Thinking through your charge up terms & conditions
I have heard about a lot of work being completed on charge up lately, not uncommon when times are busy and a client is happy to choose this option as a way to move their project on a little faster.
It’s a great option for you guys, but there are some pitfalls to be aware of. If any disputes are going to arise, a charge up job is going to be where it happens!
The definition of a charge up job is where a client allows you to begin work without a fixed/tender price being submitted, on the basis that all costs incurred will be passed on with a margin included.
To ensure that this is done in such a way that gives the full benefit of this option, keep the below tips in mind;
Ensure you confirm the hourly rate you are charging. This may be a global labour rate (i.e. covers labourer through to foreman as an average)
Or you may choose to charge out differently depending on the level of skill of your individual employees/contractors.
Remember to ensure either way this rate covers EVERYTHING attributed to the cost of the employee. Including annual and sick leave, tool allowances, travel time, kiwisaver, the list goes on.
Will you provide timesheets and sign in/sign out sheets to back up labour invoices?
How often will you do this? You need this in writing.
How often will you require payment?
What cut off dates will you have for invoicing? I.e., will you invoice on a Wednesday each week for Friday payment?
If you miss the Wednesday deadline does that then fall into the next week?
How will materials be paid for? Will this be passed on via invoice from you, or will the homeowner pay them directly from the provider invoices?
How will you make a margin on this?
Should you be passing on your trade rates?
How will your P&G be calculated?
When and how will P&G be paid?
As per materials costs, how will subbie costs be paid?
Still more to think through
Generally, how will margin be applied for the work? You aren’t doing the job just to keep the guys busy; you are doing it to make a profit.
How and when your margins are applied is a really important point to have clear at the start and in writing.
How will homeowners own works & subbies be managed?
Will you provide monthly summaries to the client regarding costs to date and projected totals?
Will you provide a budget estimate at the start of the project just to make sure that the client’s expectations are realistic? It’s probably a good idea!
I have to credit the website www.bobforbuilders.co.nz for some of this list, with my own spin on things of course! Check it out; it has lots of fantastic information!
Where a QS comes into charge up
At the end of the day, my point by listing the items above is that as the QS we can help you with all of these things.
Not to mention the fact that QS assistance is a legitimate cost that you can pass on to your client in the charge up situation and will ensure that things stay smooth and your relationship with your client intact.
It is far easier to be the ambulance at the top of the cliff, than the bottom!