ᐅ The Same Old Problem – Turnkey Contracting vs. Individual Contracts
Created on: 6 Nov 2014 09:52
N
Neubau82
Good morning, dear new building community!
I am facing the classic decision... whether to go for a turnkey build or to contract everything separately...
First, here are my key data:
Plot size – 805 m2 (8,663 sq ft) available
Living area – 160 m2 (1,722 sq ft)
Roof – gable roof 22°
Floors – 2 full floors
Basement – fully cellar
Heating system – air heat exchanger
Heating – underfloor heating on ground and upper floors
Windows – plastic frames, triple-glazed
Bathroom – shower/bath/2 washbasins on upper floor
Toilet – WC/shower on ground floor, prepared connections in basement
Garage – double garage 9 x 5 m (30 x 16 ft)
Floor plan – simple, rectangular without slopes or offsets, symmetrical
Dormers – none
For the above building project, we have received a turnkey offer of €345,000.
I am now very uncertain whether I can actually save anything by contracting the entire build separately... I also know that the construction industry can be quite hectic, and one often a) waits ages for quotes, and b) has trouble finding anyone with availability.
I am skilled in crafts myself (trained carpenter) and also have many acquaintances in the construction industry (bricklayers, carpenters, electricians, etc.). Unfortunately, you still have to present figures to the bank... which in turn require reliable data... leaving aside the mental strain...
After extensive research and discussion, I have gathered many opinions and perspectives. The following comments from my friends and acquaintances have been on my mind day and night:
- Don’t contract the trades separately, you won’t save anything; in fact, it might even be more expensive. General contractors negotiate completely different prices than you can (structural engineer)
- Based on experience, contracting separately at this scale leads to additional costs of about €100,000. General contractors negotiate very different prices than you can (architect)
Since these statements come from very experienced people, I think there must be some truth to them...
What is your opinion?
Be brave and contract separately?
I just want to sleep well again... well, I guess I can forget about that for at least a year anyway.
Thanks for your advice!
I am facing the classic decision... whether to go for a turnkey build or to contract everything separately...
First, here are my key data:
Plot size – 805 m2 (8,663 sq ft) available
Living area – 160 m2 (1,722 sq ft)
Roof – gable roof 22°
Floors – 2 full floors
Basement – fully cellar
Heating system – air heat exchanger
Heating – underfloor heating on ground and upper floors
Windows – plastic frames, triple-glazed
Bathroom – shower/bath/2 washbasins on upper floor
Toilet – WC/shower on ground floor, prepared connections in basement
Garage – double garage 9 x 5 m (30 x 16 ft)
Floor plan – simple, rectangular without slopes or offsets, symmetrical
Dormers – none
For the above building project, we have received a turnkey offer of €345,000.
I am now very uncertain whether I can actually save anything by contracting the entire build separately... I also know that the construction industry can be quite hectic, and one often a) waits ages for quotes, and b) has trouble finding anyone with availability.
I am skilled in crafts myself (trained carpenter) and also have many acquaintances in the construction industry (bricklayers, carpenters, electricians, etc.). Unfortunately, you still have to present figures to the bank... which in turn require reliable data... leaving aside the mental strain...
After extensive research and discussion, I have gathered many opinions and perspectives. The following comments from my friends and acquaintances have been on my mind day and night:
- Don’t contract the trades separately, you won’t save anything; in fact, it might even be more expensive. General contractors negotiate completely different prices than you can (structural engineer)
- Based on experience, contracting separately at this scale leads to additional costs of about €100,000. General contractors negotiate very different prices than you can (architect)
Since these statements come from very experienced people, I think there must be some truth to them...
What is your opinion?
Be brave and contract separately?
I just want to sleep well again... well, I guess I can forget about that for at least a year anyway.
Thanks for your advice!
N
nordanney10 Nov 2014 11:50If the budget with the general contractor (GC) only allows for laminate flooring, but with separate contracts you can get parquet for the same price, then I would prefer parquet rather than settling for just laminate. It’s not more expensive than what might have been discussed with GCs during negotiations.
