Contractor Bid Questions

[Stacey Blunt]

Ok, so me and my partner are doing our first rehab and are in the process of getting general and subcontractors into the single family home to give us bids on our renovations and improvements. We just got our first one back today and it came with a detailed outline of everything we asked to be considered in the project, but the only price that was included in the outline was the total price of $95,000...way over what we had budgeted. This is my first time dealing with contractors, but am I wrong in assuming that a good detailed bid should include the prices for each particular aspect of the project? I even tried to call and ask about the specifics and prices for each portion but he said that if he did that then the price of the bid would have to increase. The only information for specific price he would give me (after several failed attempts) was the cost of the HVAC portion of the work and that was substantially greater than what an HVAC subcontractor had bid! Should I decline this and keep my search open or try to work with this guy and come to an agreement on the numbers?

[John Ellis]

Here are some points to consider:

Breaking down each category is fair to ask but remember that each material and each labor hour will be hard to account for. Big materials are easy (Cabinets, Counters, toilets, etc.) but small materials like screws, glue, caulk, paint brushes, rollers, plastic, are hard to estimate and put into a category. When I do a bid I include material and labor together as it gives me a way to cover myself if I am off in certain categories. Again after getting at least 3 bids you can get a better idea of what contracts are doing around your area. 

If you send me a message I would be happy to send you an actual example of a bid I submit. I modified the sheet off the one J Scott has for download. 

[Scott C.]

Congrats on your first rehab. 

Most general contractors do not breakdown their proposals. As much as 20 -40% of the job cost is managing the project using their people and subcontractors. Trying to negotiate price with a general contractor usually does not work unless you have a written specification or scope of work and several competing bidders. 

I do not know what your experience is but I would suggest you try to manage this project yourself and get bids for each trade. The knowledge and experience you gain from doing this can only help you in the future.

If you don't feel comfortable doing this, you should sit down a write up a detailed scope of work you want done and have everyone bid the same. If a general contractor recommends a different item, listen to him and ask for a separate price on that item.

Hope this helps

[Mitch VanDeveer]

@Stacey Blunt 

Good morning, I'm new to posting in the forums but not new to construction I've been a general contractor for over ten years and in the construction industry for almost 20.  First congratulations on your first rehab it takes a lot to make the jump.  

As far as your contractor, you need to have at least one preferably two more estimates to compare that price to. Try going to your local REI or reaching out on BP to find reference, you need to find a contractor that has a track record working with investors is a different business model than working for home owners. When a contractor is only giving you a single number for an entire scope of work they are hiding an extremely high mark up and don't want you to be able to shop there prices. You are correct in assuming that a good contractor would give you a detailed estimate break down, we call it a schedule of values. This breakdown is also how a good contractor invoices the client so you know what you're paying for. This breakdown is also how when you as an investor can value engineer, cut costs, when you project is legitimately over budget. Good luck and feel free the message me if you have any questions.

[David Hood]

I'll bet you could save at least $30,000 by managing the job yourself. 

[Richelle T.]

I agree with@Scott C. 

Since this is your first rodeo, I think you stand to gain a lot of experience (both in terms of cost for labor, materials and for what all is involved in a rehab). Im my opinion, outsourcing this would be a lost opportunity to learn fair prices for each trade and learn how to intelligently request what you want in each phase of the project. 

[Karen Margrave]

@Stacey Blunt Welcome to BP!  When looking at bids, the most important thing is to be sure when comparing them you are comparing apples to apples. For instance, on cabinets, are they solid wood, melamine, glued drawers or dovetail, standard slides or upgraded etc. Painting, type of paint and finish, etc. HVAC what is the brand, appliances? brand ? Not only the brand, but the line in that brand as each manufacturer has several lines. 

As to the advice above on managing your project, that's all well and good if you are good at doing that and are comfortable dealing with subs, you understand the permitting process, and can schedule well. Otherwise, you may cost yourself more than you save. 

Here's a blog I did sometime ago that may help you too. Working with contractors

Above all, CHECK LICENSE, BOND, INSURANCE AND ... REFERENCES!! Find a contractor you feel comfortable with. 

[Account Closed]

( for my real job) i estimate construction costs, mostly large commercial and public projects. 

I would say I am careful about what I break out because it opens me up for possible items that I didn't anticipate ( allot of costs are dependent on others in a contractors mind). there are allot of spread costs that when bidding, you are high on some and low on others but in the end you hope it will even out and end up with the profit margin you anticipate. 

as for the comment of saving  30k by managing yourself? i highly doubt that, unless your scope of work is truly small and you are hiring a contractor that literally doesn't self perform any work, which in this world the competition is too fierce, and a small time reno contractor wouldnt stay in business too long if they are just simply "pushing paper".

@Scott C. is exactly right. With large contracts there is always a set of plans and a set of specifications detailing exactly what the client is expecting, all the way down to the grade of nail to use for each item. 

On my rehabs I hire the trade contractors directly, there is less risk because if i mess up then i just have to repay/negotiate with that sub on the work, if there is a general contractor in the mix then im paying the sub to redo the work plus the general's profit overhead, again.

