Profit Bull's-eye

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Time-and-materials contract keeps gross profit on target despite numerous change orders and a final cost nearly double the estimate.

May 01, 2000

David Rhodes

 

The way Janie Hall remembers it, most of the decisions had been made by the time construction began on her kitchen remodel and family room addition. The job took a little longer than planned, but otherwise proceeded uneventfully.

David Rhodes, whose Knoxville, Tenn., custom home building and remodeling company, Schmid & Rhodes, performed the remodel, remembers things a little differently - the job exceeded estimate by a whopping 80 percent once all 40 change orders, unanticipated structural problems, and allowance overages were tallied. It was finished just three and a half weeks late, remarkable considering all the changes. What may be most noteworthy, though, is that things went so smoothly that the Halls never regarded the process as exceptional.

ThatÆs just the way Rhodes likes it. "We are a service-driven company, which plays in our favor when we are doing remodeling," he says. ItÆs especially advantageous when Rhodes is doing a high-end remodel for clients such as Ken and Janie Hall, who expect a no-hassle, top-quality job - and who, when satisfied, become regular customers and referral sources. He set the precedent with this kitchen and family room project, which won a Chrysalis Award in 1998.

After years of living outside Knoxville, Ken and Janie Hall were ready to move into town. They found the perfect area - an established neighborhood filled with beautiful, old houses - and an almost-perfect house - a gracious, 80-year-old colonial. Previously owned by an architect who had remodeled it, the house featured handsome spaces, including a formal living room and a dining room that seats 12. But the Halls wanted room for their family, which totals 19 counting their children and grandchildren. "[There was no] comfortable, laid back area that we could all enjoy," Janie Hall says.

 

Schmid & Rhodes Construction Co.
Schmid & Rhodes Construction Co.
Schmid & Rhodes Construction Co.
Schmid & Rhodes Construction Co.
Schmid & Rhodes Construction Co.
Schmid & Rhodes Construction Co.
Schmid & Rhodes Construction Co.
Schmid & Rhodes Construction Co.
Schmid & Rhodes Construction Co.
Schmid & Rhodes Construction Co.

Immediately after buying the house in October 1994, the Halls began researching remodelers. "We went and looked at some of DavidÆs work, and some of the things others had done," says Hall. "I was just real impressed with David," she says, especially his skill of blending new additions to old houses. It helped, too, that RhodesÆ good reputation was known in the HallsÆ business circle.

 

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Rhodes visited the house, heard the goals of adding informal space in the back, and assured the Halls that he was going to take care of them. He directed them to architect Bill Andrews and told them to let him know when they had a design. "We recommend Bill often," says Rhodes. "WeÆve done 20-plus jobs with him. We have three or four architects we work with in this market. We try to keep each other in mind and take care of one another to create a team concept." The Halls interviewed and selected Andrews to do the job. After a few drafts, the design concept ended up knocking out the whole back of the house, enlarging the kitchen, and turning the old garage into a family room.

By the time Rhodes came back into the picture in February 1995 to present a construction estimate, the Halls "were anxious to get going," he recalls. "They were living 30 minutes away, and wanted to be in Knoxville." The $179,312 estimate was built around AndrewsÆ floor plans and elevations, but the architect had been asked to specify few finishes. "A lot of it was æmatch existing,Æ" says Rhodes. During the estimating process, Rhodes helped the Halls come up with details, but a number of product selections were left for later. Without hesitation, the Halls signed a time-and-materials contract based on the cost estimate, a proposed allowance for product selections, and a projected completion date of July 15. "We hadnÆt decided on finishes, but they knew the cost was going to change," says Rhodes. He had explained that the cost would be a "moving target" with a time-and-materials project.

 

The remodeled house makes a graceful "L" just as it did before, but the space under roof in the new wing is completely different. A three-car garage hogged the shape originally.

