Would you be happy to accept a pay cut in what you do if asked by your employer? Why would you ask your builder/subs/suppliers to do the same?

"Do you typcially find that builders will flex on price and, if so, by how much in percentage terms? Etc, Etc. "

I run the office for a builder. My boss works on the premise that He plays fair and you play fair. He gives you his best price the first time. He does not have time to play the negotiating game. He is good at his job, stands by his work(we just replaced the driveway on a job that we finished 4 years ago at our cost).

You could pick the bidder that you like the most and tell him that you will hire him if the two of you can get the price down. Let him make suggestions about how that might be dome. Discuss the pros and cons of the suggestions. If you can get to where you want to be put the changes into an addendum and sign the contract. If not, say goodbye and go talk to the other contractor.

Sierraeast - The difference from your analogy is that I haven't hired the builder yet. I'm trying to negotiate what I pay him (which he can agree to or not) before I hire him. In your example, the person has already been hired.

jmagill - Fair enough, but I don't know whether my bidders are the type who give their best price the first time and won't negotiate. It can't hurt to ask, right? Does your boss really get offended if someone tries to negotiate or does he simply say he doesn't negotiate?

macv - my best case scenario is that he would simply agree to a price cut without changing anything in the plans to get there. but your suggestion is a good one.

The term "negotiation" means a process by which the involved parties resolve matters of dispute by holding discussions and coming to an agreement which can be mutually accepted.

The term seems to be repeatedly used by homeowners as a euphemism for getting a contractor to lower his price without reducing the scope of work or modifying the quality or schedule.

If you are not willing to discuss the possibilities with the contractor you are not negotiating, you are dictating a resolution that the contractor can take or leave.

what sort of markup are they working with? it is a fair question and an honest builder will answer it.

"jmagill - Fair enough, but I don't know whether my bidders are the type who give their best price the first time and won't negotiate. It can't hurt to ask, right? Does your boss really get offended if someone tries to negotiate or does he simply say he doesn't negotiate? "

I think the problem is you should never ask for a bid from a contractor you have not completely vetted.

You should already know how he does business, you should have talked to other homeowners he has built for etc.

Bidding a job takes alot of time. Time is money. You need to have done your job before you ask him to do his.

My boss won't even bid the job until he knows that the potential customer has done his homework. Otherwise he is often just wasting his time to educate the consumer who ends up going with the lowest bidder who does not do the job right.

"what sort of markup are they working with? it is a fair question and an honest builder will answer it."
What does the mark-up have to do with anything?

Every contractor brings a different level of workmanship to a job. What he expects to ( or needs to) make as a profit is his business. You are either willing to pay his price or you are not.

The problem with talking about profit is the following.

The bad contractor will find a way to make it back. He will either short you on quality or "change order" you to death.

The good contractor will expect to be paid what he is worth and will stand behind his work.

The only amounts that would be subject to a mark-up in a Fixed Price contract would be increases in scope or quality above what was specified or above the allowance amounts. These are essentially miniature Cost of the Work contracts within a Fixed Price contract so they need a specified markup.

Unless the contractor needs to commit to a markup amount for the above mentioned items, he can claim any markup he wants since it will make no difference to the contract amount. Some general contractors give realistic Allowance amounts and offer a low (or even no) markup on extras and overruns thereby impressing the owner with how reasonable he is.

It is not wise to take a simplistic view of contractor pricing like trying to approach a Fixed Price contract as if it were a Cost of the Work contract since you can expose yourself to games contractors know how to play far better than you.

In the end your best protection is to issue complete professionally prepared bid documents and get 3 or more bids. Unfortunately, that takes additional time and money so it's not a popular option for many homeowners and that often puts them in limbo wondering which contractor and what price to accept. As with many things in life you can pay now or pay later.

Jmagill wrote -

"What does the mark-up have to do with anything? Every contractor brings a different level of workmanship to a job. What he expects to (or needs to) make as a profit is his business. You are either willing to pay his price or you are not. The problem with talking about profit is the following. The bad contractor will find a way to make it back. He will either short you on quality or "change order" you to death. The good contractor will expect to be paid what he is worth and will stand behind his work."

