Written by Holly C. Bertsch.

Originally posted on Building Moxie… The Blog. What she has to say is just so important for customers to remember when looking for a contractor — whether for a new project or a remodel or repair — that I’ve reprinted it here with her permission.

Did you know that when you are interviewing a contractor, they are often interviewing you too?

It works both ways, much like a job interview should. Unless said contractor is desperate for work, they are often checking out your project and making a mental decision on whether they want to take it or not. By asking questions along with the usual first time formalities of an initial meeting, your contractor is drawing conclusions about your project, and how you, as a consumer, would be to work for. And believe me, I have turned down high paying jobs simply because a prospect did not seem as though they would be easy to work for (more on that later). I am not saying that I want a person to be a pushover, just accepting anything that we do, but I do want some understanding and flexibility — because without these things my job would be nearly impossible.

Another thing we look for in potential projects is: Is it even feasible? Are you thinking you can have champagne on a beer budget? Are you wanting to turn your only outdated 5′x8′ bathroom into a spa retreat (which we can do, if you are prepared for some serious inconveniences)? Are you wanting some HGTV miracle makeover to happen with no planning and in a very short time frame? Are you wanting to complete some of the project yourself, and are you capable of doing it in a skilled and timely manner? And . . . the most important, are you desperate to have this work done, now, no questions asked, no planning, no budget considerations? These all are big red flags to us. A good contractor works with time, planning, budget, and your dreams to make your project a complete success.

A well respected contractor also looks for problem customers. I am not talking about the type of customer who wants to stay informed and be really involved in the process. I am talking about the customer who wants to “run” a project, or considers themselves a general contractor. The one who wants to buy every single two by four and basically seems to think they know how to, well, run a project. These people usually have full time jobs, or are semi-retired, and fancy themselves as experts because they may have even “overseen” the building of their own home. They often demand a lower rate because they feel the “general contracting fees” should be waived.

We typically do not want to work with someone on a “contract basis” and/or someone who wants to be their own GC. This is usually because we end up wasting a lot of time doing their job as the General Contractor for them, in other words — scheduling deliveries, running to the store for materials, and dealing with otherwise poor planning on their part. We have been doing this a long time and we know what needs to be done, when and by whom. If you want our particular skill set, you can feel free to hire us at our company rate by the hour as sub-contractors for your project. Just know though that it may end up costing you even more, because we exactly know how to make a job run efficiently. After all, we do this every day. The amateur general contractor-type usually rubs a good renovation contractor the wrong way. (Remind me — I need to write a whole new entry about this alone, so forgive me for venting in this paragraph! –Holly)

What we look for usually is a customer who is genuinely interested in what will be going on during a project, has questions initially and along the way, and is willing to grant some type of confidence in us. It is a short-term partnership that is formed to reach your final goals, as well as ours. We want to see your project through to completion, to your full satisfaction, and with a full payment at the end because we stuck to your budget. Can you begin by relating your wishes and dreams to us, but still be willing to accept advice and realities?

A good general contractor will want to “feel out” an initial customer during a few meetings to determine if this is a customer they want to be working with. A not-so-good contractor may be all smiles, wanting to jump on whatever job you have – right away. This not-so-good contractor in general may also be a little too over-enthusiastic about your work. I am not saying that it is bad to have a person who is excited about your project, because we often get excited about certain types of work, but if they seem to be desperate, they may not be the contractor for you. A good contractor is usually booked at least a month to six weeks out or more. There may be extenuating circumstances when they are not, but remember, a good renovation takes planning and . . . time.

A good contractor will be looking at you, while you are looking at them. They will qualify you as a potential client. Sometimes, a contractor will not call you back or answer your emails. I have heard this complaint from customers of ours before. They call a few professionals, and never get a call back or they meet with said professionals and never hear from them again. Maybe the problem is your expectations or your attitude? Maybe they are just really bad contractors? Maybe you need to call more professional contractors. Or you can call us, no matter where you live, and we will give you our “always free advice” because we are good, honest, and receptive remodelers.

And this is my two cents.

On Thursday, April 22, 2010 the new Federal Renovation, Repair, and Painting (RRP) law became the law of the land. Much has been written about it, and most of what has been written is pointed at industry professionals. So, what does the RRP law mean to you, our customers and property owners.

It means a lot!

Are you affected?

