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Just when you think you can spot a lemon of a remodeling job, along comes a lemon that turns into lemonade. The project that Gehman Custom Remodeling completed for David and Terri Wyher this summer is a thirst-quenching case in point.
At first the project looked straightforward enough — exterior repairs and a few other things. But check out this recipe for turning a job sour:- The contract price was about $43,000. Additional work ballooned the total price by more than 270 percent.
- More than half of the nearly $74,000 price on the changes involved unwelcome necessities: repairs to structural problems uncovered around the house.
- Just 12 years before, the Wyhers had paid to remodel the kitchen and add a family room, a third-floor bedroom, a third garage bay and a master suite over the garage and kitchen. Nearly all the structural problems began with that "home improvement."
After photos by Don Pearse Photographers Inc.The acid factor of this job was enough to give both clients and contractor heartburn. Instead, by the time this project was completed in July 2005, the Wyhers were so pleased that they'd already signed a second contract to remodel two second-floor baths. Project manager Tom Moyer was hoping to be assigned to the Wyher house again.
What saved the experience? Smart problem solving, skillful communication and sound construction practices.
Gehman designed new shelving for this cabinet, which now wraps around a load-bearing steel column.Warning signsHaving heard good things about Gehman from several sources, the Wyhers went straight to the company in early August 2004 to take care of a few needs on their 1979 home in Blue Bell, Pa. The project included replacing gutters and downspouts, re-pointing the chimney and capping the cornice. The Wyhers also asked Gehman to box out a bay window, put in a new front door with sidelights and insulate the garage. Before work began they signed a change order to renovate a powder room, plus make a few improvements to their home office.
As long as Gehman's crew was there, Wyher wanted them to fix what he thought was a cosmetic problem — the warped and bowed plywood panels flanking the refrigerator. Sales consultant Gary Hoch presented preliminary numbers to Wyher for most of the work, but not for the problem in the kitchen. Hoch thought that the extreme bowing of the panels suggested serious structural trouble, as he could find no moisture issue to explain it. Plus, the prior remodel had made large cutouts in the back wall of the house to open the kitchen to the family room addition. The refrigerator sat in the old wall location.
When the refrigerator could not be budged, the truth became clear, says Dennis Gehman: "The refrigerator was holding things up."
The news came as a bombshell to the Wyhers. In early December they signed a letter of intent to proceed with work only on the exterior and the powder room.
As Gehman's production staff proceeded, they spotted more potential structural problems. The brick veneer was pulling away as much as ½ inch from the front of the house. The front door was dented on top, the header above it seemed to be sagging, and there were large diagonal cracks in the drywall on adjacent walls.
The old front door had a dent, and the undersized 2x10 double header was overstressed. Gehman replaced one of the header beams with an LVL beam, installed a new door and covered the wallpaper cuts with molding.Delivering bad news"When there are problems, we always try to communicate clearly, early and often," says Gehman. He spoke repeatedly with the Wyhers to discuss the bad news and recommended hiring an engineer on a time-and-materials basis to analyze the structural issues.
The Wyhers vetoed the idea, hoping that the architect of the 1992 remodel — who also had acted as general contractor — would help. When no help was forthcoming, they let Gehman bring in engineer Maureen Purcell.
Before
A couple of weeks later Purcell surveyed the foyer, front door and brick veneer area. She discovered that the third-floor shed dormer addition was inadequately supported and therefore "transferring a lot of weight to the front of the house," says Gehman. That weight pushed out the brick veneer and caused the ceiling over the powder room, foyer and front wall to sag. Exacerbating the situation was the fact that the double 2×10 header over the front door was undersized and severely overstressed.
In the meantime, project manager Al McCarthy handled the powder room conversion while Moyer focused on the exterior, the bay window and the garage.
Moyer quickly discovered that the fascia was "a pressed composite wood [that was] saturated with water and crumbling" away, he says. He replaced it with aluminum before installing new 2×6s, cornice capping and gutters.
Inside, McCarthy discovered that the powder room floor was alarmingly out of level. "In this 5- by 6-foot room, the floor sloped 1¼ inches," says Gehman. "Someone had cut a floor joist to get a pipe in and never fixed it." McCarthy sistered new joists to support the floor, and proceeded with the room remodel, laying new floor tile and installing new fixtures.
