We also build custom new homes. Most of what we build we design as well. Generally, only a builder who also designs can accurately design a project to a pre-determined Budget.
That explains our mission but why and how does contracting and sub-contracting work; in the domestic building industry, in Melbourne suburbs and across Australia?
When a new home owner signs up with a builder it should be to a standard ‘Fixed Price Contract’.
This means builders won’t/cant increase the fixed price of a contract unless the owner requests extras in writing, exceeds nominated allowances or unexpected issues arise.
As the contract is between the builder and the owner the builder is also known as the Head Contractor.
To be in a position to fix the price to the owner builders request quotes from their trades people, also known as Subcontractors, sub trades, subbies. Each trade quotes their piece of the works and their price is locked in.
Subcontractors are not 9 to 5 employees. The sporadic nature of domestic, onsite works and a subbies’ need to run efficiently, as a self-contained business, (supplying materials, labour, tools, insurances and transportation) makes a standard employee relationship inefficient and impractical, especially as the trades tend to work for other builders as well.
Sub-Trades, contracted to the Builder, cannot put up their quoted prices without a valid reason either.
This system of contractual relationships in the Australian building industry has always existed because it is fair and efficient. The builder does not need to worry too much about how long a trade takes or what time they turn up as long as the job is done on schedule and to a good standard.
Everyone from the builder down is accountable and only paid for what they do and how well they do it. Holidays, rain days, down days, ½ days are no financial impost to the builder or the consumer; they only pay for the work that is completed as per quotation.
Naturally this system keeps prices lower for the consumer and is not constrained by outdated and inequitable labour regulations. This system also encourages Trades to do their portions of work (sub contracts) fast and efficiently. If a plumber has allowed for 10 days in their quote but can complete the works in 8, then they are two days ahead to earn more on another contract.
The better the builder is at finding fast, efficient and most of all quality trades, the more competitive he is in the market.
Although these contracting conventions help keep a lid on prices building is not a cheap exercise.
With many trades charging up to $50.00 the hour (Nov 2015) and around 60% of a projects’ cost is in labour hours it is understandable when consumers are very surprised when they find out just how expensive building their home is.
Compliance costs (red tape, permits, etc.) and GST also add around 20% to the cost of a project.
You can read more on that subject in our blog, the cost of building.
P.S. The “Capital” in our name refers to the building element on top of a column, see logo above.