I make up a simple scope of work, with line items for each general scope ( example: painting whole house scrape prime plus 2 coats, all drywall work for bedroom #1, all electrical for kitchen, etc,) they dont have to be extremely detailed, but enough detail to allow you to pay the contractor in regularly billings for percentages of work completed per scope and actually be able to explain to your boss ( i always say i have a boss just to end that discussion, be it my wife or my dog or whatever).

I usually have a simple paragraph stating the exact types of materials I want used and reference that all work must be in accordance to the latest applicable IRC. In there I state that They must have me inspect their work at individual milestones for pay ( example: painting the house I must inspect after scraping to ensure enough scraping was done and prior to 1st coat, inspect again prior to second coat to ensure I really did get a good true first coat of paint, etc.) 

I also base pay off percentage of work complete for each line item. you both must agree to the percentage at time of pay. up front on the contract I state that I hold a 10% retainage from all billings to be paid upon final satisfactory completion. 

regardless of the area you are in ( the company i work for, i bid work in every state) it is acceptable for  you to utilize the basics of contracting including detailing out a scope of work, paying based on percentages of individual milestones, holding retainage to ensure satasfactory completion.

now some small time contractors may be unwilling to work with you because its obvious the standard you will hold them to and they wont be as easily able to half *** their way through the work and blame you for not being specific. but most will, and may even prefer it as long as this is discussed and detailed in the executed contract. Another item i do is I use my own contracts which is very common with larger value projects ( owner to provide the contract) but less common with small 100k or less type contractors, most dont have a problem with it and it allows me to just throw my scope of work into it as an appendix and all my requirements about retainage and inspections and IRC references is in there. 

as far as your 95k bid goes. get 4 or 5 more bids, it will become obvious where the fair value is. I enjoy getting allot of bids, and its very simple once you have the scope of work, line items written up. simply meet the contractor at the house give them the piece of paper and continue.

[Raven Parmer]

I agree with the others that you definitely need at least 2 more bids. I work in commercial architecture, and all bids are broken down. I.e. windows are $x, doors are $y, total is $z. Add in a % contingency and a % mark up, and it's all fairly transparent. Now, they could be inflating the window number and showing a smaller profit percentage, but overall, it is helpful. Especially when comparing bids. If contractor A bids $10K for windows, and B does $2K, you know someone got it wrong (did B miss some windows, or did A use top of the line when you wanted standard) . That's where the 3rd bid becomes helpful.

I would not feel comfortable taking a bid that was not broken down. And I would not feel comfortable only getting one bid.

[Stacey Blunt]

Thanks for all of the help and advice! I think that I am going to go the route of subbing out most of the work and managing the project myself. I will keep you guys updated on the entire process, and hopefully it should be a great learning lesson and success for me and my business partner.

[Mark Vejnar]

Do you have plans and specs? If so, why not forward those to someone like Isaac Essex or another quantity estimator in your area? Then you at least have a rough idea on materials.

[Ahmed Porter]

We get called out all the time for bids on house and most of the time I give a price for all the items that  it will take to get the house in order and some unforeseen things that are going to pop up. If you do not have a scope are drawing its hard to break it out and most of the time the clients looking for what they can take out and do there self.If a person wants a detail estimate from us I charge  around 175 -250 and it out lines everything we do that to get rid of the one that are just calling you to get a price are get ideas on how to do there job.Get a few bids the bids can very based on the mark up and the crews and even the trade can vary based on who they use. Ex my Electrical  and HVAC is high and my drywall is lower but he is good at what he does and can wire a full house and duct it in two days . As for the 30 K not going to happen  at all if you do you are there about 14 hour a day 7 days a week and face it that why you are getting bids because you do not have the time to do it your self.YOu should get a scope and if not full drawing some kind of sketch to go with the drawing and that will go a long ways  for your  project.Mark up vary from crew to crew some have 20% and some have 50% some will get in and make your project look like extreme make over and some will make you want to stop and go back to your old job. What I can tell you is develop a good relationship with a few GC .Good contractors and profits go hand and had. Send them a deck or a paint job every now and then and say stacey sent it  when it comes to getting to your job trust me they will drop the mark up are they may come by pro Bono a few times to look over your bid are send you one two good subs when you need them are have his guys come by on the weekend for helping him out I have did it many timesA good investor need go agent attorney and GC. Start developing a relationship  a bad contractor can cost you 100 of thousands . Construction joke what the difference between a prostitute  and a contractor after getting  F%&k the second time the prostitute will charge you the same price the contractor will charge you more.Good luck Stacey

[Jared Vidales]

Lump sum bids are generally used to hide proficiency, risk, and margin dollars. I haven't renovated a house yet, but i work for a mechanical contractor, and proposals are always broken out, and generally we get beaten down depending if a category is high relative to another contractors proposal. 

Always get atleast 3 broken down bids. Example- you can use contractor A for windows because he's less expensive, Contractor B for doors, Contractor C for HVAC ect. Remember low doesnt always equal quality.