project price be negotiated or bid competitively?

daviddjFebruary 3, 2013

Our archetict wants us to sign a negotiated contract with a builder she prefers instead of bidding it out. Prior to her mentioning this method I was only aware of the design, bid, build method. What is the general consensus as to which is better? My gut feeling is comptive bids will be low balled In hopes of making it up with change orders. And the other way i will not be able to negotiate a fair deal with someone who does this for a living.

This post was edited by daviddj on Sun, Feb 3, 13 at 20:57

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It sounds like the archetict may be getting a kickback from that GC. Put 'everything' in writing what you want in the house and get several bids. If you 'know' what you want and put it in writing there shouldn't be any change orders.

    Bookmark   February 3, 2013 at 10:06PM
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Sophie Wheeler

Another perspective......Professionals prefer to work with those that they know to be competent and that "get" their ideas. They've done enough projects with enough people that they've discovered who those competent people are. And if they have enough renown, or enough business, they can ensure that they don't work with any clueless newbies ever again. Perhaps your architect is one of those professionals who prefers to see their work executed in the best possible manner by those he knows can actually do the job.

    Bookmark   February 3, 2013 at 10:29PM
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daviddj, there is no "better" way to obtain construction prices and award a construction contract, only different ways.

hollysprings raises a good point, and I would guess (without knowing the situation) that this is likely the situation. That said, it's your project and the construction bidding and building is your choice. Just think it through and do your due diligence before coming to a conclusion. The lowest initial price may not always be the best and lowest price by the time occupancy rolls around. And then there's the matter of quality and reliability, which is especially important if your house is large and/or complex and if it may be beyond the experience of a chain-saw builder.

Good luck on your project.

    Bookmark   February 3, 2013 at 11:20PM
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A big disadvantage I see to a "negotiated contract" is it depends on all parties (architect, owner, contractor) acting in good faith. And we all know builders and contractors don't have the best reputations. Perhaps this builder does have a good rep, and that is why our architect insist on working with them. I just don't see where I would have any leverage in a negotiation since the work is to be done by a single contractor, which obviously does not provide us with comparative pricing. A The builder does this for a living so they are in a much stronger negotiating position.

    Bookmark   February 5, 2013 at 10:04PM
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I was 99% sure I was going to work with Builder A, who also knew our architect, but I still sent my plans to Builders B, C and D. We came up with the builder list using recommendations from friends, realtors and the architect.

We gave Builder A the job and felt comfortable with his price as we had the other bids to compare to.

    Bookmark   February 6, 2013 at 12:22AM
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A negotiated contract should be used when the Owner wishes to shorten the overall project Time or there are too many things that cannot be determined before the start of construction or if the Owner wants the builder to design major parts of the house or the Owner wants the builder to be involved in the design process or the contract compensation will be based on the Cost of the Work Plus a Fee (where the only thing negotiated is the Fee) or there is only one contractor available or one contractor knows he is going to get the job regardless of other bids.

Competitive Bidding should be used for all other projects.

    Bookmark   February 6, 2013 at 6:34AM
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Reno's is a good description of the why's/advantages of a negotiated construction contract.

In addition, the use of a negotiated contract is often used when it's desired to have maximum cost control from the outset of early design studies. In such a case the architect will get construction estimates from the negotiated general contractor during the early design phases to share with the owner, enabling the owner to be aware of the costs of various options and choose appropriately for the owwner's best interests.

A competively bid situation waits until all of the design is complete and thereafter, all of the construction drawings and specifications are complete. The competitive bidding then takes place and if results are too expensive, a redesign is required.

Thus, there are a variety of reasons to choose either a negotiated or competitvely bid process depending on the owner' priorities.

Good luck on your project.

    Bookmark   February 6, 2013 at 10:31AM
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When a project is complex, it's often times really valuable to have the input of a builder during the process. How you compensate that builder for that time is up to you, but you'll get better advice (and ultimately cheaper) if the builder is part of the project rather than just a hired gun with no personal stake in the outcome.

    Bookmark   February 6, 2013 at 1:26PM
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