Project Manager Fees

[K M]

Any advice on how to pay a project manager? I come from an engineering background and one method for bidding on projects is a 'cost plus' model. So cost of materials plus X%.

Would this model work with a project manager on a rehab project? Something like 20% over cost. So the investor would get multiple bids from each subcontractor, pick the best based on all factors (price, reliability, professionalism et al.) The PM would get paid based on when the draws are done for each of the subs.

This way the PM will not pad the cost of the subs so his % gives him a higher draw.

Does this make sense? Just looking at options for how to manage a pm.

Thanks!

[David Marr]

Ah, this is what I do! As you can see in my signature line, Construction Services. I am a PM for hire and this is how most of my clients pay me.

I have one client that pays me a flat weekly fee + expenses + a per diem for travel if necessary. he negotiates all contracts then gives me his schedule, I make revisions and then we discuss. When we are done, we have negotiated on the time frame and if I go over the agreed schedule I work for free, however, if I complete the project early then I get a bonus, usually the remaining weeks + $5-10k depending on size of project.

The rest of my clients pay 15% of construction costs + expenses + per diem if necessary. They have me do the bidding with their drawings, I present them with the bid results and they select the subs. Their architect sets the schedule and before I sign a contract I review the schedule to see if it's reasonable, if it is, I sign and commence construction. If it's not, I meet with the client and their architect and discuss the schedule. If I bring the project in early and within 1% of the budget (over or under), I get a 5% bonus. For each percent over 1% over budget, I lose a percent (i.e.: 3% over = 3% bonus) Note: Most of my projects are commercial and in the $250k to $600k range so my bonuses are substantial.

Quality in materials usually isn't a problem because most of my projects have national suppliers and the subs for the most part are just bidding their labor.