If you own a building that was constructed prior to 1978, the law applies to you and will touch on almost everything you have done, from flooring to repainting to plumbing. Only jobs covering less than 6 SF (six square feet) on the interior and 20 SF (20 square feet) on the exterior are exempt.

Jobs that fall under RRP jurisdiction must be performed by a “registered company” and a “Certified Lead Renovator” (CLR), and you must be provided a copy of Renovate Right: Important Lead Hazard Information for Families, Child Care Providers, and Schools (PDF), and sign for receipt of the pamphlet. (The duties of the CLR are identified in 40 CFR 745.90(b). You can read the regulation here.)

What does this mean? Well, that’s a bit gray. It seems to mean that, unless your job site has been certified to be lead free, not only must the general contractor you hire be “registered” (with the EPA) and use a “Certified Lead Renovator”, it also seems that the firms s/he subcontracts with must be registered etc.—unless they’re not disturbing lead paint or dust. So for instance, if the general contractor clears away all contaminated dry wall, s/he could then hire a non-CLR plumber to come in and re-plumb that area. But if the plumber has to remove contaminated dry wall, then the plumber too must be a CLR. The difficulty is in the wording of the language. The square foot rule seems to be a trigger for the lead safe work practices, not the requirement that the firm be registered and the workers trained.

Owners of rentals should take special notice: Not only does the CLR have to keep certain records to prove they have complied with the law, you do too. You must provide your tenants with copies of the Renovate Right (PDF) pamphlet, and have them sign for it. I personally think you should also request copies of all lead practices compliance check lists and tests performed by your contractor for your own legal protection. Reputable firms should be more than willing cooperate as it’s in their best interests too!

Also, you cannot opt out! As originally written, Congress allowed property owners to opt out of complying with the RRP by signing a sworn statement that there were no children or pregnant women living in, or visiting, the building. But last year the EPA, the Sierra Club, the New York City Coalition to End Lead Poisoning, and others sued for stricter enforcement—and won. The EPA website says it has:

propose[ed] to expand lead-safe work practices and other protective requirements for renovation and painting work involving lead paint to cover most pre-1978 housing, and after certain renovation, repair, and painting preparation activities are performed to require renovation firms to perform quantitative dust testing to achieve dust-lead levels that comply with EPA’s regulatory standards. Renovations on the exteriors of public and commercial buildings will also be proposed to be covered and EPA will evaluate whether renovations in the interior of these buildings create lead-based paint hazards.

Whether the opt out rule is really gone or not seems to be something of a debate. However, you can get around the law by doing it yourself. Obviously the EPA highly recommends you follow the guidelines set forth in their Renovate Right (PDF) pamphlet. It is also recommended that you call the National Lead Information Center at 1-800-424-LEAD (5323) and ask for more information on how to work safely in a home with lead-based paint. (See 40 CFR 745.82. You can read it here.)

How will RRP compliance effect my job?

Obviously, it depends. If the site of a proposed job can be certified to be lead free, then there will be no impact at all. On some jobs the impact to those using the building will be minimal. This is especially true if there is easy direct access to the job site. On other jobs, however, the impact can be pretty dramatic. The EPA recommends, and your contractor may insist that:

• Alternative bedroom, bathroom, and kitchen arrangements be made if work is occurring in those areas of a home.
• Occupants use a different entrance to the building than that of the contractor. In fact, the entire work area and its communication with the outside should be kept separate from rest of the building as much as possible.
• You remove all furniture from the job site. Covering it up is likely not going to be acceptable—save perhaps for tables and other hard finished furniture with no drawers.
• Air ducts from HVAC equipment be disconnected from the system.
• For really invasive jobs where containment can’t be guaranteed: That you move out! (If you run a child care facility, it is highly recommended that you not only close the facility during construction, but that you implement all of the above in addition to closing.)

What’s this going to cost me?

The EPA claims all of this is only going to cost you between $8 and $167 per job. As usual, things out here in the real world look a lot different than they do inside those government cubicles. Little by little state General Contracting Associations are coming up with numbers and they’re not good. Estimates start at around $500 for a small kitchen remodel and go up to as high as 30% of the cost of a job. Which means RRP could add as much as $6,000 to a $20,000 job.

But that’s just the direct cost the contractor must add to the job. Then there are the indirect costs to you, such as: temporary lodgings, meals out, storage fees for furniture, down time to your business, and so on.

