16 Mar The Trap of the Low Bidder
The allure of a low price is undeniable; who doesn’t want to score a good deal? When it comes to construction, you need to be careful not to fall into the trap of the low bidder.
Price should not be the only factor guiding your decision.
Moving forward with a bid based on price is often short-sighted and can lead to unnecessary headaches. Today, we’ll explore hiring a contractor for your project and why going with – what appears to be – the least expensive option isn’t necessarily the best choice. We will also talk about how to make informed decisions when choosing your GC.
The Lowest Bid May Not Be Accurate
The drive to understand the overall cost of your project often leads to sending out an early set of preliminary drawings for contractor bids. While the design team has already started working, they have yet to vet or plan every detail, make every design decision, or plan out all pieces completely at this point in the process.
So, at this very early stage, an incomplete set is sent to two to three contractors for bids. Based on the early drawings and project outline developed at that time, they put together their best guesstimate on costs. In my career, I’ve seen those bids can vary wildly. There are reasons for these fluctuations.
When bids come back, you must discern what was included. The first step is to qualify the numbers. Did they include $75 s/f for mosaic tile, which you may be thinking you would like to have, or $10 s/f for something more basic, or even $2 s/f, to come in low and potentially get the job? Chances are, at this early stage, that level of detail has not been determined in a concrete way with your design team, so while the drawings and narrative provided for pricing do include “tile,” it is not specific at that point as to exactly what that “tile” will be and open to interpretation.
Generally, at the early bidding phase, a contractor will allow for a “placeholder” for certain things, like countertops. This is another gray area that has the potential to swing costs dramatically at a later date. A placeholder for a countertop would typically be a standard granite, with perhaps an allowance for marble in the main bathroom or kitchen, but otherwise includes no details. At a more mature date and after time spent with your designer, you will likely have selected some upgraded stone slabs that include quartz, quartzite, marble, maybe some porcelains, and you will have added design details. Those could include pretty edge profiles, waterfall legs on cabinets in certain locations, full-height splashes in other areas, and even slab walls as features. These things are costly and probably not included in an early bid. Be aware.
Another significant issue with pricing is time. If you do choose to get bids on a project but are not ready to start until six months later, material costs may be drastically higher—often upwards of 35 percent more than the original pricing.
Another area to consider is the contractor’s fee. Depending on how the contract is written, a contractor’s fee could be based on the construction cost. As you work with your team over time to design all the features and details that will make your home special, keep in mind those details will require more attention and oversight by your contractor, and their fee will reflect that.
There are other areas that can differ between contractors, and it is important for you to understand what is included. Those areas are general conditions, covering things like a job trailer, dumpsters, and project oversight. How are the GCs structured? Will you have full time supervision? How do they maintain their jobsite? All these factors equal costs to the bottom line.
How to Make an Informed Decision When Hiring a General Contractor
Finding the right contractor can be challenging, but if you do your due diligence, you can make an informed decision.
First and foremost, trust your design team! You picked them for a reason, and now you can lean on their experience and guidance. You will probably find they have strong opinions about who they think is best suited for your job. We are a great resource in your decision-making process.
Personally speaking, I don’t give my opinion lightly, and my opinions are always based on my experience in this field, whether it was a good or bad experience. I have learned a lot. Let my experience help you navigate the water. Your architect will have a similarly based opinion. Together we will have considered the size and scope of your project, the personalities of the individuals who will be on your contracting team and make a recommendation based on those factors.
Another step you can take is to ask for references from the contractor. If they have been in business for many years, then this should not be a problem. They will be able to give you names of other professionals they’ve worked with and satisfied clients.
You can also ask friends and family who have remodeled or built new homes in the area what company they used.
It’s also worth checking out the websites of potential contractors to get an idea of their level of professionalism. Do they take pride in their work enough to invest in quality photography and explain their processes? Not doing so could be grounds for further questioning on your part.
Finally, check out the Better Business Bureau and reviews on any relevant sites before making your selection.
Once you’ve narrowed your choices, try visiting an active job site and use your judgment. Is it organized and clean? Are there piles of rubbish lying around? Is there graffiti on any of the walls? Observe how employees behave when clients approach – do they turn down the music and turn off loud equipment or keep hammering away? How much respect do they show towards people walking through their work sites? These will give you clues about how much care is taken and whether it aligns with what you’re looking for when selecting someone to complete your project. Trust your instincts – if something doesn’t feel right, then pay attention to that voice inside telling you something else might be a better fit.
If you are fortunate, your potential GC may be able to arrange a walkthrough of a completed project! If that happens, be respectful of the person opening their home or business. Look and listen, ask appropriate questions, and honor their time.
Moving Forward With the Low Bid
If you choose to move forward with the low bid, while not necessarily being the wrong choice, there are some factors to keep in mind, as we’ve been discussing.
These factors can cause unrest and angst as the job progresses and the pricing changes. Nobody wants to deliver the news that something is more expensive than originally discussed or was not included in the original budget. You should keep in mind that the prices you saw at the early stages will very likely move around and be ready for those conversations.
If you choose to go with one of the higher bids, this does not mean you are overpaying for “the same thing.” When the bids are very different in the early stages, there are reasons, and I have found in my work, that the higher bid numbers are usually closer to where the project ends up. To truly compare apples to apples, you need to get to the bottom of what the bids include and don’t include and keep in mind that all of them bid on incomplete information because of the early stage of the project.
Choose Wisely When Comparing Bids
When comparing bids, going with the lowest bidder isn’t always best in the long run. Many clients find that the lowest bid isn’t accurate and often costs more than expected.
Being aware of potential cost excess is important and essential to a successful build. If you’re comfortable accepting potential cost overages of 20 percent or more compared to what was originally proposed, then proceeding with the low bidder may be worthwhile. With careful consideration, you can make an informed decision that will keep you within your budget.