"By this time Gehman had total credibility with me," says Wyher. When Gehman came to talk with him about the engineer's report, Wyher trusted his straightforward approach. "He said, 'These are the problems, we had a highly qualified engineer look at it, and these are the recommended repairs,'" recalls Wyher. "He essentially said, 'This is the right thing to do. We don't want to deal with the problem just cosmetically.' He had a complete work order that detailed everything that needed to be done."
Wyher readily signed the $25,792 work order, as well as the $14,128 one Gehman presented soon after to fix the structural problems affecting the front of the house.
Sweet solutionsTo resolve the foyer problems, the attic floor above needed to be stabilized, and the beam over the front door reinforced. Moyer braced the attic floor with ¾-inch tongue and groove plywood crisscrossed with a 2×4 X. Then he removed one 2×10 wood beam from the double 2×10 header over the front door, replacing it with an LVL beam.
In the kitchen, because the sagging beam wasn't positioned over the existing foundation, the engineer called for a new column next to the refrigerator. It would be supported below by steel reinforcing rods embedded in concrete. The unaesthetic column had to cut through a custom base cabinet, the granite counter and a soffit.
Instead of the 3½- by 5½-inch column specified by the engineer, Gehman suggested using a less obtrusive, equally strong 3- by 3-inch steel column. A fabricator notched a slim opening in the granite, then Gehman staff trimmed the column in fluted panels and crown molding.
"We went back three times until the Wyhers felt good" about how it looked, says Gehman. "We probably used a half inch of joint compound in some places" to disguise the ceiling sag above the soffit, he adds. But it worked.
"I went from crestfallen to really happy," says Wyher. "The column is almost an improvement."
In fact, the way Wyher sees it, "Gehman improved the whole house. All the issues have been addressed and taken care of." And all the unforeseen work added only about four weeks to the schedule. "I'm very pleased with Gehman and his company," says Wyher.
The Financials
Even with more than a dozen additional work orders, Gehman Custom Remodeling maintained tight control over the profit margin on the Wyher job. The gross profit was budgeted at 44.5 percent and came in almost 2 percentage points higher than that. Dennis Gehman says two financial tools account for that success: across-the-board use of a spreadsheet template and application of productivity ratio guidelines.
Estimating: "We use the same estimating tactic for new work and additional work orders," Gehman says. The company's Excel spreadsheet template itemizes all hard costs plus job-specific expenses such as project supervision time, cleanup time and travel time for crews. Using the template even for change orders "keeps us from missing something," says Gehman.
Productivity ratio: The template builds in a 40 percent gross profit margin, but that may be raised after the productivity ratio is calculated. The goal on all jobs is a 5:1 ratio of revenue to payroll.
"We take the gross sale of the project and subtract direct subcontractor costs. The number that is left is then divided by the direct labor costs for the project. Essentially we're shooting to bring in $5 for each $1 we pay out in payroll for direct project-related costs," says Gehman.
Because there were numerous unknowns on this project, the estimator budgeted a gross profit margin of 44.5 percent. That "gave slippage room of 4.5 percent and we would still be at our target," says Gehman. In fact, parts of the project went more smoothly than anticipated, so the gross profit margin increased.
| Initial and final estimate | $42,949 |
| Change orders | |
| Powder room | $26,986 |
| Replace rake/fascia | $4,231 |
| Replace rotted windows | $799 |
| Structural issues | $25,792 |
| Attic structural repair | $14,128 |
| Doorway structural repair | $1,608 |
| Extend exhaust vent | $240 |
| Replace jack studs | $312 |
| Paint credit | -$249 |
| Unused cabinet allowance | -$250 |
| Final price of job | $116,546 |
| Cost to produce | $62,520 |
| Gross profit | $54,026 |
| Budgeted gross profit | 44.5% |
| Actual gross profit | 46.36% |
Snapshot
Dennis Gehman, CR, CLC, CKBRGehman Custom Remodeling
Location: Harleysville, Pa
Type of company: Design/build remodeling
Staff model: 13 office, 13 field
Sales history:
2001: $2,564,196
2002: $1,832,197
2003: $1,808,155
2004: $2,817,203
2005: $3,000,000 (projected)
Annual jobs: 171
Workweek: 45–50 hours
Software: American Contractor, Chief Architect, Microsoft Office
Contact: 215/513-0300, [email protected]
Products List
Door hardware: Schlage. Entry door: Peachtree. LVL beams: Trus Joist. Powder room fixtures: Kohler, Moen. Siding: Alcoa. Storm door: Larson. Vinyl windows: Simonton.