Monday, January 18, 2010

Serious Questions...

Image Courtesy American Gables

..about this concept HERE:

From their website:

"Look at the advantages of building using the ****** system (just don't want the search engines picking it up, as I am not endorsing it) compared to the old way of building and see for yourself why it’s the winning system! With the old building system:
  • The builder carries greater overheads under a standard contract – which you pay for.
  • You won’t see the real costs.
  • You are normally required to use the builder’s set trade contractors and suppliers.
  • You cannot normally change your products or finishes during the contract.
  • Premium prices will apply.
  • Variations are seen in standard building contracts as being the “cream”.
  • Variations are extremely common in the new home and renovation markets and you cannot shop these variations around to ensure a fair price.
  • There is the perception that the owner is at the mercy of the builder once the contract is signed.
  • Some builders have poor communication procedures, so you can feel like you don’t know what’s going on.
  • There is a risk that the builder may discount the contract to win the job, with the hope of making up the difference with variation loadings and surcharges that you have little control over.
  • As the builder directly controls and pays sub-contractors there is the possibility that standards of finish may be compromised to save the builder money.
  • There are many instances of builders becoming insolvent, risking your investment.
With *****:
  • The builder works in partnership with you whilst still being responsible for all the duties of a normal builder.
  • You get a fully QBSA complying contractual system.
  • You enjoy the same warranty and insurance protection as standard contracts.
  • You get a contract with all costs transparent – including what you pay the builder!
  • You have freedom to shop the marketplace for the best prices and choice of finishes.
  • You don’t have to worry about it being a “cost plus contract”, as prices are locked into individual trade contracts.
  • You pay trade rates without variation loadings – ever.
  • You have a builder that acts as your manager to protect your interests.
  • You enjoy consistent communication on job progress.
  • You benefit from formal job management procedures designed to reduce the likelihood of disputes.
  • You can take advantage of discounts and bargains in a tight market by dealing directly with the supplier with the guidance of the builder.
  • Your money works to maximum advantage because sub-contractors and suppliers price themselves extra competitively to get your work because you pay them direct – which means better cash flow for them.
  • Your builder doesn’t profit by asking a sub-contractor to take shortcuts – in fact as the builder is responsible for the standard of works, he has reason to be tougher on those standards.
  • Your investment is safe, because ******* removes the possibility of a builder becoming insolvent."

This is what is in it for the builder:

You are the perfect candidate for ***** if you suffer from:

  • Poor cash flow
  • High account exposure
  • High BSA net tangible asset requirements
  • High overdraft
  • High vulnerability to disputes
  • Not having sub-contractors tied properly to warranties
  • High risk to profit margin
  • Inefficient costing and management systems
  • Lack of a marketing advantage against other builders
  • Inappropriate tax bracket"

What I want to know is why would you participate in a system through which, as the builder, you lose all the opportunites to load in profit from the customer? (case in point .... my fireplace.... oh the lessons I have learnt!!) If the builder is no good with managing cash flow, has a high vulnerability to disputes, inefficient costing and management systems and a high overdraft....would you want him project managing your project?

Has anyone experienced this process? I would be SO interested in hearing from you. 

A bit technical today... sorry.... but you are such a wonderful resource (I built my house on your advice, remember!) ... when in doubt, ask 'the bloggers'!
A-M xx


  1. Interesting, I too would question wanting someone who can't manage their cash flow, is subject to legal action often, and who is inefficient or sorely lacking proper management skills overseeing the building of a shed, much less my home!!

    Wonder who uses this I missing something possibly?

    Kat :)

  2. I cant work it out either...very confusing. All sounded logical until the last bit about the customer has lack of cash flow etc Why would a company want to take on a build for a builder who is very high risk, how do they provide a service for somebody who has no money? I have read this through twice and I still cant work it out!

    Mrs B xxx

  3. it's basically taking all of the contract administration out of the builder's hands it seems-and there would be a benefit in that for many builders who aren't scaled up enought to handle it.

    howver, it is hard to tell through their webpage and information as to who is the superintendent of the works, because by golly, they're going to have a full time job seeing project through to completion. It looks to me as though the purchaser is the principal (not the building company who builds the house under contract to a builder) and this company are acting as the super in the contract. What they don't mention is that their likely to require a hefty percentage to act in that role.

    I certainly wouldn't recommend it to anyone who doesn't know anything about contracts or construction works, or AS2124! It is a quite a bit of risk involved if it is the scenario above, and all of the risk would be with the principal (purchaser) - the comapny acting as the super, has obligations, but really no risk in the contract.

    Interesting stuff, haven't seen anything like it before. (and sorry for my long winded reply!! :) - this is my daily field of work, but in commercial landscape architecture)

    happy monday! jules

  4. Huhhhh?!!!!
    Maybe I should ask our "ex-con" (how we refer to our "ex-contractor"), or NOT!!!!

  5. Yes well, I am afraid I will have to leave digesting this post for another time my dear A-M...Just stopped in for a fleeting visit as the Country Music Festival is really taking it out of me. 6 days till she's all over for another year, I've been busy catering for the country folk and boy can they eat (& drink). So I'l come back to you later on this one I think. I am having enough trouble figuring out what will happen tomorrow! Sorry, but will be interested in reading all the comments when I am back to normal mode next week.
    Take care & have a great week.
    Lisa x

  6. Learn something everyday. Today more than others.

    Thanks for thinking to post this topic.

    Will be back to the comments.......wanting to learn more!!

    Garden & Be Well, XO Tara

  7. My brain is too tired to wrap itself around this, sorry. But it all sounds very odd and illogical to me.

    Thank you for your comment on my post about Kylie. As heartbreaking as it was to make the decision, I know it was the best thing for Kylie.


  8. We had a look at the site last night. Dont like the idea at all. My husband has an open builder's licence (in lay terms it means he can build anything) and it is not something he would be interested in getting into. Seems to me there are too many hidden unknowns for both the builder and the client.

    Why cant all builders / contractors just go back to the old fashioned way of being a good builder, doing a good job on time and on budget and working together with the client to achieve this!

    Maybe it would be easier to achieve world peace ;)


  9. Not for this either A-M. Our experience over the years has always been to subbie work out to Tradie's we've used before & have had great experiences with. MOTH reckons we'd have no trouble building from scratch using this method. So we wouldn't ever be in the position to sign a contract with a Builder to do the complete job. But it's not for everyone, as MOTH juggles the site plan of action well & casts his eagle eye over everything & the guys know it. We're also pretty laid back about things if a delay happens, que sera sera & all that. A really interesting post.
    Millie ^_^

  10. hi AM

    It is not very clearly explained and I haven't looked at the website but it sounds like the model is some kind of managing contractor or construction manager model - builder manages the works, you engage and pay subcontractors directly and builder is paid a fee which would include a component for profit. I have advised on this model for commercial \ govt projects but I would never recommend it for a residential project it creates too many different lines of liability. Most domestic builders wouldn't know how the model works and who gives directions to the trades? You or the builder. It would also expose you to security of payment claims and other issues. The best way to make sure that the builder delivers is to have a competent adminstrator, make sure the documentation (design and spec) is 100% correct (big ask but it is just the way it is), don't change your mind during the works, don't choose the cheapest builder and use a builder someone else you know has used !! xoxo


Thanks for stopping by and taking the time to leave me a comment. I love hearing from you. A-M xx