OK - THAT makes a whole lot more sense - you are not adding a dormer, you are adding another whole story on your house, plus the sunroom close in, plus electrical and HVAC upgrade, extra stairway, etc - now the $200K range makes sense - particularly since you are putting in 5 rooms plus 2 baths, so your house will now be presumably about 1000-1250 SF per floor ?
Looking at it that way, and DUH to me - of course SR is sheetrock, I am just used to it being called rock or drywall not SR - then I would say to avoid getting his hackles up about the percentages, maybe mention that electrical and HVAC and windows and flooring and stairs and minor things like that are not in his percentages and it seems the framing is on the high side percentage wise, so maybe negotiate to add those items in, which will naturally bias toward the tail end a bit. I assumed the 3% completion was for punchlist items - but 5-10% is not unusual as final payment, so maybe negotiate up a bit on that.
I would have a serious talk about schedule - if framing will be done in 2 weeks, then that should mean dry-in complete in 3-4 weeks, so that leaves only utilties, insulation and drywall, and bathroom and flooring and doors and trim work - so even though schedule calls for 3 months, sounds to me like his ideal case is more like 6 weeks with the rest being contingency, which is reasonable and fair on a job like this. If that is the case, then I would be less worried about the percentages overall, because you are talking a pretty short timeframe.
One thing you could propose is an accelerated target but not contractural completion date schedule of say 2 months or 2-1/2 months, and for each item that does not meet its scheduled timeframe except for minor punchlist items (which item by item schedule would have to be laid out) on that schedule, than all unfinished items not meeting that schedule will be paid at only 90% pending completion of that class of work - so that way you are retaining 10% on any items not on schedule on a 2 or 2-1/2 month schedule, but he earns that 10% once a class of work is done rather than at full job completion, leaving the original 3% completion cleanup and punchlist reserve. So, if he is behind the accelerated schedule all along and is not punchlist ready till the wrapup, the end of job retention would be 10% of each item plus the 3% completion, and if all items meet the accelerated schedule the retention is only the 3% - an incentive to him and his subs.
I have used this scheme several times on remote sites or difficult access or weather jobs, with 10 or even 20% retention, and commonly 5-10% incentive bonus for meeting the overall accelerated schedule upon final job completion as well. I had one job in the several tens of millions involving both horizontal and structure construction where we convinced the owner to offer a 2%/month early completion incentive - the contractor ended up finishing over a year early by loading more and bigger equipment and chartering a barge and tug for early access and later worksite departure, and earned over 25% bonus over his bid price - and everyone went away happy. Not that you want to offer 25% bonus to him, but a 1/2% bonus for every week early completion might make him very incentivized. Of course, that could be matched with a specified penalty for late completion too, though that gets to be a sticky game if he finds some incentive to delay to work another job, and also limits your delay damages to that specified amount.
BTW - be sure you have the money available for when he finish each item, not only based on 3 months completion schedule.