contractor who has granted me privileged personal concessions.  Rationalizing such discounts by the promise of the end product serving as a special showcase comes nowhere close to justifying the behavior. 

I hope that I am not in the minority at being more than a bit surprised that you to have the audacity and poor judgement to pose your question about the fairness of the discounts that you feel entitled to in such a public forum.

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Gregory Howe AIA
Architect
Searl Lamaster Howe Architects
Chicago IL
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(Cross-posted on Residential Knowledge Community)

There is nothing unethical about engaging in a joint venture with a contractor, either continuously or project-by-project. Joint ventures can be extremely helpful in keeping both the architecture firm and the contracting firm going under the current economic conditions. They can help architects reach clients that would be unreachable otherwise.

Engaging in a joint venture while representing oneself as an unbiased, objective source of information about a partner contractor is unethical. But the OP didn't indicate that's what she's doing. Some architects are willing to pass up the few clients who need that unbiased relationship with contractors to reach the many clients who can benefit from a joint venture relationship.

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Sean Catherall, AIA
Herriman UT
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Original Message:
Sent: 11-22-2011 14:00
From: Jonathan Siegel
Subject: Architect's Own Home/Contractor Pricing

Mr. Howe's reply is the only one which makes any sense at all to me. When we built our office as well as our house we were offered a variety of discounts and even free materials. Taking free materials amounts to a kick-back and in this state would likely be in violation of the Licensing Act. Likewise getting material "tax-free" is known as tax evasion in these parts.
We have structured agreements in different ways with different GCs for our own work, having to do both with their effort (time) and with their risk. One very pleasant arrangement is to stipulate a weekly or monthly fee for the GC, then have a T+M stipulation. 
As we wish for respect from the trades and craftspeople with whom we work, we also are obliged to take a respectful stance toward them, their time, their knowledge, their skill. Cheap is no bargain, actually.

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Jonathan Siegel AIA
Siegel Design Architects, LLC
Albuquerque NM
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