Paying for Subcontractors – Fixed Price vrs Daywork




When it comes to agreeing a payment structure with subcontractors it boils down to two options, pay by the day or pay by the job. Getting a fixed price for a job before you start is always the preferred and recommended option, particularly if you are new the the building game, because knowing what a good daily rate is can be difficult and even more difficult is knowing how much work should be done during the day.

For example, bricklayers should be able to lay around 500 bricks a day, and charge around 30 pence a laid brick. However, it is human nature to work harder when you know you are getting a fixed price, and therefore you will probably lay more bricks a day when you know you will only get £500 for the entire job. If on the other hand you were getting £150 a day then you may stretch the job out to 4 days and lay to same amount of bricks as with the fixed price job, netting an extra £100 in the process.

So, you have decided to only use a fixed price structure for your subcontractors. Here comes the next issue. To agree a fixed price you must have a very detailed plan of what you want done and a tight agreement between you and your subcontractors. You should have professionally written specifications when agreeing fixed prices, because it is rarely enough to simply hand over a set off rough plans to a subcontractor and expect to get a quote back.

Measured Rates




A potential solution to this problem is a use measured rates. These are agreed prices for specific sections of work, say a price for every 500 bricks laid. Then at the end of a job you simply tally up the bricks laid and you know how much to pay. While clear in principle in practice things may not me as smooth. There are often disagreements between what was planned and what actually happened. Expect deviations of up to 10% between your expectations and those of the subcontractor in terms of bricks laid. One reason for this is that brick layers tend to work of rough surface areas in their calculations, ignoring things like gaps for windows and doors. This can sometimes remove 25% of the bricks, but as a compromise they will add joinery at no extra charge.

Summary

You have 3 choices when paying subcontractors, either a fixed price, a daily rate, or a measured rate. Each has its pros and cons and in the ideal situation you would go for a fixed price. However, subcontractors may not be able to work with that and therefore your best option may be to go with a measured rate that will ensure you will actually get something for your money, although it may end up costing you a little more than you expected.

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