Detailed Scope of Work vs "Turnkey" SOW Language

[David Robertson]

A recent forum discussion talked about how an investor's scope of work said to include "EVERYTHING" in their proposal to 'gut the property, buy materials and rehab per plan.'

Long story short, the contractor did not have dumpsters and there was some mis-communication and heart burn over additional costs incurred by the investor.

http://www.biggerpockets.com/forums/67/topics/1636...

This got me wondering...Can a Scope of Work ever be TOO detailed?  

Do you provide a detailed Scope of Work that lists every work item to be included within the contractors proposal?  

Or do you use language such as "Turnkey remodel to furnish and install kitchen, bathrooms, etc?

Which Scope of Work do you feel provides the best protection for an investor?  A Detailed Scope of Work or a more General "Turnkey" SOW?  Maybe a Hybrid?

Does providing a detailed SOW excuse a contractor from bidding items not specifically listed?  

...I personally get as detailed as possible...my last house included an 8-page scope of work, but I'm wondering if that was to my detriment?

[David Robertson]

For Example: Specifically on this project, my detailed scope of work missed the floor patching and joist reinforcement that was required when we reconfigured the bathrooms.  This work was not specifically listed on my SOW, so the contractor did not include it in his proposal, resulting in a Change Order.

If I would have used "Turnkey" language, would/should a contractor based upon his experience, knowledge and expertise know that this work would likely be encountered and include it in his proposal?

[Aaron McGinnis]

The scope needs to be precise. I dislike the verbiage you're referring to as 'turn-key'...

Good:
* Install new cabinetry per attached layout using XXX manufacturer and YYY finish
* Install grade 2 granite and 11" overhang on bar
* Install backsplash, XXX tile, YYY pattern
* Install grade 2 oak flooring, stain and 2 coats polyurethane, standard non-mix minwax color
* Remove wall between kitchen and dining room PER ATTACHED FLOOR PLAN
* Install new Frigidaire Gallery Stainless Steel appliance package (Range, Microwave, Dishwasher, Refrigerator)
* Install XXX Kitchen Faucet
* Install 3/4HP Badger Disposal
* Rough and Trim out for electrical and plumbing to code PER ATTACHED PLAN
* 20 yard dumpster
* Labor for demolition per plan
* Portapotty
Total: $50,000

Bad:
* Renovate kitchen and remove wall between kitchen and dining room as discussed
* Install new appliance package
* Install new fixtures
Total: $50,000

Equally bad -

* Install new cabinetry per attached layout using XXX manufacturer and YYY finish
* Install grade 2 granite and 11" overhang on bar
* Install backsplash, XXX tile, YYY pattern
* Install grade 2 oak flooring, stain and 2 coats polyurethane, standard non-mix minwax color
* Remove wall between kitchen and dining room PER ATTACHED FLOOR PLAN
* Install new Frigidaire Gallery Stainless Steel appliance package (Range, Microwave, Dishwasher, Refrigerator)
* Install XXX Kitchen Faucet
* Install 3/4HP Badger Disposal
* Rough and Trim out for electrical and plumbing to code PER ATTACHED PLAN
* 20 yard dumpster
* Labor for demolition per plan
* Portapotty
* Use 10x 2x4x8, 10lf 12x4 LVL, 1x5lb box framing nails, 15lf 3/4" CPVC pipe, 1 bottle CPVC glue, 4x 45deg CVPC fittings, etc... (Ad nauseum material list)
Total: $50,000

--------------------

So as the members of the class have already figured out... getting overly detailed is bad. The customer doesn't need to know that we're going to use eight 2 by 4s and 15 CPVC fittings. 

They DO need to know what's getting framed and where, where the faucet is going and what kind... etc.

In this scope, if we take the floor up or the drywall down and there's a thousand termites... that's a very easy change order to justify and a very easy change order to understand. 

What gets missed in too many interactions is believing that a straight binary text list of what's going to happen should constitute an entire scope or contract. In addition to the scope above, we'd typically have a floorplan, renderings, elevations, and a full length contract that specifies what we're responsible for and what the customer is responsible for. (Example: We're responsible for all demolition materials. Customer is responsible for making sure utilities are turned on and that the bill for said utilities gets paid.)

A lot of 'investor friendly' contractors don't want to go to this level of detail (and most investors don't want to pay for the additional design/administrative work) because... it's expensive to generate things like floor plans, elevations, renderings, and a full blown contract. 

That's where a lot of the problems come from... not making sure that the relationship is well spelled out between investor and contractor. If things like dumpsters and portapotties (AKA: Site services) aren't well spelled out, who's to say who is responsible for paying for those things? (Although in Georgia the law comes down on the side of the contractor making the property owner pay.)

[J Scott]

If you leave things generic, you'll likely find that smart contractors will do one of two things:

1.  Ask for more specifics

2.  Pad their estimates by a lot so they don't have to worry about overages

Best case, you're going to pay the same as if you did a detailed scope of work from the start (since they'll require one) and worst case, you'll overpay.  Providing a generic scope of work to a smart contractor will never save you money.

Now, providing a generic scope of work to a bad contractor may save you money, at least until he realizes all the things that his bid didn't include and he walks off the job.

Also, if you're not specific in your scope of work, what's to stop the contractor from using the ugly countertops that were on sale or the pink and blue cabinets that he purchased used off of Craigslist?

[David Robertson]

@Aaron McGinnis @J Scott  Thanks for the great responses!  I tend to agree that the more detailed the better, but there is definitely such a thing as being TOO detailed...

On my last project I provided a 8 page scope of work detailing each work item on the project and provided 3 pages of floor plans (Existing, Demo, & New) using an online design tool. 

Even with that level of detail, I still managed to miss a few miscellaneous items that resulted in change orders.  That's why I was curious if adding "Turnkey" or "Everything" language may help cover any missed SOW items that should be reasonably anticipated by the contractor based upon his experience (i.e. subfloor patching/joist work at relocated waste lines for bathroom reconfiguration)...

Obviously, you can't foresee every issue, which is what contingency is for...But the more prepared and detailed you are upfront, the better off you'll be in the long run.

[J Scott]

Originally posted by @David Robertson:

@Aaron McGinnis @J Scott  Thanks for the great responses!  I tend to agree that the more detailed the better, but there is definitely such a thing as being TOO detailed...

 I disagree that you can ever be too detailed.  If you're concerned about missing something obvious, have the contractor walk through with you and double check your work.  If you're concerned that there is something hidden and you want to put the risk on the contractor, that won't work with good contractors -- they'll jack up the price to cover any contingencies like that.

So again, being general will never save you money with good contractors.