Temecula Custom Homes

The Client Relationship Your Rights and Responsibilities

Initial Meetings

The process begins with a meeting or meetings with you and Greg Koll, our president who oversees all projects. You are introduced to Koll Custom Homes and the Koll family overall - to our values, our projects, our methods and our people. We will look at your property with you, or your existing house, and brainstorm about possibilities with you. We may take you to see some existing or past projects.

If there seems to be a good match, and you decide to work with Koll Custom Homes, both parties sign and enter into a design agreement to begin the project in earnest.

Design Agreement

Our design agreement is un-conventional, because we (and you) are agreeing to a design/build relationship. The agreement must address two central aspects - design and construction - in one agreement. All design and planning is on an hourly basis (we find that design and planning generally takes about 60-80 hours, depending on size and complexity of the project).

Separate from the construction contract, but a necessary precedent to it, the design agreement states, "It is the present intention of the parties to enter into a Construction Contract, but neither party is obligated by this agreement to do so. Koll Custom Homes is planning the construction of this project into its schedule, and assumes that the Owners will follow through with plans to proceed unless extenuating circumstances prohibit it." This says that we are both committed to building as well as design, but it's so early in the process that neither party can make an ironclad arrangement.

Open Book Relationship – A Better Way

We deal forthrightly, and early on, with money. We talk about money from day one. It is an essential design constraint, and we must be able to discuss it as frankly and knowledgeably as setting, space, aesthetics, and performance. It’s no use to complete a design that excites and satisfies if it will cost twice what the budget calls for.

Towards that end all construction work is done on a Cost Plus Fixed Fee method. The cost plus contract or “Open Book” method is a far better alternative than a standard lump sum contract. The process works like this:

    • When design is complete, we do a construction estimate; this becomes the initial line item budget. This line item budget gets refined further as engineering and decisions are completed.
    • Part of that line item budget will include the contractor’s fee which is a set number or “Fixed Fee” approximately 15-20% of the construction estimate, for overhead, supervision and profit. This is our only fee.
    • During construction all costs are billed to the customer (materials, subcontractor expenses, miscellaneous expenses, and labor at specified rates) at the same rates that they are billed to the contractor. There is no markup or extra fees tacked on. You are entitled to received copies of all contracts and invoices on the project.
    • For example, let's say our estimate shows that the drywall estimate on the line item budget is $20,000. If the drywall costs go over the $20,000 estimate, the client still pays all of the bills, however our contractors fee is fixed and does not increase due to the overage. If the drywall costs come in under at lets say $16,000, then the client is responsible only for paying the actual costs of $16,000.
    • In comparison with a lump sum contract in which, in the above scenario, the contractor would still charge the customer the $20,000 for the drywall and would pay out only the $16,000 that is owed keeping the other $4,000 in his pocket.
    • During construction, if significant changes are agreed to by the parties, these are detailed and the line item budget is adjusted up or down as appropriate.

This process allows us to work in the clients best interest instead of working the entire time to increase our profits. Think about a standard lump sum contract. After the owner and the contractor have finally worked through all of the scope of work details and determined the specs for all of the various components the contract is signed. Now an adversarial relationship begins. The client is trying to get the best of everything possible within the agreed upon price. It’s human nature to want to get as much as possible for the price you are paying. The contractor is now working to get the lowest cost producers, oftentimes cutting quality or even illegally cutting corners in order to maintain or increase their profit. Remember every time they can get a number to come in under the line item amount, the savings goes into the contractor’s pocket, not the clients!

The open book approach allows the client to SHARE in the decision making process. Instead of choosing the lowest cost producers based on cost, now the contractor could present the various proposals to the homeowner, make his/her recommendations, and they decide together who would be best fit for the project. We are now in a position to truly work in the best interest of the client, and can act as more of an advisor and partner through the process. Any savings that are garnered based on the decisions now go into the clients pocket! Can you see how this type of arrangement could lead to a better contractor/client relationship?

This method has worked well for decades and allows us to work in the client’s best interest instead of working the entire time to increase profits. We have a strong incentive not to go over-budget (we don't like to work for no profit), but because we don't take a beating if we do go over, we can give the client a fair estimate, rather than a fixed contract price that is inflated for every possible contingency.