So, what do you think?

Thanks for asking. For those who don’t know: I’m a green design/builder. I’ve been around for thirty years, and I’ve spent more than my share of time in D.C. I could give tours through the underground tunnels beneath the capital.

I’ve been pretty vocal about my belief that this law is bad, bad, bad, and should be repealed. Not because it’s intent is wrong. Not because we should ignore lead paint and its related health issues, but because:

A) It probably won’t be enforced. The EPA has no funding for enforcement. It is my understanding that they are currently lobbying Congress for the necessary funding to open enforcement offices around the country. Given that the deficit is rapidly becoming the crisis de jour, I doubt they’ll get it. So in the end, responsible builders will follow the rules; the hacks will continue to be hacks and get away with it. Therefore, nothing will change; we’re no safer than we were. We’ve just spent more money and forced responsible contractors to take on more liability.

B) If the EPA does manage to get funding for enforcement it will probably make things worse rather than better. Like all Federal agencies, it’s a huge, top (management) heavy agency with no experience in construction, and no stake in local communities and their businesses. Its relationship with contractors will be adversarial, rather than solution oriented like that of the local building inspectors. (If you’ve ever had to deal with the IRS or the SSA then you know what I’m talking about.) Over time, EPA harassment can only drive up the cost of doing business and guess what: You, the customer, will be picking up the tab.

C) The States already have hazardous material mitigation and containment programs in place. Rolling a lead program into those systems would cost us (as taxpayers) almost nothing. And for that “nothing” we would have gotten a real mitigation and containment program with meaningful involvement and real enforcement through the contractors and agencies already doing that very work.

Now it’s time for you to tell me what you think. Have I forgotten something? Leave a comment and let me know. Agree? Disagree? Let me hear!

When the quote range on your job runs from $3,000 to $75,000 you’re in trouble. I actually got an email from an individual with that big of a spread for one, single job. He was using the spread to justify his amusement at how architects price jobs based on a percentage of the cost of construction.

He saw the spread of the bids he had received for his job as making his point. I saw something completely different in his example.

First, I saw a bid spread of 400%, which means total chaos. Either there were no construction documents what-so-ever, or they were little better than napkin drawings. Often the cause of such chaotic bidding is a complete lack of construction documents. The customer walks each bidder around the job site pointing here and there, explaining “exactly what they want.” Unfortunately, those explanations often vary wildly from one bidder to the next, so each bidder leaves with a different idea about the scope of work.

Second, I saw a customer who wanted to appear more knowledgeable about the building industry than they really were, which blinded them to the warning flags the bid spread should have sent up.

If all bidders are getting the exact same information about the scope of work, the normal spread in a group of bids should be around 25%. Most of this spread represents differences in each company’s overhead costs, and an assessment of risk involved in doing the job, which the estimator builds into the price. A smaller fraction will be made up of differences in the desired profit margin and crew efficiency. The actual underlying costs remain pretty much the same for all bidders. Pay scales run within the same range, and in most communities the bidders will all be buying their materials from the same suppliers.

So what do you do if you have your job bid and the results are wild? Take a good look at your job. Ask yourself these three questions and consider the solutions:

• Do you have as set of construction documents? If not, this may be a sign that you need to spend the extra money to have some drawn up by a professional. Depending on the size and complexity of the job, you might also consider hiring a professional to manage your job and advocate for you. A construction manager can sometimes save you far more than they cost.
• Did everyone get the same information? If you didn’t have a set of drawings and specifications to hand all your bidders, did you work off of an outline? Unstructured “walk around tours” are nice and all, but you have to make sure you show the same things, and make the same points, to each bidder.
• Did you use the bidding process as an opportunity to gain information about your job? This is a really common practice. And it’s a mistake! Collect information first. Decide exactly what you want done. Pay to have construction documents drawn up if need be. Then get bids on those documents.

Once you’ve identified and corrected the problem(s), you’ll have to go through another round of bidding. Responses from the first set of contractors is likely to be mixed. Working up a bid is a lot of work. It therefore costs money for the contractor to do each and every one. So some will happily come and re-bid the job, others will decline. Be prepared. (This is one instance where a construction manager can be a big help.)

But I can guarantee, if you utilize the tools above, the results will be well worth the time, effort, and money in the quality of bids you receive, and therefore in the quality of building professionals you end up working with.

