California Market - Construction Estimates

Force Majeure Clauses

​Now, more than ever, in this inflationary period it is important to be aware of situations that are out of the contractor’s control. Most contract these days will have a force majeure clause in their contract. Force Majeure is a French term that literally means "greater force”. This can refer to acts of God, war, adverse weather, tsunamis, earthquakes, forest fires, road closures, etc… Actually it covers anything that is out of the control of the contractor.

​Governor Newsom’s new California EPA Standards are the reason for the shipping crisis at California ports. Today, it is reported that approximately 167 ships are sitting out at sea waiting to unload. Cargo ships are anchored offshore of California because the ports are jammed with containers waiting for trucks. It’s all because the new regulations in California for trucking companies are so strict. Few companies can afford the new compliant trucks. Newsom effectively cut the trucking capacity in half by making the air standards so strict for these vehicles. Bottom line: There are not enough compliant trucks to clear the docks. Steep fines are issued to trucking companies that do not have compliant vehichles and therefore they’ve been forced to stay out of California.
 
This supply line issue may affect projects because many of the building materials have been coming from overseas. Your building materials may only be a few hours away, but government regulations implemented too forcefully have created a crisis. Therefore, force majeure is in effect for building supplies and project pricing.
 
Couple this with the current rate of inflation and you have a very challenging work environment.

California Market - Construction Estimates

Future Solution: Alternative Currency
 
In this article when we say Central Bank [CB], The Fed, or Federal Reserve we are referring to the private Western Central Bank that controls our U.S. fiat currency.
 
As the Federal Reserve note (U.S. fiat currency) loses more and more value we were not surprised when several clients started asking us if we might accept alternate forms of currency. Bitcoin and silver are two subjects that have come up in conversations. We had already been thinking ahead to this possibility before the question ever came up. So we have a little forward thinking on the matter.
 
At this stage we do not have anything solid planned, however, we are in the research phase with regard to alternate currency acceptance.
 
Currency Watch – Texas
Texas Governor Abbott recently created a Block Chain Committee to head up the increased mining of Bitcoin. The head of the new committee recently introduced a proposal to make an amendment to the constitution that would allow homeowners in Texas to pay their property taxes with Bitcoin.
 
Currency Watch – Florida
Last week it was reported through independent journalist that Miami was considering a plan to pay city workers with Bitcoin.
 
Currency Watch – California
Governor Newsom recently signed a bill calling for a new public banking system in California. This is obviously a step connected to the central bank agenda to try and migrate fiat currency users into their new system. However, the Newsom plans have been a disaster across the board. He cannot even get merchandise ashore at our ports due to his own increased EPA air standards which makes half the trucks in the U.S. non-compliant. This means fewer truckers are able to pick up containers from our ports. As of today there are approximately 157 ships backed up off Long Beach and Los Angeles ports. This just further contributes to the whole problem of inflation and supply line shortages.
 
Central Bank [CB] Push Back
Obviously, any conversation about ditching the U.S. fiat currency and migrating to cryptocurrency is going to be strongly opposed by the Central Banking system (i.e. Federal Reserve). Remember, though, the Fed is not actually Federal, it is a private banking corporation. They want to introduce their own form of digital currency and tie it to carbon credits, but you know it will come with a central ledger that they can control. The block chain technology is not a central ledger so you really can’t cheat and you can’t just print more money like what they are used to doing.
 
SEE PART 2 OF THIS BLOG – Friday October 22, 2021

Disclaimer - Truplans Inc is not a financial investment firm. These blog articles are the opinion of the executives only. Always seek advice from a qualified financial planner when making financial decisions.

Riverside, California
Architect Plans for Rear Elevation Home Extension

OC Kitchens project (Mark Horton Constructions) in Riverside. New extension of family room, bedroom and bathroom are in the preliminary planning stages.

Truplans Inc is preparing to begin the design process for this Riverside home. We will be producing the design, architect planning documents, structural plans and acquiring permits for this home improvement project.

California Market - Construction Estimates

Solution #1: Scaling Back To Essential Space

It is the month of October in 2021 and Americans are all starting to feel the pain of inflation. In some cases hyper-inflation. We were told by our government and the Fed that inflation was 5.15% over last year, but that’s not what we’re feeling in real life at gas pumps, restaurants and with construction prices. In the grocery store Beef prices have doubled just in the past month or two.

Inflation & Hyper-Inflation
The Federal Reserve (not actually Federal at all, but private) started out this year telling us that inflation will be transitory. Yesterday they announced that we should get used to it, that inflation is probably going to be with us for a while. Thank you, but we already knew that based on basic math and the evidence around the world that the central bank fiat currency is failing and hyper-inflation is occurring everywhere. Lebanon’s fiat currency has already collapsed with hyper-inflation and the electricity went out to the whole country last weekend for a whole day because the government could not purchase the fuel for the two sustaining power plants.

Upcoming Blog Special: Solution: Alternate Currencies

Construction Contract Prices Go Up – What Next?
Since Truplans Inc secures a good number of construction permits each month throughout California we see the immediate impact of inflation in our industry. Homeowners that received construction quotes at the beginning of the planning process are shocked when the project is requoted based on approved plans. Like a weed growing in your garden you don’t see the growth daily, but come back after 4-6 months and it’s surprising how fast it raised it’s ugly head.

