Hello, we got our line item breakdown back from our lender and are
getting ready to close on our construction loan. There is a one line
for the "builders contingency". Is this the amount the G.C. has
budgeted in case of cost overruns ? I'm asking just to be informed,
not to question or expect any kind of credit afterwards. All I'm
concerned about is the final price. I'm trying to antisipate any
monies I can pay myself to keep out of paying interest on the loan.
(like change orders and such). Thanks much.

Yes, it's a little bit of wiggle room that the contractor puts
in to cover minor cost changes, like fluctuations in the costs
of materials and things like that. More substantial cost
changes should be done by official change order, the contingency
is just for minor stuff. +/- 10% is standard on fixed price
bids, for cost-plus I don't know if a contingency is commonly
used, I would imagine it wouldn't be necessary. -- M9


"Charlie" <(E-Mail Removed)> wrote in message
news:(E-Mail Removed) om...
> Hello, we got our line item breakdown back from our lender and
are
> getting ready to close on our construction loan. There is a
one line
> for the "builders contingency". Is this the amount the G.C.
has
> budgeted in case of cost overruns ? I'm asking just to be
informed,
> not to question or expect any kind of credit afterwards. All
I'm
> concerned about is the final price. I'm trying to antisipate
any
> monies I can pay myself to keep out of paying interest on the
loan.
> (like change orders and such). Thanks much.

"minerva nine" <(E-Mail Removed)> wrote in message
news:T9idndOvc8Mlil_dRVn-(E-Mail Removed)...
> Yes, it's a little bit of wiggle room that the contractor
puts
> in to cover minor cost changes, like fluctuations in the
costs
> of materials and things like that. More substantial cost
> changes should be done by official change order, the
contingency
> is just for minor stuff. +/- 10% is standard on fixed price
> bids, for cost-plus I don't know if a contingency is
commonly
> used, I would imagine it wouldn't be necessary. -- M9

I always show a contingency... my most successful use has been
to include a long list of things that could go wrong
(including delays due to late payment.. ..with a percentage
price associated with each one and or a dollar price. I make
sure my contingency list is as long as my arm and covers
everything imaginable.

Then when the owner gives me a two month late start for
instance while demanding that I complete on the original
schdule 2 weeks hence (when its a 2 month job)... he has
*already signed the contract with a contingency fee for that
....same for when he subsequently pays late on progress
payments... It just ads up..

If he's nice I try to skip much of that billng...if he is
nasty he gets nailed to the wall...it covers my cost of
dealing with such people...and they really cant object up
front because it is a very very reasonable list, In the
past its been some moron plant manager trying to look good by
putting me under pressure with late payments so he can drive
the price down when I get desperate.... the solution for
that is chatty little daily memo's (but specific as hell) from
before the contract is even signed, and cc a few of his
subordinants, they wont object...then when the hose job is
attempted you can bind that all up and send it to his
corporate management along with a letter from your attorney
mentioning damages.... works like greased lightening.


If you dont itemize the list of all possible contingencies,
they can argue etc. at the end of my list I say ...other
contingencies at 10% under our normal billing rate and parts
at cost or client may buy them and we will install at the
prefferred rate.(limited of course)...This leaves the client
utterly unable to say you are money grabbing or unfair or
whatever.. and presents a very reasonable image.

What I find now predominantly is bad engineering, utterly
fatal planning on large jobs, total corruption, kick backs and
special interests...knives coming out from the woodwork that
you cant predict.... so I have these contingency detailed
contracts and I mention them by item number (not always by
subject) in the daily memo's that go out....the memo's form a
paper trail and by tacit agreeement of failure to reply or
object actually become part of the contract (supportable in
court)...only defeatable if the client can say he didnt see
the memo...(if it gets nasty I make it a point to casually
stop by and hand the memo to the guy with his staff present as
I summarize the contents in front of the witnesses... then
mention that briefly in the next memo.

I also take a lot of pictures these days.

I dont do any of this with established clients of known
character though... only with new ones, and about half the
time it ends up saving my toast.

Ive had these people lie bold face to me and thier management
even as the memo's prove them wrong... what it is...most dont
even read the memo's... they dont know that you already have
them by the ass....(thats a real advantage to the contractor).
I run the memo's in my word processor so I can attach the old
ones to the new ones, or sections etc. and have it all ready
to print the whole job history if required later.

