"Normal" Range in Bid Variation

GoosterDecember 20, 2012

I'm trying to get a handle on the expected range of contract bid variation. In other words, I've received back some quotes that have higher than expected variation in the contract total, especially when you don't consider the cabinets. I've done quite a bit of renovation in the past, but my last kitchen was 16 years ago.

Here's the rub: three of the four use the same cabinet quote (or are willing to). None include appliance allowances. Flooring and counters are bid using the same material and style (and I have independent bids for each). In the comparison below, I've removed or equalized any allowances.

1. Low Bid ($53.5K)
2. Firm #2 Bid 1.13X higher (same cabinets, $60.5K)
3a. Firm #3 Bid 1.33x higher (same cabinets $71.1K).
3b. Firm #3, with full custom cabinets 1.47X ($79K)
4. Firm #4, High Bid (different semi-custom cabs) 1.6X ($85.5) (1.41X when using the same cabinet bid)

Prices above are inclusive of all but appliances and some decorative finishes.

The kitchen is using mid-range materials with some high end elements and fully customizable cabinets (or full site built custom). Construction elements are required, which means the GC contribution is higher than a typical remodel.

The range in bids is worrisome.

Price, obviously, is just one variable but will be given some weight. In many cases, I can just ignore the variation and focus on quality, service, and responsiveness. But this range is so large, I'm struggling to get a handle on it.

This post was edited by gooster on Thu, Dec 20, 12 at 10:53

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Any chance you could give the actual amounts in dollars?

    Bookmark   December 20, 2012 at 10:46AM
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I wouldn't want site built cabinets for an upper end remodel. That's low end low quality and poorly finished.

Rule #1 is always throw out the low bidder. He's forgotten something, or is a poor buisinessman who may not even be in business to finish your remodel. Especially when the next highest bid is so much higher. His is an unrealistically low bid.

Next look at the remaining bids with the new low bid setting the delta. Your bids won't be so far apart at all now.

    Bookmark   December 20, 2012 at 10:54AM
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I've updated the post; I realize now that the absolute magnitude is critical to the question.

    Bookmark   December 20, 2012 at 10:54AM
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LOL. You're worried that your bottom bid is 37% lower than your high bid? My high bids are sometimes three times the my lowest bid, and always at least double.

There's no science to pricing residential renovations. Stop thinking of "cost" as some objective variable, and translate it to what it really means: "the amount of money I'd like to filch from you." This is one area where it is definitely not true that you necessarily get what you pay for.

A contractor may submit a high bid for a thousand different reasons, like:
- They have more experience and are truly better at understanding the scope of the project
- They don't need the work
- They don't want the work
- They hire the absolute minimum of Latinos so as to avoid offending the delicate sensibilities of their Prada-clad clients
- You sound like a PITA, meaning someone who objects to shoddy work
- They usually serve only those To the Manor Born, who would never notice--or even brag about--paying $15 for a nail
- They like to expand the scope of work regardless of what you ask them for, like the guy who insisted that I had to dig up and redo my entire driveway afterwards, or the other guy who insisted I repaint my entire house at the same time

I graciously condescended to allow a very high end builder to bid on my project, because my architect said he was pestering her for work. He offered to do an eight-foot, single story bumpout, not over a full foundation, for the low, low sum of $200K. Not including cabinets or appliances. Oh, or flooring or countertops. By the time my architect got through with him, he was able to use two bathroom stalls at the same time, if you catch my drift.

I wouldn't always throw out the low bidder, either. Yes, sometimes it's the guy who winks at permits and hires laborers from the Home Depot parking lot. But not always. You didn't do a statistically valid sampling of all contractors in your area before you submitted your bid, so how do you automatically know the low bidder isn't just the only fair deal on your list? You have to look deeper than price alone.

    Bookmark   December 20, 2012 at 11:47AM
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You might also want to consider the schedule. We did our remodel with tight schedule pressure. We asked four well-respected contractors to bid. Only three responded, and the difference between the low and high bid was about 100%. Our lowest bidder was the one we hired, but not because of the price. We hired him because he was the only one of the three who had thought about the schedule and gave us a good understanding of how the project would run. One of the three actually said to us, as we were reviewing his bid face to face, that they never provide a schedule because they "like to make sure everything is done right before they move on to the next task." This sounds nice but what it meant to me at that time was we'd be doing our remodel for two years. No way.