This is just one example among many. Upgrading windows (color, material, U-values), interior plaster finish Q3/Q4 instead of Q2, different electrical installation (more switches/outlets, LAN, automation), a larger shower, perhaps with a rain shower head instead of a classic shower rail with hand shower, etc.
There is some truth to the idea that people tend to consume more (and build with higher quality) rather than save.
This is just one example among many. Upgrading windows (color, material, U-values), interior plaster finish Q3/Q4 instead of Q2, different electrical installation (more switches/outlets, LAN, automation), a larger shower, perhaps with a rain shower head instead of a classic shower rail with hand shower, etc.
There is some truth to the idea that people tend to consume more (and build with higher quality) rather than save.
nordanney schrieb:
If the budget with the general contractor only allows for laminate flooring, but with separate contracts you can have hardwood flooring for the same price, then I would definitely choose hardwood over being "only" satisfied with laminate. It’s not more expensive than what might have been discussed in talks with general contractors.
This is just one example among many. Upgrading windows (color, material, U-values), interior plaster quality Q3/Q4 instead of Q2, different electrical installations (more switches/outlets, LAN, automation), a larger shower maybe with a rain shower instead of a classic shower rail with hand shower, and so on.
There is some truth to the idea that you tend to consume more (and build with higher quality) rather than saving money. I can only agree with that!
nordanney schrieb:
If the budget with the main contractor only allows for laminate flooring, but with individual contracts you can get parquet for the same price, then I would rather choose parquet than settle for "just" laminate. It’s not more expensive than what might have been discussed in talks with main contractors.
This is just one example among many. Upgrading windows (color, material, U-values), interior plaster quality Q3/Q4 instead of Q2, different electrical installations (more switches/outlets, LAN, automation), bigger shower and maybe a rain shower instead of a classic shower rail with handheld shower, etc.
There is some truth to the idea that people tend to consume more (and build higher quality) rather than savings.Please explain that to me (I built with a main contractor)
because I can’t agree with it.
If the construction specification says: “laminate flooring valued at €20,” but I want parquet with an additional cost of €50, I can have the main contractor (or their subcontractor) install it.
Just because you are building independently with an architect doesn’t mean you get the parquet for €20; you still have to arrange where to get “your” parquet from. It’s the same with a main contractor: I visit suppliers and have “my” parquet delivered, which is then installed instead of laminate.
A main contractor is willing to provide any special features possible: colored, foil-coated windows, extra windows, special front door, Q4 plaster instead of Q3, cement plaster instead of gypsum plaster... all at an additional cost.
Okay, I admit some items, like skylights, might cost much more with certain main contractors, making them unaffordable... but in those cases, you can always arrange special contracts for individual trades.
This was exactly how it worked with our main contractor! Our upgrades for electrical work, plumbing, and tiling were handled exclusively by the individual trades.
Regards, Yvonne
ypg schrieb:
This was exactly how it went with our general contractor! Our upgrades for the electrical work, plumbing, and tiling were handled exclusively by the subcontractors. But that’s precisely the problem often encountered with general contractors. They negotiate subcontractor prices down so much that there’s hardly any profit left in the main contract itself. Only through special orders—where the homeowner usually has no choice about which tradesperson to use (e.g., for electrical work)—do the subcontractors make their profit. That’s why an outlet might cost €40 or €50 instead of €30 when you arrange it yourself. For the subcontractors, it doesn’t matter as long as their average profit margin works out. If you were to source everything directly through the general contractor, it would likely be even more expensive. For example, our snow guard cost twice as much per running meter when purchased through the general contractor compared to buying it from the tradesperson directly.
ypg schrieb:
It’s just like with the general contractor: I visit the stores and arrange for “my” parquet flooring to be delivered, which is then installed instead of the laminate flooring. We thought the same for the tiles. However, our tiler received bigger discounts at one tile supplier due to the volume of materials he bought, but not at another supplier. So, indirectly, we were still tied to particular suppliers, and we ended up doing a second selection process.