YIKES! Although this may be the reality of how most GCs operate, where does a homeowner even start with this kind of mindset??? I would run far, far away. I realize that, just as there are many types of contractors, there are also many types of homeowners, and I always expect GCs to "interview" me just as thoroughly as I interview them. With me, they'll get someone who is fair-minded and more than willing to do my homework and prepare the most accurate, detailed set of bid specs/plans from myself, the architect and structural engineer. From the GC, there must be some accountability and willingness to explain how their business differs from others, what makes them the best person for the job, and of course, how they arrive at their final price. Again, this is not only to make sure that I, the homeowner, am getting the appropriate price, but also to ensure that they, the GC, are getting enough to make the job worth their while (or else, as mentioned above, they will clearly get it out of us one way or another.)

If they don't show us how they do business to some degree and how they arrived at their bid (and we're not asking for the sun and the moon here), how can homeowners even begin to make an informed decision? You're asking homeowners (especially when many are also business owners out there also fighting for business in our own industry and defending our costs/profits/overheads) just to take a leap of faith...based on what? A reputation? A promise? Pleeeeease. In this economy?? That is not how business is done in the real world, and maybe a few years ago, contractors had that kind of leverage but I'm glad to say, not anymore.

Also, I'd be the first one to blast a homeowner who solely focused on price (and in that case, obviously they'd only be hurting themselves because they'd get a sub-par GC who would probably walk off the job or do some really bad work). But really, it's time that contractors step it up and get a little more business savvy.

Yes, this means more homework, which must be a major pain in the neck after a long day on the job, and yes, it's not always a perfect process, but GCs need to show a willingness for more transparency. And especially without making threats that they'll get it out of the homeowner one way or another.

What about a GC just focusing their bid and their discussions with the homeowner around doing good work for a fair profit (and offering proof of both)? Most homeowners would be great with that. If the homeowner insists up front that they want/need to pay a GC a fair profit (as we did), for everyone's benefit and for the benefit of the project, then why wouldn't a GC want to include that information in the bid discussions?

I can't believe that there isn't a better way to achieve a win-win project and business relationship other than just the mindset of trust the "good" contractor by his reputation or else you'll piss him off and then you'll be really sorry.

"I can't believe that there isn't a better way to achieve a win-win project and business relationship other than just the mindset of trust the "good" contractor by his reputation or else you'll piss him off and then you'll be really sorry. "

Not once did I say just trust. What do you think doing your homework is?

You need to know everything from, does he have all the proper insurance to how often he bills before you ask for a price.

Price is important but you need to know all the other stuff will be taken care off.
The bid will ittemize (to a certain degree) his prices, but it is in no way your business what his profit is unless it is a cost plus bid.

We see too many contractors bid low or cut their price and the homeowner ends up with problems 5 years down the road.
We end up being called in to fix the job for a lot more money than it would of cost in the first place.

This entire discussion is convincing me that my decision to do a cost plus/not to exceed contract is the right way to go. Yes, it seems like a lot of work up front to spec everything out and watch every line item cost, but a fixed price contract seems to leave you at the mercy of a GC getting it done "however."

The way they get it done for cheaply and quickly in order to maximize their profit may not be good for you in the long run.

My one foray into the construction world involved a fixed price contract and believe me the GC was in no hurry to finish or do it right. (Or even show up on site ONCE.) If I hadn't been there every day standing over the contractors and forcing them to do it right it would have been an incredible mess.

"This entire discussion is convincing me that my decision to do a cost plus/not to exceed contract is the right way to go. Yes, it seems like a lot of work up front to spec everything out and watch every line item cost, but a fixed price contract seems to leave you at the mercy of a GC getting it done "however." "

Remember, the contractor who wants to can still find a away to mess up that situation as well.

He can add in for hours of work that never happened. He can get kick backs from subs and suppliers. He can buy supplies have you pay the bill and then return them.
They always seem to find a way.

The homeowner can not be on the build site 24/7 and that is why you need to have done your due diligence before you even get to the bid process.

Please don't let this thread scare you off, there are lots of good, fair and trustworthy contractors out there. It just happens to be work to find them and vet them.

In case anyone is interested, in a Cost of the Work contract it is improper for the contractor to accept kickbacks or keep discounts from suppliers if his contract with you calls for reimbursement of "actual cost". Of course, that should be clearly spelled out in the contract. If the contractor fails to honor that commitment and overbills you by mail it is mail fraud.