Back a couple of years ago, during the housing bubble, I heard a lot of complaints about how hard it was to get a contractor to even return a phone call, never mind scheduling the work. And, with that much work around, there were also lots of complaints about the high prices.

During the boom, understanding the difference between (self) employment and running a business was optional. If you knew how to estimate materials correctly and had an idea of what “everyone else” was charging for “similar jobs”, you were golden. That’s really all it took. Demand kept prices high, so even the least business savvy contractor was almost guaranteed to make money.

And believe it or not, that helped you, the customer. The contractor was making enough money to pay all the bills associated with the job. So even if the contractor you hired was a terrible business person, the chance that you’d get slapped with a mechanics lien by some subcontractor or supplier because your contractor didn’t pay them was reasonably low.

Not so today. Now that the bubble has burst, jobs are not so plentiful. Competition for those that remain is much higher. And while you may think that’s a good thing because it means you’ll get your job done cheaper, keep in mind that beyond a certain point, “cheaper” also means riskier. Sometimes, much riskier.

Back in February I told the story of a career carpenter, now self-employed, who was working for the same hourly wage he’d been paid as an employee.

Now you might think: “Wow! I can get this job done really cheap with this guy.” And, if all goes well, you might be right. Or, you might find out the hard way just how expensive this guy really is — not because he doesn’t know his trade, and not because he’s dishonest. Rather, because not being a business person, and therefore not knowing how to correctly price himself and his job, he leaves both himself and you vulnerable.

For an example, let’s suppose Mr. Carpenter here owes some back child support he hasn’t been able to pay (probably because he’s not really making any money on these jobs he’s doing). So, while he’s working for you the State decides to exercise its right to drain his bank account to collect. Well, Mr. Carpenter owes the Home Depot money for the materials he’s bought for your job. And the State just took the money and gave it to his ex-wife! They not only took that money, they also took the money he needs to live for the next month.

So now he has no money to pay for installed materials, no money to by food, no money to put gas in his truck to get to work (your job), and no money to fix any of his tools that might break on the job.

But all of that’s his problem, right? Yup — until it becomes yours!

Because in most states, Home Depot has the legal right to place a mechanics lien on your house for the materials Mr. Carpenter bought and installed in your home — whether he was a licensed contractor or not; whether the job was finished or not.

Now, I’ll admit that this is an extreme example. But in this economic climate, as contractors (and their former employees) get more and more desperate for work, you’re going to see more and more bid that are not just low-ball, they’re down right ridiculous.

In my article on how to choose a remodeling bid I provide some common sense ideas on how to at least winnow down the bids to those that make sense. Those same techniques will also eliminate individuals and contractors like Mr. Carpenter. Because this information is so important, especially now, let me repeat it here:

• If you have a bid that’s disproportionately low, throw it out. “Low balling” is a bidding tactic that some contractors use to get jobs that is, in my opinion, dishonest. Basically the contractor deliberately under bids the real price of the job in the hope of being the lowest bidder. Then, after s/he’s gotten the job and the work has started, s/he finds reasons to get you to sign Change Orders that progressively raise the price up to what the bid should have been in the first place. In some states, I understand a contractor can be disciplined for using this type of bidding tactic.

  Another reason a contractor might submit a low ball bid is because they have no intention of doing the work! They take your money and disappear with it. This year was a particularly nasty one for transient operators.

  In either case, this isn’t the kind of person you want to hire.

• If you have a bid that’s disproportionately high, throw it out unless you can find a darned good reason for the high bid — or you and this person just really hit it off.
• That leaves you with a pile of middle bids that are all worth your consideration. All other factor’s being equal, I recommend picking the contractor you get along with best, not the lowest bidder — though the two may be the same. Because remember, this individual and his or her crew is going to be around five or six days a week for months on end! You don’t want the industrial version of your mother-in-law!

Good luck evaluating the bids for your project!

contractor, bid, bids, bidding, soliticting, remodel, remodeling, recession

Powered by ScribeFire.

The design/build method of building isn’t exactly new. But it’s growing popularity in commercial and public construction has taken time to trickle down to custom home building.

And for good reason.

Design/build is a very different animal. Even if you’ve had a home built before, and so are familiar with the standard architect/design and construction contracts, design/build can seem as mystifying as it is attractive. The advantages:

• Design/build is usually a “turn-key” operation. Your building project is overseen by an architect or general building contractor who acts as your representative for the whole project: From earliest conception to handing you the keys.

