Today, when I Googled “fixed price tender”, a Wisdom Homes website page about their Five Star Pledge comes up as the 6th result. It’s only preceded by pages offering definitions of the term and some forum threads all asking what it means to have a fixed price tender. If I can find a cheaper fixed price tender from another builder for a similar house, wisdom will beat it by $1000!
So I guess you could be forgiven for thinking that a fixed price tender will be, well, fixed. That you could actually compare it with another fixed price tender easily. Imagine the surprise you’ll get when your fixed price tender has words like these in it:
- to be costed when…
- by owner
- note only
- subject to….
All these words mean that the price at the bottom of the tender could change.
Here is where to look for those change words in your tender:
- Piering. In our tender it actually says “Provide concrete Piering (Fixed Price) up to 1.5m deep.” The next sentence says “Should additional piering be required, any extra costs will be charged to the owner.” What this means is that the “fixed price” includes all the piers up to 1.5m deep. If any particular pier needs more than 1.5m, we’re going to be charged extra. Other builders work it as a combined allowance. For example, you might be allowed 90m worth of piering. So if all the peirs add up to be 90m you’re ok, anything over and you’re charged. In some cases, anything below 90m will be credited back to you. Our clause doesn’t say anything about crediting us back if all the piers are well under 1.5m. And then there is the trust issue: unless you’re watching them pour the concrete how will you know how much piering you actually used?
- Service connection points. For sewer, water, stormwater, phone, NBN, electricity, gas. They will all say “within … meters of the building”. So, for example, our sewer connection is included if it is within 10m of the building and connecting to an existing junction point within the site boundary. If the sewer connection point is 11m away from our building we pay extra. If the junction point is not installed on our site boundary we pay extra. This can be an issue with big blocks, or where you need to set the house a long way back from the road (typically these connection points are installed adjacent to the street)
- Earthworks. Our equal cut and fill allowance is for 1m of fall over the block. If your block is really sloping and needs to be levelled out then you will be charged extra.
- Retaining walls. If you need a retaining wall installed to correct the slope of your block, it’s extra.
- Tree removal. If you’ve got trees to clear, more $$. Same goes for long grass and debris. If someone has left their rubbish on your vacant lot it needs to be cleared before site work commences or you’ll be charged for its removal.
- Footpaths. If you have a council footpath along your block any damage to it could be your responsibility.
- Subject to developer, council and statutory authority conditions of approval. If the developer/council/anyone who needs to approve your plans asks that you change your plans for a particular reason, you’ll be charged. If there are extra fees for resubmitting your plans for approval after the changes have been made, you’ll be charged for that too.
- Flooding. If your land is affected by flooding you’re up for more money. This could be in the form of consultant fees, flood reports, surveys or corrective measures.
- Building adjacent to sewer. If your house is to be built near a sewer line then a peg out fee may be charged. Then, if any changes need to be made then you’ll be charged for those too. Our house will be adjacent to a sewer and I don’t understand why they simply cannot cost these changes seeing as we know it’s there. What they have done is put in a $2000 provisional allowance to cover it. But, this means if the price of a peg out fee (currently $910), for example, changes between now and when it is finally costed we will be charged the increased price. If extra piering or other concrete is needed we will not be charged today’s price, but the price when it is actually purchased. I’m told the reason they cannot cost it right now is because the block is unregistered.
- Stormwater Hydraulic engineers design. If your council requires a hydraulic engineer to give their ok to your house design to make sure you’re not adversely impacting the stormwater system you’re going to be charged. I’m not sure why the builder cannot find out now if this will be required and cost it. The clause just says “note only” and there has been no allowance made for it.
- Standard fees. Standard development application fees should be included. Any other application fees will be charged to you.
- Council damage bonds. Some councils require you to pay a bond (around $1000) in case you damage some of their assets (usually footpaths and kerbs). The builder will probably ask you to pay that even though you won’t be the one driving the excavator that will likely do the damage!
- Subject to developer approval. If your developer, like ours, wants to approve everything from your choice of brick to your external paint colours and plant choices then this clause is likely. Ours says that if modifications are required to suit the developer then we will be charged.
- Restrictions as to User. Because the land is unregistered the Section 88B is not available. This document outlines restrictions on how the land can be used. For example, if there is an easement. If your plans have to change because of this then you’ll be charged.
- Impact on adjacent lots. At the moment there are no other houses next to us. If there is before we lodge our plans for approval then we will need to pay for a footprint survey to confirm the setback of our house lines up with the other properties.
- Bushfire prone areas. We have been given a provisional allowance to cover whatever is needed to make our house bushfire safe. If it costs more, we’ll be charged.
- Changes to State Legislation. If legislation changes and affects a part of the build then you’ll be charged.
- Changes to taxes, charges and levies. If one of the approving authorities changes their taxes, charges, levies or pretty much anything else, you’ll be charged.
I think that’s it.
A few of these things are because the land is unregistered. The developer is stipulating the building contract must be signed before we can settle on the block. They allow 21 days between registration of the block and settlement. 21 days is not enough time for the builder to find out all the unknowns and then get the tender and plans back through estimating and drafting. So we’re stuck with it the way it is.
In my opinion, this should not be called a “fixed price tender”. I think its false advertising.
There are other builders who do offer something that looks much more like a true fixed price. Check out Anne and Alok’s blog for a good example of this. There were a few things for them that changed after the tender and the builder coughed up for it. That must have given them some peace of mind.