It is also possible to limit the amount that the contractor bills for his on forces thereby limiting the danger of overbilling for that labor.

This is how we worked it with our recent builder - when we had changes (and thankfully, there were very few) we paid the sub directly with no mark-up

This is a very dangerous practice, doubly so if you happen to be building in a state that does not allow direct liens by subs. Our lender goes to great lengths to warn against this practice.

By paying a sub directly, you have lost all claim on the GC for the quality of the work done by the sub. You may even have relieved the GC's insurance carrier of any liability they assumed on or for work done by the sub.

Here in Tennessee, you have given the sub the right to put a lien on your property, a right he does not have if his work was contracted for by the GC and is on four family or less, owner occupied residential property. Normally, only the prime contractor (GC) has that right.

"In case anyone is interested, in a Cost of the Work contract it is improper for the contractor to accept kickbacks or keep discounts from suppliers if his contract with you calls for reimbursement of "actual cost". Of course, that should be clearly spelled out in the contract. If the contractor fails to honor that commitment and overbills you by mail it is mail fraud.
It is also possible to limit the amount that the contractor bills for his on forces thereby limiting the danger of overbilling for that labor. "

It is improper, illegal and just down right wrong. It still happens.

A crook will always find a way and sometimes even a desperate contractor, who usually does everything by the book will cut corners.

It costs alot of money to go after the bad ones and you often end up in losing in the end. You are far better off finding the good contractor from the start and adjusting your finishes to lower costs than trying to squeeze every dollar out of the contractor. The good ones are fair in their prices all the time and do not try to pull one over on you.

"Please don't let this thread scare you off, there are lots of good, fair and trustworthy contractors out there. It just happens to be work to find them and vet them. "

Yes, and I think I have one or I wouldn't be embarking on this process. The contract boilerplate (we haven't put in actual dates and numbers yet) addresses all of the concerns raised here. The protections are slanted toward the contractor a bit, but if I wrote the contract I am sure the opposite would be true. I still plan to have an attorney review it and might request a revision to a line or two, but overall I am not displeased with the wording.

No, no contract type is going to protect an owner from a deceitful and fraudulent GC. But on a fixed price contract I don't get to review the bills or dictate specific details. Just barely good enough to pass code or sloppy work that can be covered up with drywall isn't good enough for me if it means saving $50 now and paying $500 later to fix it.

"No, no contract type is going to protect an owner from a deceitful and fraudulent GC. But on a fixed price contract I don't get to review the bills or dictate specific details. Just barely good enough to pass code or sloppy work that can be covered up with drywall isn't good enough for me if it means saving $50 now and paying $500 later to fix it."

Being able to review the bills has absolutly nothing to do with the quality of work.

Do you know if the nailing pattern on the sheeting is right? Do you know that the rebar that the engineer called for is the rebar that was used? Was the rebar tied off properly. Did he use the spec'd depth and correct rock for building the driveway? Is the asphalt the right depth? Did he use and install flashing properly?

Reviewing the bills only tells you that he bought the right materials, not that he used them (especially if they are hidden in the walls).

"Do you know if the nailing pattern on the sheeting is right? Do you know that the rebar that the engineer called for is the rebar that was used? Was the rebar tied off properly. Did he use the spec'd depth and correct rock for building the driveway? Is the asphalt the right depth? Did he use and install flashing properly?"

These questions get to the core of the homebuilding dilemma. Who, indeed, knows these things and who will assure the homeowner that they are appropriately specified and properly constructed. The builder? The building inspector? A consultant?

Few homeowners are experienced in home construction and even good GC's and subs make mistakes.

"Few homeowners are experienced in home construction and even good GC's and subs make mistakes."

That is it exactly. Thats why focusing only on price
ends up being a mistake. You need a contractor ( and subs) that will stand behind their work in the long run.

You can always find someone who will do it for the price you want. They just will not be there when the problems start to appear.

It's interesting how jmagill completely misinterpreted my post and is taking a contrarian stance with just about every subsequent comment.

