Sunday, March 8, 2009

comparing the bids

Having a finished design and complete set of drawings and specifications ensured that we got more accurate bids that could be directly compared with each other. The contractors took about a month to put together their respective bids. Each contractor presented their bid in an hour-long meeting. During the meeting, we:

  • Skimmed the bid to get the gist of the proposal (note: the bottom line number is not really the bottom line).
  • Asked questions.
  • Reread the bid and looked for what was included and not included, or included as a line item or option. For us, these items were plumbing and electrical options, HVAC equipment, light fixtures and appliances.
  • Asked about the options or line items.
  • Asked how change orders are handled.
  • Asked about the payment schedule.
  • Asked what happens if something were mistakenly omitted from the bid.
  • Added the desired options and items that were not included. This became our revised bottom line number.
Keep in mind that the bid is really a ballpark figure. During construction, there will be change orders due to materials or finishes being discontinued or unavailable in the project’s time frame, client changes, better construction techniques, pre-existing conditions and surprises inherent in older homes. It’s best to think of the bid as the financial starting point of the project.

What we most appreciated was that the bids were transparent and open-book. They indicated what and how the contractor was thinking about the project. Because they were itemized, we knew exactly what we would be paying for each service or material. In essence, we knew what the subcontractors’ had quoted to the general contractors. This allowed us to make educated decisions on where we could shave costs.

Despite the transparency, it was difficult to compare bids directly as each contractor bundled the numbers slightly differently. I ended up creating an Excel spreadsheet based on construction industry standards established by the CSI to decipher the differences between bids. In doing so, I was able to identify areas where the contractor was a little high or low, and then ask the contractor about the discrepancy. The most common reasons for cost variations were: (1) my misunderstanding of the bid, (2) the contractor’s or sub’s misinterpretation of the drawings, specifications or scope or (3) omission or oversight by the contractor or sub.

Creating the spreadsheet was well worth the effort to better understanding the bids. At first glance, the bottom line numbers looked like they differed only by 4%. After doing the detailed analysis through the spreadsheet, we discovered that the spread between the three bids was more like 11%. This was not too surprising given the varying experience levels, sizes of company and amount of overhead.

It was clear that we would be happy with any of the contractors as the client references all spoke highly of their respective contractor. Having visited completed projects, we were confident that each contractor could produce the level of quality we desired. All the contractors and their subs were licensed, bonded and insured. Everyone seemed likable and trustworthy. It was difficult to have to select just one.

Tune in next time for hiring the contractor!

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