N
nordanney10 Nov 2014 13:26Hello Yvonne,
it's actually quite simple. From the beginning, we planned the house together with our architect/site manager and specified a certain set of features.
With these plans and specifications, we first approached general contractors (GCs) to get a sense of whether a) the budget was right and b) we would have been comfortable building with a GC based on competitive offers.
After the offers—despite discussions and negotiations—did not appear very attractive to us, even though they were probably market-appropriate for GC bids, we decided to go for individual trade contracting. Then our calculations suddenly made much more sense, and we could afford features that we otherwise would not have chosen.
In the end, we were cheaper than building with a GC would have been, although more expensive than it would have been with the same features (based on the original plan).
It is true that you get custom options with a GC as well. However, there is a fixed price for the house on paper from the start, which does not decrease during construction. Of course, I also see the risk that an architect might underestimate costs and the house could end up more expensive, but based on my current building experience (and that of almost 40 neighbors who have just finished or will be moving in within the next few weeks), it seems accurate that costs tend to be higher with individual trade contracting when compared to a similar price offered by a GC.
it's actually quite simple. From the beginning, we planned the house together with our architect/site manager and specified a certain set of features.
With these plans and specifications, we first approached general contractors (GCs) to get a sense of whether a) the budget was right and b) we would have been comfortable building with a GC based on competitive offers.
After the offers—despite discussions and negotiations—did not appear very attractive to us, even though they were probably market-appropriate for GC bids, we decided to go for individual trade contracting. Then our calculations suddenly made much more sense, and we could afford features that we otherwise would not have chosen.
In the end, we were cheaper than building with a GC would have been, although more expensive than it would have been with the same features (based on the original plan).
It is true that you get custom options with a GC as well. However, there is a fixed price for the house on paper from the start, which does not decrease during construction. Of course, I also see the risk that an architect might underestimate costs and the house could end up more expensive, but based on my current building experience (and that of almost 40 neighbors who have just finished or will be moving in within the next few weeks), it seems accurate that costs tend to be higher with individual trade contracting when compared to a similar price offered by a GC.
The answer from [USER=12491]@ypg exemplifies how general contractors/project managers keep their clients busy: with what are literally “superficial matters.” They prefer to handle the truly important aspects for the house’s durability and functionality privately. However, I prefer to discuss topics like these with my architect and craftsmen:
- Details of the window lintels to avoid thermal bridges
- Thickness of the “black” insulation at the base of the building
- Precise installation of the underlayment membrane on the rafters and how and where it integrates with the insulation. This determines whether your roof lasts forever or rots away in 5 years
- Installation techniques of the roof waterproofing (glued, nailed, welded, or a specific combination of these), type of roof waterproofing, and details of the sheet metal work in the roof area
- Ventilation of our 3° (5.2°) mono-pitched roof (which is still incorrectly regulated in the standards, but in recent years new findings have emerged that will eventually be incorporated into the standards)
I could write two more pages and still not be finished.
You can influence all of these aspects during the construction phase or in the preliminary discussions beforehand and positively shape them if you work with a smart architect and arrange individual contracts.
The general contractor/project manager just builds as usual, and the expert checks everything afterward. Many things can no longer be changed then, or only with a major dispute.
- Details of the window lintels to avoid thermal bridges
- Thickness of the “black” insulation at the base of the building
- Precise installation of the underlayment membrane on the rafters and how and where it integrates with the insulation. This determines whether your roof lasts forever or rots away in 5 years
- Installation techniques of the roof waterproofing (glued, nailed, welded, or a specific combination of these), type of roof waterproofing, and details of the sheet metal work in the roof area
- Ventilation of our 3° (5.2°) mono-pitched roof (which is still incorrectly regulated in the standards, but in recent years new findings have emerged that will eventually be incorporated into the standards)
I could write two more pages and still not be finished.
You can influence all of these aspects during the construction phase or in the preliminary discussions beforehand and positively shape them if you work with a smart architect and arrange individual contracts.
The general contractor/project manager just builds as usual, and the expert checks everything afterward. Many things can no longer be changed then, or only with a major dispute.
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