On today’s show we’re talking about how to get construction quotes that make sense. It’s easy to be confused by multiple quotes. On today’s show we’re going to do a case study on a small commercial office build-out in an office.
The scope of the work was to partition about 550 Square feet into three offices and a lunch room. There is the addition of a small sink a fridge and a dishwasher. The existing space has almost all the lighting and electrical needed. We only needed to add electrical circuits for the dishwasher and the fridge.
So all in all, the scope of work seem pretty simple. In total, we’re talking about adding 55 linear feet of new wall partitions. They’re 8 feet high, and the work obviously needs to comply with the building code.
The fact is, this is a very simple project. There’s no doubt that mobilizing a team for a small project would cost a little more.
In order to comply with commercial codes, we need to use metal framing instead of wood framing. The doors should be solid commercial quality doors instead of the hollow doors that are common in residential. The electrical must be done with armoured cable, and the drywall must be 5/8” thick instead of 1/2”. All these things will cost more compared with residential construction. But there is nothing too outlandish so far.
The first quote we received was for 18,000. That seemed high to me. The second quote we received was for a better number, about $14,000, but it left many items open for further refinement. It did not include appliances, nor any electrical work. The scope wasn’t clearly understood.
The third quote was for $37,000 and did not include appliances.
In the end, I contacted a high volume contractor that only works on large commercial projects. What I discovered was that they were going to charge me the same price that they charge the high volume builders. I’m used to paying high volume prices for work on development projects. This fourth quote came in at a great price of under $5,000. The scope was narrow and it didn’t include the entire project. But I was willing to hire the electrician and the plumber. In the end, the project would get done for under $10,000.
When it comes to negotiating construction contracts, even a simple one like this, I tend to focus on getting a detailed breakdown of the work and the cost for each line item. That way I can see if there is a missing assumption or perhaps if the contractor is way off on their view of the scope of the project.
If all you have is a lump sum price, then you have no tools to assess the quote. You can’t tell if the contractor is greedy, or if they’re simply mistaken. Sometimes, the number is too good to be true. That’s as much of a risk as a number that’s too high. When the number is too good to be true, it could mean that they failed to include a portion of the scope in the project.
You can still get a bad quote from a great contractor. It’s tempting in those cases go looking for another contractor. That would be an unfortunate loss for both you and the contractor. Great relationships are hard to find and equally hard to maintain.
By focusing on understanding the scope of work for each line item, I managed to save about 50% compared with the reasonable quotes.
In fact, the contractor I chose didn’t even ask for any monies up front. They simply asked for a purchase order and they would bill me at the end of the month for the completed job.
Sometimes the biggest companies with the largest overhead are precisely the ones you want to do your work. Stay away from the two guys and a pickup truck. They’re the ones you can’t count on to get your project done on schedule or on budget.