Just to clarify how my comment fits in, I was responding to the OP who asked about negotiation. Until one has a clear picture of how much the builder is making on the job (another reason I don't like fixed price contracts, among other things), it's extremely difficult to understand how much you can negotiate.

I'm sure that NO ONE on this board is dumb enough to assume that they A-don't have to do their homework on builders or B- the difference between a "good" contractor and a "bad" one is clear cut.

Let's give everyone on this board a little more credit. Everyone has invested a lot of time in his/her respective homebuilding process so vast oversimplifications aren't going to help the OP with their negotiations. We are all sharing personal experiences and there just isn't one right or wrong answer, frankly.

"It's interesting how jmagill completely misinterpreted my post and is taking a contrarian stance with just about every subsequent comment"

Only one of my posts was in response to your one sentence.
"what sort of markup are they working with? it is a fair question and an honest builder will answer it."
I stand by what I said.

A builders mark-up and his williness to tell you the number has nothing to do with whether he is honest or not. Just as it is none of your business what his mark-up is unless your contract and what you pay is based on that.

I have been reading this site for years. We have seen numerous threads where posters have come looking for help because they have not done their homework. I deal every day with this business. Feel free to disegard any info I might offer.

The truth is we don't know it all, any of us. Thats why I keep reading because I see new problems everday that others are facing. I will soon be building my third new home and I keep learning. If what I post helps one person than I have paid back the help I received.

Maybe you work for a builder than quotes fixed-price contracts?

It absolutely is my business- they are potentially building my home and I need to understand how they pulled their numbers together. The last thing you want is a builder than walks off the job because they're running out of money. I want our builder to make money- if they don't they won't stay in business- a reasonable future customer understands this. However, if there are questions they won't answer than something is awry. There is no reason for a fixed price bid to be secretive- then something IS up.

My boss does both types of contract. One the customer takes this risk on labor and materials costs going up or down. One the builder takes the risk.

I am interested in how you are going to really know how they pulled their numbers together? Are you expecting line items for health insurance, vehicle insurance, office paper, printer ink, wear and tear on framing equipment, depreciation on vehicles. Do you expect to see each employees paycheck? All the above numbers are built into the price he quotes. Did he have to raise someone's wages during your build? Who pays for that?

How will you know that they continue to pay workers comp, and builders risk. How will you know the subs have paid all those costs.

I am curious when you have your car fixed do you expect to know his mark-up? Do you ask the doctor?

How do you decide based on markup who will do the better job?

Exactly, mdev. If a builder told me s/he was making 2% on a deal, I'd run. Either they are lying, don't know their business, or are planning to recoup their costs elsewhere and probably at my expense.

If a builder is going to hire the absolute cheapest labor they can find to save pennies, it's my business. Maybe I WANT the cheapest labor. Maybe I don't. Same for materials... is the builder using quality materials or a poor grade of lumber or it sat in the rain for months at a previous job site?

A fixed price contract focuses *only* on price. A cost-plus contract focuses on price, materials, labor costs and construction methods. No, I don't have enough knowledge to assess the quality of each piece of work. That's why I'm hiring a GC!

Any GC that won't tell me how s/he arrived at their estimate is one that won't get any business from me. Maybe they are honest, but honest businesspeople usually don't try to hide the details of a bid.

"There is no reason for a fixed price bid to be secretive"

There are very good reasons for a GC to not want to break down his Fixed Price bid into the different trades and reveal his markups and contingencies. Negotiating with multiple bidders allows the Owner to unfairly "shop" the trade prices between bidders and force each bidder to either accept a lower trade price or to use another contractor's sub. It also challenges each contractor to meet the markup of the contractor with the smallest overhead even though he might not be the best builder or be adequately staffed and equipped.

But the most damaging aspect of negotiating with multiple contractors at the same time is usually the ability of the owner to challenge each contractor's contingency amounts which can be between 10 and 20% of the work depending on the quality and completeness of the drawings, the stability of the local labor and materials market, the weather and other unanticipated delays. This is the contractor's business, not yours, unless you are willing to allow the GC to charge you for these additional costs.

"If a builder is going to hire the absolute cheapest labor they can find to save pennies, it's my business. Maybe I WANT the cheapest labor. Maybe I don't. Same for materials... is the builder using quality materials or a poor grade of lumber or it sat in the rain for months at a previous job site? "

How are you going to know if he hired the cheapest labor but billed you higher?