Some will then say the memo's were inaccurate and deny
material fact...thats when they get the memo reissued with
photo's attached. There is a lot of peace and joy in not
having to worry about net outcomes in these cases.





My only mistakes in that regard are doing some small jobs with
no contract, just verbal agreement.(usually under 2k a
week,with weekly progress pmts I dont write a formal
contract.....a practice I should cease forthwith.... one can
be sued and be liable without all that.

With one man decision makers, I find much less need for a
contract and memo's than with corporations... the internal
disasters and lies, back stabbing etc can eat you alive if you
dont have an air tight situation. Ive had some of these
morons demand a 20,000 kick back no a 50,000 job saying .."but
YOU are making 50K..." this class of person has absolutely no
clue about reality.

They demand a kick back twice my gross and 4 times my net.
(I dont pay kick backs regardless anyway...but these days its
costing me a *lot of business... as taxes go up and wages go
down, many more are seeking to make the difference up with
under the table money.... understandable but the net effect is
a disaster wherever it happens)



I also word my memo's to always be open for added
contingencies.... solid statements can be spun by a corrupt or
ignorant management to your detriment.

So for instance if they decide to move the cooling tower 30'
after I have had a $100,000 basin poured...I say "Per
contingency item #12. relocating already constructed features
costs *should be in the range of 100k, plus T and M on
demolition (paragraph included)..;plus assorted other costs
for rushing the job to completion on a now forshortened
schedule., profit and overhead percentages..etc.

These days I see some engineering boiler plate that tries to
preclude ALL of that..and make the contractor entirely liable
for all of the client, vendor or engineering created
disasters. I just line it out...and submit a nice low bid on
that basis.

Then the owner has to reconcile my 500k bid against the other
million dollar++ bids and discuss it internally. When that
happens given the tightness of funds these days they have to
face the music on these extra's and delays issues that are not
the contractors fault.......... or pay double or more for the
project.... money many dont have these days.

Also I find many jobs are frauds from the start... that is the
contractor that gets the job is in bed with the corporate
management and gets awarded extras say on a 20 million dollar
job of 5 billion... amazing... its no contest because its an
inside job..a way for top management to seal 5 billion from
the stock holders...the contractor on these deals get a cut
too...80% or more though goes on various via's to swiss
banks..

One recent example was a US intelligence semi conductor fab in
Oregon... the prime contractors were Helmut Kohls outfit from
Germany and a Korean outfit (NO american contractors on this
US govt job)... and management was all CIA people with bogus
engineering degrees on the wall... that job was supposed to be
a few hundred million...it went billions over budget the money
all untraceable to off shore foreign companies... all
fraud....they ****ed off a friend of mine by claiming that he
made an error locating a few small pumps then wrote a stunning
hundred million dollar extra on that...a job most on the NG
would have done for 10k.


You won't get into those, they use their own group of
insiders...if its going to be *gross they use no bid insiders
like Haliburton in Iraq.... billions a month can be vaporized
that way as for instance our GI's go without body armor.

When you see these people not trying to hide it very hard, as
with no bid contracts or just insiders allowed to bid.... as
they prosecute small potato's to create smoke ....you know the
entire mess is corrupt to the core. Its been that way in the
US military intelligence mess for 30 years now...

for those are seeing red at these comments... you might be
interested in the congressional testimony on same
www.fromthewilderness.com economics links the left margin.
60 minutes has also run much of this and its been on Cspan...







Phil Scott


>
>
> "Charlie" <(E-Mail Removed)> wrote in message
> news:(E-Mail Removed) om...
> > Hello, we got our line item breakdown back from our lender
and
> are
> > getting ready to close on our construction loan. There is
a
> one line
> > for the "builders contingency". Is this the amount the
G.C.
> has
> > budgeted in case of cost overruns ? I'm asking just to be
> informed,
> > not to question or expect any kind of credit afterwards.
All
> I'm
> > concerned about is the final price. I'm trying to
antisipate
> any
> > monies I can pay myself to keep out of paying interest on
the
> loan.
> > (like change orders and such). Thanks much.
>
>
>