Wednesday, March 29, 2006

Windfall Profits

This is how it happens:

You are the architect and you specify 3/4" Lapidus granite for the kitchen counters and backsplashes. The million dollar house is bid and the contract for construction is signed at a fixed price. Then one day you get a phone call from the granite installer asking if the owner has selected the granite yet. After expressing surprise that you are even receiving a phone call about this because the specifications are so clear, you read to the installer what you wrote about 3/4" Lapidus granite in the specifications. He says he'll call you back. When he does, he says that he originally priced a mid-grade light brown granite per the contractor's instructions, and the Lapidus granite will cost your client an extra $3,000. That's how it happens.

Update: Turns out the granite installer was lying and the contractor really did give a complete set of drawings to the granite installer, who "overlooked the specifications" and priced cheaper granite for whatever reason. The contractor is now pressuring the granite guy to eat the difference. May not happen that way. It's their dispute. The owner personally selected the Lapidus granite and the bid is the bid.

This is also how it happens:

You are the architect and you specify all the plumbing fixtures down to the exact make and model. The million dollar house is bid and the contract for construction is signed at a fixed price. Then one day you get a phone call from the contractor asking if you and/or the clients might review the plumbing schedule once more before the plumber orders the fixtures. Your client does this and decides to change a couple of the fixtures. In the meantime, prices have gone up 25% between the end of 2005, when the plumber pre-ordered the fixtures at a locked-in price, and Spring of 2006. Rather than re-pricing only the fixtures that were changed by the client and keeping all the other fixtures at the locked-in 2005 prices, the plumber re-prices everything at the inflated 2006 prices. After great gnashing of teeth because of the unexpectedly huge cost increase (this is where the client writes, "You are an idiot" in an email), you as the architect finally figure out what happened, and the plumber doesn't get his $1,500 windfall profit as he'd hoped. That is how it happens.

Update: The contractor has been disputing this all week with the plumber, who still isn't budging for whatever reason. So it looks like the contractor will be forced to eat the difference between the 2005 and 2006 prices on the fixtures that didn't change.

5 Comments:

Anonymous Anonymous said...

I don't get it. There seems to be no ramifications for when the contractor screws up -- he just phones you and says it will cost more. -- But if the isn't completely on the ball at all times -- it could be very costly...

How do you protect yourself from evil contractors? -- and also, is it really worth it to get Lapidus granite as opposed to mid-grade granite?

Dena

6:40 AM, March 30, 2006  
Anonymous Anonymous said...

I would think that it's the contractor's error....the specs were clear, and it was on his own liberty, without permission, that he instructed the granite installer to bid a lower-grade granite. The contractor oughta eat the diff......

9:59 AM, March 31, 2006  
Anonymous Anonymous said...

oops... I mean't to say if the architect isn't completely on the ball at all times...

Dena

7:11 PM, March 31, 2006  
Blogger HRlaughed said...

Whoever said the architect is always on the ball? We make mistakes too. I even made one once... I think... can't remember it right now. But as Frank Lloyd Wright said, "we simply advise our clients to plant vines and move on."

12:06 AM, April 01, 2006  
Blogger HRlaughed said...

By the way, I've been pondering a long contractors/subcontractors-aren't-the-nicest-people rant since I started this blog, but never got around to it. These two examples I detail here are merely the most recent examples. In fairness, the builder for this million dollar house is a remarkable exception to his profession's sleazy norm. I like him. And more importantly, I trust him.

I can't believe I just wrote that.

12:11 AM, April 01, 2006  

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