"A fixed price contract focuses *only* on price. A cost-plus contract focuses on price, materials, labor costs and construction methods. No, I don't have enough knowledge to assess the quality of each piece of work. That's why I'm hiring a GC!

A proper contract whether fixed or cost plus has everything detailed on quality and materials.

Again I ask how are you going to know the difference? What if he had the good quality lumber delivered and gave you the bill and then he sent it back and used the stuff sitting in the rain. How are you going to know?

"There is no reason for a fixed price bid to be secretive"
There are very good reasons for a GC to not want to break down his Fixed Price bid into the different trades and reveal his markups and contingencies. Negotiating with multiple bidders allows the Owner to unfairly "shop" the trade prices between bidders and force each bidder to either accept a lower trade price or to use another contractor's sub. It also challenges each contractor to meet the markup of the contractor with the smallest overhead even though he might not be the best builder or be adequately staffed and equipped.

But the most damaging aspect of negotiating with multiple contractors at the same time is usually the ability of the owner to challenge each contractor's contingency amounts which can be between 10 and 20% of the work depending on the quality and completeness of the drawings, the stability of the local labor and materials market, the weather and other unanticipated delays. This is the contractor's business, not yours, unless you are willing to allow the GC to charge you for these additional costs. "

Very good post.

I know alot of subs that give far better prices to contractors that they have worked with for years. They know that they will get more work down the line, get paid on time etc. They pay that back with better pricing. Why would a GC put his special costs out there for everyone to know. The sub would never work with them again.

We have a line up subs begging to work with us. They know that we will pay them with in days of receiving the bill and not have to wait until the bank releases the funds. Our suppliers give us special discounts becuase we pay by certain dates again not waiting for the bank to release funds. The customer benifits in the end but we would not have those discounts if we let other contractors know how our costs.

We have to respect our subs and suppliers businesses as well.

macv and jmagill,

Okay so if the owner really needs to mind his/her own business when it comes to how the contractor arrived at his/her bid, then what's the ideal way for a homeowner (after providing complete details in the bid documents) to make the right decision about which contractor to choose? Let's assume the homeowner has only sent the bid documents out to highly-qualified, insured, bonded contractors with outstanding references (from homeowners as well as local suppliers/subs).

What criteria should homeowners use to ensure that the price is right (not too high and not too low)? What if prices are all over the place or if there is one GC whose price is significantly lower...should a homeowner just put it in the "too good to be true" category or do a little more digging?

This question applies to both cost plus as well as fixed price bids.

I sincerely look forward to benefiting from your industry expertise, and thank you in advance for the information.

Susan3733

If the bid documents are properly done and all possible finishes, appliances , fixtures , mechanical, lighting choices and layouts etc are spec'd then the difference in numbers should not be great.

This also is based on bidding with contractors that are of similar quality.

Price differences may be because of years of experience or even how the customer is to deal with. It could come down to how bad the contractor needs the job.

Maybe one contractor knows that there is an underground stream running under the property and you will have to put in a special foundation. Maybe one contractor knows the snow load on this property needs to be beefed up. Maybe he got a great prebuy on lumber because of the volume he does.

If you have done your home work on the contractors and provide great bid documents, the contractor should be more than happy to explain why he thinks his bid is higher.

This paternalistic attitude that the GC knows best is part of what gives GC's a bad name. Full disclosure is the only way to ensure a fair deal to both sides. Otherwise it's just a pig in a poke.

Of course there's competition. If you want me to pay more, convince me why you're worth more, the same as any other business has to do. If you can't, maybe you aren't worth more. Extra overhead costs don't necessarily equate with a better end product. On the other hand, if you're the lowest bidder, you'd better convince me why that doesn't mean you're the worst.

How will I know if I am billed for one set of materials and another is used on the job site? Easy -- it's called being there to inspect progress. Every. Single. Day. Spot checking costs on line items to ensure I'm paying fair market rates. Hiring an independant inspector. Checking out the reputations of the major subs. Getting independant estimates of material quanities required and see if they are a reasonably close match to what was ordered. When there are leftovers, do they get returned or do they just disappear?

