Do Contractor Savings Pass to the Owner?

Question

I'm planning on doing a rehab project from a distance. This may mean a combination of buying materials for the job myself and having a contractor buy materials.

Any tips on setting up a project in such a way so that any cost savings the contractor manages to find on materials (i.e. sales on items or negotiated discounts) get passed on to the overall projects costs?

Same question for when labor comes in less than estimated?

I'm sure the contractor will make sure that any extra costs incurred are passed along!!

Jared Forman · Answer

Hi Benjamin,

Unless your contractor is financially incentivised to save you money, than they aren't going to pass along the savings. They will be worried about how much they will make and about the next job. I find if you have them tied as a partner or a salary based upon saving and time they may do what you want.

Greg Dickerson · Answer

You should definitely get multiple prices for a turn key job. It will be cheaper and quicker in end. Let the contractors supply all materials and labor as they warranty everything and be responsible for any waste, damage, theft etc, If you try to supply materials especially from a distance everything is on you.

Filipe Pereira · Answer

@Benjamin Poole almost never. We are doing a few unit renovations in springfield mass right now where we have negotiated down large orders (i.e. flooring) and have passed that on to the owners (owners hired us for construction supervision basically), but most times contractors never tell the owner. This is where it pays to have a property manager or independent third party on the ground with construction experience that can provide oversight for you to make sure you aren't getting hosed. But, as others have mentioned, you should be getting a few quotes in an effort to hedge against being "taken to the cleaners" by your contractor.

Aaron McGinnis · Answer

Use a cost plus model. Every receipt and invoice gets turned in and the contractor gets XX% added to it.

Matthew Paul · Answer

@Benjamin Poole  No , any discount a contractor gets is due to his loyalty , buying volume and negotiations with the suppliers . No professional contractor will even tell you what the materials cost . They will give you a contract  price for the finished job . Contractors are for profit businesses , leaving money on the table is not a good business practice

Mike D'Arrigo · Answer

@Benjamin Poole first of all, you will never be able to buy materials cheaper than a contractor can. They have contractors discounts and volume discounts that you don't have access to. As far as those discounts, no, it would be rare that they would pass them a long. They build those discounts in to their bid and price accordingly.

Caleb Heimsoth · Answer

@Benjamin Poole contractors won’t pass along savings. Your question doesn’t make much sense honestly.  They buy material and you pay the agreed price.  There are often large markups on materials that contractors buy.

This is why people want to often buy their own material (then you know what it costs) but that introduces other challenges.  You can do it either way but you need to understand what you’re doing

Do Contractor Savings Pass to the Owner?

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