Solution #1 – Essential Space Only
Many homeowners realize that it is still a very good idea to put their cash into their home and property. Home improvement seems to be a much safer place than leaving your money anywhere in the central bank’s declining system. However, inflation has caused budgets to be exceeded and homeowners are scaling back on the scope of their projects. Over the past several months we have seen many major projects scale back their design to essential space only. Many had designed beautiful additions with lots of new functional space. The effects of inflation are very real.

​Scaling back means reprioritizing and building only what you need verses what you want.
Scaling back is the first and obvious solution. We will talk about other solutions that are becoming apparent in upcoming blogs.

Disclaimer - Truplans Inc is not a financial investment firm. These blog articles are the opinion of the executives only. Always seek advice from a qualified financial planner when making financial decisions.

California Market - Construction Estimates

UNDER-PRICED / PAY FOR IT TWICE
What happens when a project is under priced?

It might seem like you’re getting an awesome deal, but if a construction quote seems too low compared to others you should ask why. The contractor may never have told a lie is his life. What happens, however,  when your contractor, striving to be both honest and competitive amidst rising prices, unknowingly quotes your project too low? Do you think you’re getting away with a deal?
 
You might think you are getting a great deal, but a construction price that is too low should raise your concerns. Here’s my experience;
 
During the 2008-2009 market collapse I was asked to come to evaluate a two story addition where the contractor had walked off the job. The roof was still open to the sky and I thought what a dirty contractor he must have been. When I saw the scale of the project and after asking a few key questions I began to realize what had happened.
 
ORIGINAL QUOTE?
One of the questions I asked was, “How much was the original contract?”. The homeowner said the whole job was contracted for $75,000. This was an immediate red flag. I knew by experience that ball parking the project should have been around $150,000. They said the contractor kept asking for payments earlier than expected until they had paid everything and the project was only half done. It did not take long to figure out what happened here. I told the homeowner that the contract amount should have been more like $150,000. This is why the project was only half done. The contractor went out of business on this job because he had failed to properly quote the project.
 
COST TO COMPLETE (Double the Original Contract Plus)
Walking in on a failed project is not so simple. Completing the remainder of this project would undoubtedly cost more than $75,000. The original price tag should have been around $150,000. To add to the problem as a contractor starts running out of money they start taking short cuts. Yes, shortcuts had been taken that needed to be fixed in order to pass inspection. Damaged insulation that was sitting in the open attic had to be thrown away. The new contractor is also in a bad spot. They like pleasing their clients and don’t like walking into a nightmare situation. No matter how hard they try they can’t make up for the unexpected additional funds the homeowner needs to raise to complete the job. There is just no easy solution for a failed project. Everyone loses.
 
BEST PRACTICE TO AVOID NIGHTMARES LIKE THIS

• Get multiple quotes. And then Get more quotes!
• Question everything. Especially when the quote seems a little too low.
• Throw away quotes that seem too good to be true.
• Don’t make your decision solely based on contract price.
• Understand that some contractors will give a “too low price” unknowingly.
• Remember that other contractors might give low prices intentionally. Then they raise the price through change orders because “this and that” were not included.
• Be ready to scale back your project if no one can meet your budget.

California Market - Construction Estimates

Construction Inflation 2021 Briefing
In this series we will talk about what you can do to have a successful project within budget.

TRUPLANS INC
Orange, California
 
Chris Doering - CEO Briefing
  As the founder of Truplans Inc I have worked in and around the residential construction market for eighteen years. During all of these years I have worked in three main areas;

1. Construction design & planning (both architectural and structural)
2. Construction estimating (small remodels to million dollar rebuilds)
3. Construction management systems

 
Being engaged in these three areas has given me a pretty good bird’s eye view of our industry mainly in the Southern, California market.

  As an expert estimator for several brands I could provide a fairly long list of tips, do’s and don’ts when securing construction estimates. This is NOT my focus in this blog series. Today, the real looming challenges facing every general contractor are the following;

1. Inflation
2. Supply Line Issues

 
This blog series will address both inflation and supply line issues.
 
The Big Question
How much is my project going to cost when the plans are ready?
  The second half of 2021 is proving to be a real challenge for contractors and homeowners alike. Prices keep going up for every category of construction. We will attempt to tackle this question over the next few days in this series of articles in this blog. 

Some Recent Issues Industry Wide

Insulation
Some projects are stalled waiting for insulation materials to arrive. On top of this the prices for materials have been increasing every two weeks.

Windows
Windows used to take 1-3 weeks to deliver. That changed in 2021. Some manufacturers like Milgard started taking 3 months from the date of order. The current delivery time for windows today has increased to approximately 4 months. This is a supply line issue that affects construction efficiency and profitability.

Warning: General contractors strive to give you a good price because they want to be competitive. As the economy changes rapidly contactors might be giving construction quotes based on old pricing information. This could easily put dozens of contractors out of business as they unknowingly misquote your project.

This is NOT good! You might think you are getting a good price, but if the contractor cannot finish your project for the price quoted both the homeowner and the contractor lose. See example in upcoming blog this week.