I may be ignorant about some construction things but I'm not stupid.

jmagill,

With all due respect, not only is there no answer to my question in your response, but most of your reply actually reinforces my position. At the very least, I'm still left wondering, what criteria should a homeowner use when reviewing contractors' bid prices?

I understand and agree that all things being equal, as you say, "the difference in numbers should not be great", but unfortunately, homeowners know that's not usually the case. There is almost always an outlier.

As you say, "Price differences may be because of years of experience or even how the customer is to deal with. It could come down to how bad the contractor needs the job."

These are exactly the kinds of differences I'm trying to understand by asking a contractor to support his bid.

If the contractor has an edge because of his years of experience, that's a reasonable rationale for a higher profit margin, and many homeowners would be willing to pay extra for that valuable experience. On the other hand if his price is based on "how bad he needs the job", that low price will make me more skeptical, and I'll need to press the contractor further to ensure that he's not just lowballing the job only to get it out of us some other way later on, or worse, walk off the job. I've had contractors recently tell us that they're just trying to pay their own mortgages and keep food on their table, so their margins are tighter than normal, and I appreciated knowing that information and didn't hold it against him as a "too good to be true" price...at least I had peace of mind that he was thoughtful in his bid process and was knowingly placing a lower margin on the job because times are tough.

If the contractor has placed some sort of higher cost on the job because he perceives me as a picky PITA or difficult to deal with, I'm sure he wouldn't tell me that straight out, but in asking him to support his price, I'd be able to see that my attention to detail was turning him off and I'd know that we weren't a good fit.

All of these scenarios lead to a better outcome for all...I just don't see the downside to a homeowner asking for a better understanding of the numbers.

In your example, if "one contractor knows there's an underground stream running under the property and you'll have to put in a special foundation", yikes, why wouldn't he tell me right away and be eager to point it out? This would both defend the reason for any extra cost in his bid as well as demonstrate his knowledge/expertise as a contractor. Same with the snow load or the great prebuy on lumber that you mentioned...why would these need to be secrets held from the homeowner? Knowledge of these issues only benefits everyone involved.

It's too bad more contractors don't approach each job from a "win-win" perspective and see that with the current business climate, they need to go a little beyond what they may have done in the past and help the homeowner understand their bid price, why they're worth it, and the thought/effort they put into ensuring that it was the most appropriate bid.

I think maybe some are trying too hard to equate bid negotiation=impending doom and that laypeople on the board are too impossibly inexperienced to make a sound decision that appropriately balances price & quality. This goes back to my earlier comment about attempting to over-simply the criteria we all use as we build our homes.

We were extremely lucky I guess. Our builder, bar none, has the best reputation and has maintained it for 60+ years. I can't find a single person who has a bad thing to say about them. They also happened to provide us with the lowest not-to-exceed estimate when it was all said and done. A true "no brainer" when it came to making a decision. Did we negotiate to get to this point- absolutely!

Based on some of the quality arguments I've heard here, we should have hired the most expensive builder- so long as they are "happy to explain why he thinks his bid is higher."

"All of these scenarios lead to a better outcome for all...I just don't see the downside to a homeowner asking for a better understanding of the numbers."

Understanding the reasons for different numbers and asking for the buider's actual costs and profits are two very different things.

A good builder will explain about the underground stream etc. He has no reason to hide it. In fact if you have done your homework before you asked for a bid you would have had a discussion with the builder and he would have told you up front that he his bid would include the costs.

Sorry my reply did not answer your question in a way that worked for you. I guess we would know up front that we could not work together.

Yep, you're absolutely right. We probably wouldn't be a good fit. I'm one of those picky homeowners who asks a lot of questions when I'm spending our $750,000 in life savings trying to create the best home for our family. I have a strange need to know how that money's going to be spent and who's going to be spending it.

I'm sorry, I couldn't resist the flip response, but, seriously, differences like these are what makes the world go 'round and are okay with me.

Funny thing is, I bet you and your company are outstanding in your industry. The thing about people like me is that we may ask a lot of questions up front (and I try to do so respectfully and politely), but once we do our homework and identify the right person for the job, we're fiercely loyal, go above and beyond as great referrals, and being reasonable business people ourselves, we're usually willing to pay fast and well!! :)

All the best to you and your business!