As it turns out our low bidder held to his schedule and his cost but went out of business at the end of our job. We were saved by the contract we had written with him, which gave us a lot of held back cash so we could become the GC in his stead and get the subs to finish the project.

There are a lot of variables in play here.

    Bookmark   December 20, 2012 at 12:08PM
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Thanks for the feedback and excellent points.

The perspective from karen_belle and live_wire is pretty spot-on with regard to the business viability of the lowest bidder. I'm always wary of it as well. The advice on the contract is key.

The range of variance some of you've seen is amazing. I can see 3x on certain elements (like a tile job) but overall on a 70K job it should wash out to some degree. Ranging from 50K to 150K on this job given the scope limitations would be pretty extreme. I've given these bidders the same layout, the same material wish list, the same cabinets or specs and a detailed scope of work. When meeting with them, we've hidden our Prada and we speak Spanish. You can see my other post for the proposed layout of the space.

Bidders 1 and 2 were referred to us by the KD/cabinet people. Bidder 3 I've worked with before. Bidder 4 is a large firm with two locations. Interestingly enough, Bidder 2 has been in business the shortest amount of time, is a small firm and submitted the least detailed bid. Bidder 3 was surprised with how high his bid was. Bidder 1 and 3 each visited the site twice and submitted detailed bids covering every item cited. I do think all four are interested in the job. I screened out (or was screened) by others who were too busy.

I've found that since this is not a cost-plus bid, you can always pay more for the unexpected or underforecasted, but you never get you money back on the excess.

I'm leaning against the site built and going for the well-regarded near-custom cabinets.

    Bookmark   December 20, 2012 at 1:38PM
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The range is pretty normal, I'm afraid. We had a remodel recently where the bids were $105k - $72k (putting a new second floor on the house). We had 6 contractors look at it and got 5 bids. The one guy who did not bid was the one I'd have hired if possible - but he hit some serious personal problems and just couldn't take on another job so he declined to bid.

The highest price guy was a PITA and I didn't like him (he wanted me to talk with his electrician and plumber to get their bids separately, which made me wonder why I would hire a GC?). So when his bid came in way over budget I was sort of happy.

The lowest price guy was okay, but he was pretty certain he could tell me what I wanted. "Nah, you wanna get vinyl windows inside and out, they're easier to clean with the grilles between the glass." Nope!

The guy we hired was actually the last bidder. I was sort of settled on a guy I had assessed as capable & willing to listen, even if he seemed a little short on "vision". Then our cleaner said we just HAD to talk to this other guy and we did. The GC we hired was a whopping 28 years old, owned his business, and was right in the middle of the pack in terms of his estimate (3rd cheapest out of 5).

More importantly - he didn't tell me what I wanted but he did have vision for how things could be. It's a tough balance to find someone who can offer suggestions but understands its the homeowner's final choice if they want to buy more expensive windows or less expensive molding. Hands down, he was the best GC I've ever worked with and I'd hire him again in a heartbeat. I'm still amazed when I think of how young he is (I was nowhere near that smart at 28).

Did you feel like any of the guys you talked to were people you trusted to make the right decisions if you weren't there? I look for that quality, because there are a dozen things that can come up in a single day and if I get a call about every single one of them ... I can't do my job (which is paying for that remodel).

Good luck! It's a nerve wracking decision.

    Bookmark   December 20, 2012 at 1:47PM
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That's another important factor, EngineerChic. Between two equally good contractors, you'll get a better value from the guy who's trying to build his business. Maybe he's 28, maybe he's just in a growth mode; either way, he's hungry for customers and wants to do a good job to build his reputation.

    Bookmark   December 20, 2012 at 3:03PM
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I agree with Marcolo about the lowest bidder. We got bids from $200k to $350k, and we gave each bidder a full set of architectural drawings along with a detailed set of specs for what should be included in the bid. In our case, it was the high bidder who got thrown out immediately. He submitted a one page bid with a number, no further detail. The others were all highly qualified and would doubtless have done a good job. It was our feeling that the low bidder really wanted/needed the work and would do a great job. So far we have been very happy with our choice.