  That can take lot of stress out of what is, for most people, a very stressful project.

• Because the project is under one firm’s management, the entire project is streamlined, which aids in budgeting control and time management.

  This reduces costs and decreases the amount of time it takes to deliver the project.

• You don’t don’t have to shoulder the burden for making decisions you might not feel comfortable with: Like selecting a good builder or plumber or making the testy bureaucracy come to the table so you can get on with things.

  Your design/builder is (or should be) a professional. S/he knows how the system works, and knows whose going to do a good job building your new home.

How A Design Build Contract Works

Unlike a standard construction or remodeling contract, where the contractor is handed a set of construction documents and asked to quote a price, the design/build project starts with no more than a budget and a conception. The conception is often no more than sketch drawn on a napkin over lunch. The purpose of the design/build process is to turn that napkin drawing into a finished project for the money in the budget.

To do that, the design build contract talks about phases of work, and uses control documents to allow you and your design/builder to manage each phase of the project with respect to the budget.

The first phase is the design phase: Here you and your design/builder turn your dreams into construction documents. In this phase your design/builder will be estimating prices for you from well known statistical data. Your design/builder will also be working with the various regulatory agencies to make sure that their requirements are met, and that there are no road blocks in the way that will prevent the project from ever seeing completion.

In my contract I call the first step in the design phase “project feasibility”: Can we build the house you want to build? Are there any impediments that will either be too costly or virtually impossible to remedy? Questions I like to answer for the customer before money starts being spent on designing a house that can never be built!

In design/build, project progress is usually controlled by a document called a “Notice To Proceed”. This is a document usually given to you by your design/builder, which you have to sign, that gives him or her your authority to proceed with the step. Along with the Notice To Proceed there is also usually some requirement that the design/builder provide you a budget estimate of what that phase of the design process is going to cost.

Personally, I break things up into three phases: Feasibility, design, and production of the final construction documents. That way, at any point along the way, you can stop if you need to. If fixing some site problem is going to bust the budget, we’ll end up stopping in the feasibility phase. If I can’t seem to get the floor plan to look like you want, we’ll never get past the design phase. You’re free to hire someone else to move the project forward. But if we make it through the first two hurdles, then we’re ready to nail down the final construction documents needed to begin construction.

Which brings us to the construction phase: In a linear sense, once the construction documents are completed, your design/builder will ship the plans off to the various suppliers and trade contractors who will be building (or bidding to build) your home.

In practice, the design/builder has usually already been talking to vendors and contractors about the project, so much of the preliminary budgeting and bidding work will have been completed by the time the building department signs off on the final documents.

In any event, when all the bids are in and the prices are known, your design/builder will present you the final price and time line for construction. This is usually done in the form of another (the last) Notice To Proceed with construction. This Notice To Proceed will look the most similar to a traditional construction contract, containing, among other things, the progress points at which you’ll be required to pay preset amounts on the project.

Until eventually you’re writing that final check and being handed the keys to your new home. Project, and contract, complete.

Things To Watch For

Unlike regular construction projects, your relationship to your design/builder is going to be a lot more intimate. There’s going to be quite a bit of back and forth as you make the hundred or so decisions that only you can make about your new home. At the same time, you need this person to be able to tell you when something just isn’t going to work for one reason or another. So your design/builder needs to be someone with whom you can develop a good working relationship.

It also needs to be someone who will treat you fairly. Be wary of contracts that lock you in early. I have heard that new AIA (American Institute of Architects) design/build contracts apparently make you pay a severance fee if you decide to let the architect go prior to completion of the project, for instance. This locks you into a relationship with a person you may hate to death, or forces you to pay a healthy fee to get rid of the git!

At the same time, realize you need to treat your design/builder fairly too. It’s unreasonable to expect your design/builder to put a month or more of time into initiating the construction process, lining up subcontractors, vendor pre-construction materials orders and delivery schedules, putting together a construction schedule so the subs know when they’re expected to appear and so on, only to then be told you’re letting them go. Many design/build contracts, including mine, do expect some compensation in that eventuality. But that’s very late in the process. And long before all that pre-construction time gets invested, you should know whether you want your design/builder actually building your house, or whether you want to put the project back on a more traditional design/bid/build track and look for someone else.