Susan3733

I think at the core of it we don't disagree. I think the homeowner should get all the answers they need. I think they should be on top of things in almost all respects. The builder should be held to what he contracted to provide both in price and quality.

I think though there is a line between how much profit the builder makes and your right to know that.

In my neck of the woods 750,000.00 is usually for the guest house. None of these homeowners have the time to babysit a contractor. They have to know going in to the job
that the he or she will do the right thing. More often than not they don't even live in the same state. We document everything in digital files. We can pull up a photo of every wall before it was closed in. We can show every stud, wire or water line should a question ever arises. We earn our fees and the customer knows this before they ask for a bid. We will not even hard bid a job where we know that quality is not just as important as price.

jmagill,

Kudos to you! Sounds like you have a great business going...and yes, in my neck of the woods, $750,000 doesn't generally get you a whole house either (the average lot here goes for triple that amount as do most renovations, and it's far more than that for oceanview or beachfront).

I'm probably very familiar with the type of home you build, and how you are able to operate with your customers, having grown up and spent most of my life in the most expensive places to live in the U.S. (and not on purpose!)

All that said, I think we're talking in more general terms on this board and not dealing with the mega wealthy, who are probably not spending their time reading Garden Web home forums anyway.

Heck, I'm shocked to hear that your clients are even involved at all in your bid process. I assume you'd just chat in general about a figure, and then send their accountant an invoice each month and let the dollars roll in. That's how it's worked most of the time around here with the top contractors, but I think times are a changin'.

By the way, what neck of the woods are you in?

Susan

Jmagill,

Your last post is totally out of bounds and I don't think you understand what this board is all about. To (attempt to) put down someone who talks about spending their life savings on a home by making some off-the-wall comment about a guest house demonstrates that your behavior just doesn't jive with what we are trying to help each other accomplish here.

Please consider your words before posting.

Ah, now it becomes clear. When you're dealing with customers who have a thousands to throw away in the course of a multi-million dollar vacation house project, it's easy to say price doesn't matter so much. I'm sure none of those customers actually want to waste money, but $10,000 here and there in extra profit on a project of that scale is chump change. That approach is entirely reasonable at that price level -- many out of state customers with that kind of budget would happily pay more to not be bothered with anything. I'd love that level of service. BUT...

My project is much smaller than Susan's. That philosophy just isn't an option. A couple of line items padded with an extra $10,000 could entirely derail my project. Cost control is essential. That doesn't automatically mean go with the lowest bidder or put the thumbscrews to the GC. It does mean we'll probably have to go line item by line item determining if there are acceptable cost cuts that can be made and decide on which kinds of things do I want to prioritize spending.

I don't have time to babysit the house either, but I will do it because I have to.

"Jmagill,
Your last post is totally out of bounds and I don't think you understand what this board is all about. To (attempt to) put down someone who talks about spending their life savings on a home by making some off-the-wall comment about a guest house demonstrates that your behavior just doesn't jive with what we are trying to help each other accomplish here. "

I put no one down. If you judge your worth on the price of your house than you have a problem not me. My house was built for far less than 750,000.00 and we did most of the work ourselves becuase that is what we could afford.

Maybe you shoul think before you decide whether I am judging or not.

"My project is much smaller than Susan's. That philosophy just isn't an option. A couple of line items padded with an extra $10,000 could entirely derail my project. Cost control is essential. That doesn't automatically mean go with the lowest bidder or put the thumbscrews to the GC. It does mean we'll probably have to go line item by line item determining if there are acceptable cost cuts that can be made and decide on which kinds of things do I want to prioritize spending"

How many ways do I have to say it. If you are getting bids from a contractor that pads his line items with amounts like 10,000.00 then you have have not done your homework and are already dealing with a contractor that you should not be doing business with.

You should have ruled him out before you even got to the bid process.

Some of the comments about an owner's right to know what is included in the bid price make me wonder if everyone is talking about the same kind of project delivery system.

One of the most important aspects of such a system is who is responsible for the design, how much design information is provided to the contractors bidding the job, and if any of the design is the responsibility of the bidders.

