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Old 11-19-2018, 04:46 PM   #17
DavidM's Avatar
City: Litchfield, Ct/Punta Gorda, Fl
Country: USA
Vessel Model: Atlas Pompano 23
Join Date: Aug 2012
Posts: 5,040
Perhaps this is a good time to share my contracting experience, both with fixed price plus change order contracts and time and material or cost plus contracts. This experience was not in boat building but from forty years of building heavy industrial projects.

My company's prime contracts were probably 70/30% cost plus/fixed price. Our subcontracts were about 90% fixed price.

Cost plus contracts rarely had contentious financial problems. Yes when we sometimes overran the budget the client wasn't happy. In most cases there were legitimate reasons but not all and in a few rare instances when it was obviously our fault we made a price concession.

Probably 80% of our fixed price contracts had contentious financial problems. In virtually all of these it was due to the client contracting with a loose scope. When the inevitable change orders came up the client didn't want to pay, almost always because he told his management that the fixed price was a fixed price. In our case we recovered about half of our proposed change order amount and in about half of those we lost money on the contract as a whole. One thing that was quite different from your situation is that we hoped to do more work for these major companies and sometimes would just suck it up for good will. That is not likely to happen in a boat building contract.

Our subcontracts faired similarly but in these cases we had a much more solid scope because we knew the dangers of a loose scope and these were pure construction contracts and our engineering was pretty tight.

So our biggest problem and yours too was a loose scope that begs for lots of change orders.

But even with lots of change orders there were subcontractors who bid low and tried to make it up with unreasonable change orders. We negotiated hard and in almost all cases, well all actually as I had no litigation over change orders in my career, we came to a decent (I won't say reasonable) price accommodation.

You no doubt hope your scope is tight and that your builder will be reasonable as the inevitable change orders come up. I wish you luck.

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