New Company - How to mark-up subs and prepare contracts

[HorazII]

I have just started a new civil/site land development engineering company and will be using subs for such things as traffic and survey. I will be marking-up the subcontractors prices and charging that higher fee to the client.

How should my contract for that original service, i.e. traffic engineering be written up? I assume you typically you would hide the mark-up, or is that wrong and do you just reference the subs contract and show the mark-up as a consultant fee or something?

Lastly, if your not disclosing the mark-up, does your contract generally have to state everything found in the subs contract?

I hope this question makes sense, thanks!

 

[greenone]

We mark up our subs and make it invisible to the client. They get one invoice, with either a lump sum, or if hourly, the marked up hourly rate, not the rate we were charged by our subs.
Your terms and conditions of contract need to be complete enough to protect you without adding on the subs' conditions.

 

[DonPhillips]

Profit is not a dirty word but you client does not need to know you are marking things up, unless your contract states this will be transparent. Typically, a lump sum for a scope of service is a lump sum and your markup is your business.

Make sure your subcontract has the same provisions as your contract with the owner. You may be beholden to a duty of care that your subconsultant is not, or a duty for which you are not being fairly compensated for the associated risk. Especially construction observation. This can be a source of risk that your E&O and thier E&O carrier will both say are not covered if the contracts are not clear and coordinated.

I used the EJCDC and they are coordinated similar to the AIA contract families.


Don Phillips

http://worthingtonengineering.com

 

[HorazII]

Thanks for the responses. I agree that the mark-up would be unseen and our general terms and conditions covers subconsultants well.

One last question on this topic. As far as my proposal to my client, for example a traffic study. Should my contract explain the scope in detail, have the same assumptions, same exceptions, etc as the sub-consultants original contract to me has? I do not see a way to reference the subs contract if it contains their original fee estimate.

Thanks

 

[DonPhillips]

I typically do the detailed proposals and pay special attention to the exceptions to ensure no misunderstanding when you need to bill for additional services. I typically write into the proposal a reference to the form of the contract (and include a blank version if the client may not be familiar with it) so when it's terms sink in, you are not renegotiating your proposal.

Don Phillips

http://worthingtonengineering.com