A contractor telling an owner why he would be a good builder and what methods he might use to improve the project and provide quality control and assurances to the owner should be a part of the initial or follow-up interviews, not part of the bid submission unless of course there are elements of the project that require design input by the individual contractors which will make it pretty difficult to compare the bids.

A builder knowing that there is an unusual subsurface condition is a bit of a stretch since it is normally the owner's responsibility to provide that kind of information to the builder unless of course the builder is providing the land.

It is possible we are talking about quite different project delivery systems which would lead to quite different expectations from competitive bidders.

A contractor telling an owner why he would be a good builder and what methods he might use to improve the project and provide quality control and assurances to the owner should be a part of the initial or follow-up interviews, not part of the bid submission unless of course there are elements of the project that require design input by the individual contractors which will make it pretty difficult to compare the bids. "

My boss vets all possible clients for real expectations, ball park pricing etc before he even starts to bid. If he and the customer don't know what ballpark they are in before they bid, they are just wasting time.

Ahhh- so you're in Jackson, eh?

You seem to pick fights on several internet homebuilding boards- LOL.

Best of luck to you-

Not picking any fights, I say it like I see it. You are free to respond or not respond as you see fit. I just don't think that only one point of view is helpful to anyone. My opinion is as valid as yours.

If you are making a serious attempt at finding only reputable, experienced, well known to the area builders for your build and have it narrowed down to that, negotiating is a major insult, imo. He/she throws out a #, take it or leave it. The fact that their reputation speaks for itself giving you a quality build is worth it's weight in gold. Dealing with anyone else is called "gambling".

"If you are getting bids from a contractor that pads his line items with amounts like 10,000.00 then you have have not done your homework and are already dealing with a contractor that you should not be doing business with. "

It was a hypothetical scenario, just like the ones you are tossing around.

But I think we've all got the message now about which kind of builder you work for.

I just don't get why folks seem they are 'entitled' to know what a GC's profit is. That boggles my mind. A bet the folks who feel that way have 'never' asked the store what their clothes/car.....etc..etc... actual cost is or for anything else they buy. That's ludicrous!!! Honestly....if you're in business are you 'really' gonna tell the customers what your actual cost is.....GET REAL FOLKS!!!

no contractor is gonna give your their actual cost. Their prices are always inflated for multiple reasons, mainly because they're just playing it safe and secondly they can just dump it in to profit if they are under. Also there's always room for negotiation even if that just means getting a better price because you can. GCs are always going to inflate prices assuming you're gonna ask for a lower price and they may really want or need the job. If they can;t meet your price then get a bid from someone else.

I tell my children that no one is ever "on time" for an appointment except by accident. If you want to be on time arrive early and wait to knock. A lot of things are like that in life.

Contractors cannot accurately predict the cost of a job any more than you can; they will either be low or high; so they must add a contingency to their bid amount if they want to stay in business. That amount is not something they can share with the Owner in a Fixed Price bidding competition.

If the contractor is forced to reveal all of his expected material, labor and sub costs, it doesn't take much math to determine his contingency. It can be quite different between bidders because they will all perceive the risk differently and have different levels of credit available to get them past a rough spot.

If you want to participate in the buyout of the job use a Cost of the Work contract with a GMP. If you want the contractor to do everything use a Fixed Price contract. Don't try to mix the two contract types; you can get yourself into serious trouble.

Provide complete enough documents so you only have to ask a bidder if he included this and that if you suspect he did not. The contract should require him to carefully review the site and the design documents and to inform you of any substitutions before signing the contract. It's wise to ask him if he has done that. Go through the design drawings and contract item by item if you wish.

If you have prequalified each bidder there should be little left to do unless the prices are all too high and you want to negotiate with the low bidder to lower the cost of the project.

A negotiation involves two people offering suggestions, not one dictating terms, but there is nothing wrong with letting the contractor know how much you feel you need to lower the price and then let him go first.

If you do this with all of the bidders you should revise the drawings and give everyone a chance to bid again. It is highly unethical to have unilateral negotiations with multiple bidders although I'm sure it is done all the time in the homebuilding marketplace. In the commercial marketplace where professional involvement is mandatory you would be run out of town on a rail.

A true "negotiated contract" involves one contractor selected from a list for his ability and reputation or perhaps for his low markup since it is fair to ask for that information in that situation.