Make sure your contract keeps you in charge! I can’t emphasize this enough. Don’t be bamboozled by some fast talking contractor or architect. This is your home and your money. Certainly there are rights and commitments on both sides, but in the final analysis your design/builder is, or should be, working for you. The contract should reflect that.

In the same vein, don’t ever sign a contract that locks you into your design/builder’s schedule. The schedule should be something worked out between the two of you, and documented via the supplementary documents attached to the Notices To Proceed as circumstances and conditions dictate.

Finally, maintain your self awareness: Building a new home is more stressful that most people realize, even using the design/build method. If you need a break, don’t be afraid to tell your design/builder you want to put the project on hold for a few weeks while you take a vacation. (Don’t over look the fact that your design/builder might need a break too. S/he’s only human, and burn out is as common in construction as it is in other high-stress jobs. But they probably won’t ask. You’ll have to “recommend” it.) If you need to sign a change order to make that happen do it! Believe me, in the long run, losing a month to take a breather will seem a small price to pay for the increase in quality and satisfaction you’ll have with your new home.

Good luck with your design/build project!

Technorati Tags: construction contract, design/build contract

Last night I was chatting with a friend who related the lament of a contractor who had just lost a contract to a “kid” who had bid the job so low, the older, more experienced contractor knew the young fellow couldn’t complete the job for the contract price.

It’s a perpetual problem built into our American construction culture. Journeymen and master craftsmen are pretty much expected to become contractors themselves. Young people, attempting to avoid the minimum wage racket of fast food, take classes in school, leverage that into a part time job after school helping a builder, then work full time in the summer. By the time they’re 18 they’re almost journeymen; by the time they’re 25 they’re senior journeymen at their trade, and are crew chiefs or construction supervisors.

Many will decide to become a contractor. And there’s the rub.

Yes, they know the craft. But knowing how to build a house has nothing to do with knowing how to run a business, or how to accurately compute the cost of building that house. They don’t know the difference between their hourly wage and what it costs the boss to pay them that wage, and they have no concept what-so-ever of what it costs to run “the back office.” And ironically, even given another ten to twenty years in the trade, they still won’t know.

This was amply demonstrated to me many years ago. I was called out onto a job site on which a master carpenter was doing a beautiful job of fitting a hand made, cherry wood arched door frame into obtusely angled opening. The man had thirty years experience in his trade. All of it spent working for a company in Sacramento. Finally, he’d decided to strike out on his own. One day I had the opportunity to ask him what he was charging the customer. His answer: $25/hr!

I was stunned.

He was working for his former hourly wage, oblivious to some rude realities that were going to catch up with him at tax time: All those taxes his employer had paid for so many years — or had split with him — were now his responsibility. And then there are the hidden costs of being your own boss: Vehicle maintenance, bad debts, adverting, the non-billable hours of work that go into paperwork and bookkeeping, broken and worn out equipment — all costs not built into an employee’s salary. All costs the Boss has to factor into the price of every job.

There is a double standard in the construction industry, as in so many other professions. We expect people to go from being employees to business experts in their formerly salaried position with with the wave of a bureaucratic wand. Upon issuance, the master craftsman is supposed to be an expert on contracting law; to know how to bid a job, how to make payroll, how to write at least three types of legal contracts and a half a dozen other routine forms, none of which he’s likely ever even seen prior to striking out on his own.

There is no easy answer. In California the State License Board fails dismally in its task of attempting to turn craftsmen into business people by teaching them what the State thinks they need to know through the trade and License Law tests. But at least it’s trying.

In reality, this is problem bigger than, California. It’s a problem in all the States. The same mechanism that works so well in teaching young people the building trades — apprenticeship — fails dismally at teaching them to be contractors, and for good reason: Turning a young apprentice into a valuable employee is in the best interests of the employer. Turning a valuable employee into competent small business owner creates a competitor for the employer. Few contractors want to see yet another contractor succeed on their turf. Let the kid learn on is own!

And who gets to pay? Unfortunately, the public. Contractor horror stories are at least as common as medical horror stories. All too often the bubbly home owner’s enthusiasm at discovering they can get that new kitchen at a price they can afford turns into a nightmare of delays and cost over-runs that have them scrambling for money from everywhere they can find it, just to get a usable kitchen.

Sadly, often it isn’t really low-balling; it’s simply a lack of experience.

