Friday, December 12, 2008

The General Contractor Bidding Process

So you've interviewed a few contractors, and now you have a few that you would like to bid on the project. We asked 6 contractors to bid on our project and 5 submitted bids (the 6th called after we asked him and told us that he had taken a conflicting project). We gave each contractor a set of our plans and an additional list of specifications and variables that we wanted them to factor into their bids. For example, we gave them the option of including a bid for finishing our basement and we wanted a price for a recycled rubber slate-look roof.

You can either let the contractors submit what they want to submit as part of their bids. Be sure your plans are extremely detailed and you should make choices on tile, cabinets, countertops, windows, etc. in order to get the most accurate bid. Whatever you don't choose, the contractor will give you an allowance which means that they estimate how much it will cost and when you pick the actual product and it costs or more or less, then that affects your price proportionately.

You can also ask you contractors to provide you with their standard mark-up on labor and materials. So, if they pay a sub a certain amount, they may charge you that amount plus 15% percent or more. Mark-ups in Northern Virginia seem to range from 15-25%. Those that charge 15% may do more of their work with their own employees (such as framing, drywall, etc.) and then only subcontract out other trade work (plumbing, HVAC, electrical, etc.). If your contractor works on a mark-up basis, you should ask to receive receipts and invoices for everything you pay a mark-up on.

Each contractor should sign a standard bid form which includes their bid as well as any allowances. They should be instructed to attach additional pages if necessary.

You should give your potential general contractors 2-3 weeks to return bids.

The bids you'll receive will likely vary widely. Some will be extremely detailed and some will not include a substantial amount of information but will include a complete price with certain allowances. From there you need to assess the bid price and the allowances to see how the prices compare.

Don't be surprised by how far the bids range. Once you look at the allowances, you'll see where some of the differences are but some contractors are just more expensive although they may not necessarily be better than another less expensive contractor. Things such as office expenses and other factors I've mentioned in previous posts impact price. But, some reasons for the prices are unexplained and you should definitely ask if that contractor is under serious consideration.

You'll probably throw out the lowest and the highest, and then pick from there. We narrowed it down to 2 possible contractors after the bidding process based primarily on price (neither the lowest or highest) and personality. We then interviewed both with our architect for an hour each. I also visited the job site of one of the finalists who we were leaning towards. After that, it was very clear who we should pick.

Again, this process takes a lot of time (about 8 weeks for us), but it's worth it if you can spare the time. Meeting with the contractors multiple times was well worth every minute, and will hopefully lead to a well-informed choice and fantastic final product.

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