    Bookmark   December 20, 2012 at 4:14PM
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We're all over the place with bids also. And we've been pretty exact on what we want - we're working from my plans, so all the people have been working on the same plans.

One large busines was our BY FAR highest bidder, one guy that touted his "green building practices" was our next, and then some others along the way.

We're finding that the smaller guys tend to be more inexpensive in general, but you also need to be a little more cautious - it's harder to be certain that you're getting someone who isn't just going to disappear.

The guy that we planned on going with came back with a decent bid, not the lowest, but reasonably higher than the lowest bidder, but then wound up that he totally disappeared when we were ready to sign the contract. We're stuck right now with appliances sitting in our basement and looking for someone to do our kitchen.

    Bookmark   December 20, 2012 at 5:40PM
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The price range doesn't mean anything. It's tough to get a handle on the "correct" number for YOU, very tough. Call references and ask detailed questions (write the questions down so you don't forget to ask.)

Some of the questions should be about bids and actual costs - did references pay roughly the amount that was bid? Less? More? How much more? Why? Etc.

The advice here is great, I especially like Marcolo's. To me, the hardest part of remodeling is finding the right people at the right price.

And you can hide the Prada but you can't hide where you live.


    Bookmark   December 20, 2012 at 6:38PM
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gooster-do you mind explaining this? "I've found that since this is not a cost-plus bid, you can always pay more for the unexpected or underforecasted, but you never get you money back on the excess."

Thanks. Still a ways from actual bids for redo. Good luck to you.

    Bookmark   December 20, 2012 at 7:38PM
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Can you ask them to break out their numbers so you can better understand and compare? Tell them that you want to make sure that they're not leaving anything out - you'd rather find out now then later.... ie ask for:
Cabinetry installation

Then you can see where and how they differ and try to figure out why.

    Bookmark   December 20, 2012 at 9:16PM
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As a GC for 30 years, it's interesting to see peoples take on the bid process. In our area, most contractors "bid" a job on a cost plus a fee basis, (typically a percentage, or an agreed upon fixed fee) ... meaning a client has the ability to decide what they want to spend on what ... that simple, the contractor then applies his fee on the choices made by the owner

This post was edited by ctycdm on Thu, Dec 20, 12 at 22:33

    Bookmark   December 20, 2012 at 9:56PM
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Thanks once again for the responses. This part of the process always touches a cord with everyone.

It does seem that the larger operations, rather than enjoying economies of scale, actually suffer from more overhead requirements. This overhead can translate into better service and maybe better quality. But in the end, as people point out, you have to be happy with the GC (or project manager) and that can be difficult to predict in a large operation.

I was favoring those people that resided in similar neighborhoods and focused on the area. Ones that understood the nature of the older properies and respected the need to maintain architectural integrity balanced by reasonable cost of implementation. Up until I received all the bid, the lowest bidder was a leading candidate for a number reasons. Then suddenly, I am taken aback by the price distribution.

soi_bean: I can't believe someone submitted a one number bid on a 350K job. It's not a completed house.

gina_w: so true. My neighbors and I have joked that we pay the neighborhood premium for any job or service rendered.

SparklingWater: By my comment, I was referring to the bid practice in the area of getting a fixed price for a job element. If there are overruns, you usually hear about it. If there is an unexpected causational issue, you may (and should) have to pay extra. You rarely hear that something took less time than expected and that you are owed a credit. That is simply the profit. In reality, often times things will go over the estimate or under and in the end, the bid is supposed to balance out so the overall job remains reasonably profitable.

phylhl: all but one potential GC submitted bids with breakdowns. They were all presented with a bid description that outlined the current scope and restrictions. The one that did not said a detailed document with allowances could come with a fee. I've already priced out many of the major cost elements and 3 of the four agreed to work with an external cabinet supplier, even if they would still include a quote for their own custom supplier.

    Bookmark   December 20, 2012 at 11:13PM
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