Like many other service providers, commercial painting Tracy companies are there to make a profit. However, profitability depends on several factors, including how they contract with customers.
The two standard contracts are:
- Fixed-price
- Time and materials (T&M)
Are you thinking about having your breakroom kitchen or reception area repainted? How about your old facility needing a fresh coat of paint? Whatever painting job you have in mind, the cost is undoubtedly at the top of your mind.
So, which contracts to choose, and also, how to choose? This guide aims to dig deeper into T&M and fixed-price contracts.
Fixed-price contract
A fixed-price or flat-rate contract gives the client an exact price or rate for the project. The contractor will deliver the project for that price regardless of the hours and material spent.
Transparency is one of the most distinctive attributes of the fixed-price contract. The contractors are getting paid for their skills and expertise instead of the hours they spend on the project. For the client, this type of contract means they get the results they paid for – there won’t be any surprise charges.
Under this contract, the customer may agree to pay for the project in two ways:
- In full once the job is completed;
- In installments as the project continues. In this payment option, the client pays the initial deposit and the remaining amount in installments as each project stage is completed.
The fixed-price contract is good when the scope of the project and the necessary expenses are clearly defined.
Here’s an example: an experienced paint contractor knows the price of paints, materials, and labor for a project that costs $5,000. Therefore, the contractor is most likely to go for the fixed-price contract that, after building in a profit margin, sets the project’s total cost at $6,200.
Don’t use the fixed-price contract when the project is bound to change as the job progresses or requires custom jobs or jobs with a lot of detailed work. It is also not suitable for large and complicated paint projects.
Time and materials (T&M) contract
A time and material, or T&M, contract is suitable for larger projects with less up-front certainty regarding the full scope of work. It also allows flexibility and change orders in project details.
Under the T&M contract, the project can start and stop at any stage. This contract allows the client to control the costs down to the material level. It also lets the client know where and what was paid for during the job.
Here’s an example: a painting contractor is tasked with a project to paint a new ten-story office building. Under the time and material contract, the contractor and client agree to set the rates for the specific elements of the project – namely, the time (labor), paints, and materials to paint the office building. However, the total final cost of the project – which builds into the contractor’s profit – is not determined until the project is completed.
The client may set the maximum amount on how much they will spend on the project. As a form of protection, the client may stipulate a clause that ensures the project’s cost would not exceed that set amount.
Commercial painting projects typically deal with large spaces, often with complicated layouts. The challenges of working in different shifts and around customers and employees add to the complexity. The time and materials contract is best for such projects, typically delivered in (often irregular) stages. This contract is also best for repair and maintenance projects, custom projects, or projects that involve a lot of detailed work.
Avoid this type of contract when you have a limited budget for the project.
Fixed-price vs. time and materials contract – which is best?
Determining which contract is “best” depends on several factors.
Use the fixed-price contract when:
- The project is small in scope.
- The scope of the project and its requirements are clearly defined.
- The painting contractor has previously completed similar projects.
- The time and materials required to complete the project will likely stay the same.
Use the time and materials contract when:
- The project is large and complicated in scope.
- The project requires a relatively long period to complete.
- The requirements for the project cannot be estimated upfront correctly.
- The project is new to the paint contractor.
- The time and materials required to complete the project will change over time.
Custom Painting, Inc. understands that every project is unique, so we offer flexible pricing plans that best suit our clients’ needs.
Now you know how a painting contract works! If you’re looking for a commercial painting Tracy professional for your business, contact us for a free estimate for your painting job.