On today’s show we’re talking about the merits and pitfalls of just accepting a contractor’s bid. When you’re experienced in construction, you get a feel for what items should cost for both materials and labor. But there are two distinct markets, the retail market and the developer or contractor market.
In the retail market, there are businesses out there charging what I consider to be outrageous prices for what amounts to basic commodity construction. Yes, quality matters. But I often find that in the retail market you get amateurs charging more than the most skilled trades people. These are the crooks. Frankly, they’re out there and you can run into them often.
I have a job under construction right now where the entire crew didn’t show up to work yesterday. Why? Because one of the members of the team has a family member with a health issue. Because one person couldn’t work today, an entire team of three people didn’t show up.
This crew was in fact the lowest bidder. To be honest, the number they quoted was lower than I expected. So I wasn’t surprised or upset when they discovered that they underbid the job. I fully expected to pay more. I feel badly that the subcontractor has a family member with a health issue. He’s absolutely doing the right thing by being with his family. Somehow, I’ll have to find a way to maintain the schedule with alternate labor. Otherwise the delays will cascade. I knew I was accepting a low ball bid and that there was risk of problems.
The first bid that I received was from someone who said they could do the work in a week and at a competitive price. But in the end, they quoted 4 times the price of the low bid, and fully three times what I considered to be a fair price. I made them aware that I was a developer and we discussed per square foot rates. Somehow between that conversation and the paper quote, something got lost in translation. Clearly they didn’t get the job.
I had another subcontractor quote me a price that was double what it should have been. I worked out the hourly rate and concluded that they would be charging me $125 per hour for what amounts to unskilled work. I reminded the subcontractor that I was a developer and that I had a volume of business in the pipeline. He offered that if I paid cash, I could save the sales tax. At that point, I knew I couldn’t hire his company. But I decided to see where the negotiation would go. I offered that if he gave a really good price on this project, I would give him early visibility of new projects in the pipeline. So he offered me a 4% discount. Needless to say, they didn’t get the job.
I had another contractor inflate the square footage in the scope of work on another part of this job. He argued that he needed to add 10% to the area because there could be wasted material. I completely agreed with the additional material allowance. There is always material wasted because the cuts result in odd remnants that can’t be used. But there should not be 10% wasted labor. The labour component of square footage is the actual square footage.
The funny thing is that these attempts at cheating the customer aren’t even sophisticated. They are plain as day.
Perhaps these subcontractors think that customers don’t know how to perform basic arithmetic.
I found one subcontractor selling materials from second subcontractor with an additional markup on the original supplier’s price.
Folks, the path to saving tens of thousands, or in some cases millions of dollars is found in being curious, asking lots of questions, and checking the math against known benchmarks.