 

Demolition began about two weeks later. So did the changes. First came the walls. Schmid & Rhodes had planned to tie the addition into existing walls, but discovered during demo that the walls were badly water damaged and had to be replaced. Then, as the Halls focused on the kitchen, they decided to do much more than originally planned. Not only that, but many of the products the Halls selected, including fine cabinets and bookcases, marble counters, brass door hardware and high-end lighting, exceeded allowances. By the time the job was completed, allowance overages totaled $49,000.

And then there were the change orders, all $59,760 of them. Most came up in RhodesÆs informal daily conversations with the Halls, or the weekly budget and progress meeting. Fine-tuning in the family room and kitchen ranged from adding exhaust venting to changing lighting locations to installing raised panels instead of columns. But most of the additional work, notably interior painting and re-roofing, spruced up other areas of the house.

The remodeled garage space contains a family room, new and enlarged kitchen, bonus room and veranda. There's a three-car carport around back. Window patterns, proportions, clapboard siding and dentil work exactly match the original colonial house. A new roof completes the seamless connection.

 

Rhodes accepted the work with a smile. The fact that it was varied and spread around the house made it easier to fit into the schedule. Rhodes subcontracted everything on the Hall project. At any one time, he had six to 12 workers on site, including carpenters and trade contractors. While they were framing for the addition, he says, painters were busy in the existing house. When the Halls decided to re-roof the whole house, it was easy enough for Rhodes to line up a roofing crew. Handling all the changes "didnÆt seem chaotic," he says. "ItÆs not as if they doubled the size of the room [addition]."

Rhodes says the time-and-materials system takes the worry out of ever-expanding jobs such as this one. His clients like the flexibility of making changes and being able to do so without cumbersome change order procedures. Some days two or three changes were made on the Hall job, he says; change order red tape would have bogged the schedule. Since the company subcontracts most labor, they can easily add on to the project. Rhodes says. "Our resources are more extensive [than if the company used more in-house trades]." A few later projects were pushed back a bit because the Hall job ran long, but those clients didnÆt mind.

 

Budget History
Budget History
Budget History
Budget History
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Budget History
Budget History

One of the biggest challenges of the project was matching the new millwork to the houseÆs existing trim. Recognizing a potential production obstacle, early on Rhodes took sample pieces to a mill shop, which started working on duplicate knives to get the proper profile. "They got it," says Rhodes, and began fabricating new trim, which was ready and waiting when installation began in May.

The only replicated detail that caused real problems was the hidden guttering. "That was trying," Rhodes says. Built into the soffits and eaves, the gutter system looks great, but is inclined to fail. Sure enough, the system backed up during a thunderstorm within months, and Rhodes came out to fix it. Now heÆs put a more reliable solution in place: The Halls are on a maintenance program to clean their gutters regularly.

A breakfast area forms an open connection between the all-new kitchen and the family room. Random length hardwood floors and classic white cabinets continue motifs established in the original 1920s house. The design first called for columns at the juncture of kitchen and family room; the Halls opted for raised panel work instead, believing it tied in better with the rest of the house.

 

Midway through the remodeling project, the Halls moved into the house. From May until August, they lived upstairs, shielded from the first floor work site by plastic sheeting. They never lost their cool. Rhodes says the Halls were great to work with. "They were realistic and appreciated your work, [which is] extremely motivating to tradespeople."

Despite the load of additional work orders, Rhodes managed to wrap up the project by Aug. 5. Actually, "it was very difficult to know when the job stopped," he says. Since the Halls kept inviting Rhodes to take care of remodeling projects around the house, he declared the big job over in August and opened a new file for maintenance work.

Many of the Halls' selections, including fine cabinets and bookcases, contributed to the graciousness of this 80-year-old colonial remodel.

 

The Halls are enjoying their new kitchen and family room and the new patio out back. When they catch a glimpse of the major remodel under way next door, they feel especially fortunate.

"ItÆs a major mess," says Hall. "I feel so sorry for [the neighbors]. If you donÆt have good subs, youÆve had it. I do think it helps when you know your builder and his reputation. I really feel like I was lucky to find David. He made sure that nothing went wrong."

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