Time and Material or Fixed Bid?
If you are a homeowner looking to hire a contractor to do projects around your house, knowing which option is the best, is not always that clear.
Let’s break it down
Time and material is when you hire a contractor and agree to an hourly or daily rate for labor (this can be just 1 person or a whole crew) plus the cost for all materials used for the job, plus any markup the contractor requires. (More established contractors will have a higher markup as they have a better understanding of overhead and what it costs to run a business while some contractors are happy to get their labor rate and won’t mark up materials at all)
Fixed bid is when the scope of work can be clearly defined and you and the contractor agree on a flat fee to complete the job. Sometimes, this can be a hybrid structure, where the labor is fixed, but the materials will be charged at their actual cost plus any agreed markup.
Which one is better?
Boil it down to 2 words…
Can the scope of work be clearly measured and quantified? If the answer is yes, then it probably fits in the fixed bid category, if not then T&M may be the better choice.
Here is a list of some jobs where a fixed bid is industry standard.
Note- the following list only applies to standard materials and standard installations. If you start getting into custom details, then it starts to get gray.
Fixed Bid or Flat Fee
- New construction- most of these types of jobs are a blank slate and have few surprises and therefore can be bid with a fixed price. The plans and specifications are clearly defined and the contractor understands what is expected. The exception is custom building. Any type of construction that deviates from cookie cutter and mass production construction will not always work with this format. For example; when Jensen Hus builds contemporary and modern homes, we are using materials and styles that many sub-contractors are not familiar with and they are not confident to give a bid, because they are unsure of how difficult or how long the job will actually take.
- Flooring- installation and finishing. Hardwood, laminate, tile, carpet. square foot
- Roofing- square foot.
- Drywall and plaster- square foot
- Decks- typically these are small enough where a contractor can figure their costs and give you a fixed number.
- Countertops- fixed price
- Insulation- type of material and thickness and per square foot
- Siding- square foot
- Gutters- lineal foot
- Tile- type of materials and per square foot
- Mechanicals- (Plumbing, electrical, HVAC) these cowboys have a pretty good idea about what $h## costs so they fixed pricing is the norm.
- Finish carpentry- small jobs- less than a week – pricing varies
Time and material
- Paint- I know this can go either way, but I have found that it is better to find a contractor that you can trust and who works for a fair rate versus a fixed bid and here is why. Paint quality is subjective. There is no “industry standard” regarding quality and detail, especially with remodeling. Getting a job “perfect” could take months versus getting it to “good” might take a few weeks. If your painter has given you a fixed bid, 9 out of 10 times they will not take the extra time to fix things that should be fixed because they don’t want to lose money.
- Finish carpentry- anything over a week, I like to hire by the hour. Good finish carpenters are persnickety artists and they need the space to perform their craft. If they see something that needs to be fixed or have to take something apart to make it fit just right or they just want to put a little spice in, they need the peace of mind knowing they will be paid for their effort.
- Repairs- It is nearly impossible to quantify the time it will take to fix something, regardless of what it is. Negotiate a fair rate and let them have at it.
- All things custom
Regardless of the type of project you have or what cost structure you settle on with your contractor, the key to success is patience. Be willing to wait to find the best fit for your project. If you need something done yesterday, then you will either overpay or be dissatisfied with the results. There are plenty of quality contractors out there, you just have to put in the effort to find them.