Technorati Tags: contractors, contracting, the business of contracting, estimating, bid estimating, building costs

We just got some bids on a remodeling project and the bids are all over the map! And even the lowest bid is much more than we expected we’d have to pay for our project.

Why are the bids so high, and why is there so much difference between
them?

Well, there are two different things going on here.

First let’s address the scatter in the prices of the bids: The National Home Owners Association says you should expect a difference of about 20% in the bids you receive for a home improvement project. Under normal circumstances, I assume. But we haven’t had “normal” circumstances in the residential housing industry in years! During the boom builders could pretty much name their tab (within reason, anyway). And now, during the bust, they’re bidding jobs outside their regular field of work, and doing so in a highly competitive market. Both extremes lead to a wider variance in bid prices than you’d expect to see for any given job, but for very different reasons.

Now to the second question: Why are the prices so high?

Repair and remodeling is a very different animal than new construction. Repair and remodeling loses all the advantages of the economics of scale that new construction enjoys, both in the purchase of materials and in labor.

Consider: In a new construction project the doors are purchased as part of the bid package by the supplier for the entire project. So while a door might cost $200 each, by bundling that door into $150,000 worth of materials for the whole project, the contractor is able to buy them for only $135 each. When the laborers install them they have the advantage of brand new square framing and many doors to install. As a job is repeated time is saved. So installing 10 doors is cheaper (per door) than installing 1 door.

Now over to the your remodel: Your whole project probably doesn’t total just the materials in the new construction. And, you may have only one or two doors that need to be changed. So the economics of scale are lost both in purchasing power and in labor savings. Then, your doors are going to be installed in old frames that are probably no longer square. They might not even what we refer to today as a “standard” size. All these factors increase the cost of installing the door.

Multiply this example out to the size of your project and you can see why remodeling is a very different animal than new construction. According to Building News International the national average price for a remodeling project is $86 per square foot — almost the same as for new construction.

Finally, let me give you some suggestions about which bid to choose. Obviously I can’t be specific as I know neither the details of your project nor the contractors in your area, but in general:

• If you have a bid that’s disproportionately low, throw it out. “Low balling” is a bidding tactic that some contractors use to get jobs that is, in my opinion, dishonest. Basically the contractor deliberately under bids the real price of the job in the hope of being the lowest bidder. Then, after s/he’s gotten the job and the work has started, s/he finds reasons to get you to sign Change Orders that progressively raise the price up to what the bid should have been in the first place. In some states I understand a contractor can be disciplined for using this type of tactic

  Another reason a contractor might submit a low ball bid is because they have no intention of doing the work! They take your money and disappear with it. Believe it or not, it happens a few times every year.

  In either case, this isn’t the kind of person you want to hire.

• If you have a bid that’s disproportionately high, throw it out unless you can find a darned good reason for the high bid.
• That leaves you with a pile of middle bids that are all worth your consideration. All other factor’s being equal, I recommend picking the contractor you get along with best, not the lowest bidder — though the two may be the same. Because remember, this individual and his or her crew is going to be around five or six days a week for months on end! You don’t want the industrial version of your mother-in-law!

Good luck with your project!`

Technorati Tags: remodeling, contractors, bids

“You just talked yourself out of a job,” my mother quipped after I put down my cell phone. I was at her house resetting the controls on her Monitor heater after last weekend’s power outage. She’d just overheard a conversation between myself and a prospective customer.

“That’s because I’m honest,” I replied, returning to resetting all the heating schedules. “I’m not particularly interested in spending that poor woman’s’ money for her when she’s not going to get good value for her dollar.”

“Honesty?” My mother feigned a look of bewilderment. “From a contractor?”

Mind, my mother makes no distinction between the chap who fixes her refrigerator and the chap who paints her house — it’s still a sad commentary on the general attitude toward the industry.

And I suppose she’s right — from a certain point of view. Certainly I could have simply done what that woman on the phone wanted me to and taken her money. One more customer. One more invoice paid. One more sale “closed”, keeping the percentages where they’re supposed to be.

I know trades people with that very attitude. I’ve cleaned up their mess; dealt with their frustrated and angry customers who felt bilked by hard driving sales people or employees out to “do it quick and fast” to “make the buck”. Time being money, you understand. It makes me faintly nauseous.

I suppose I’m just horribly old fashioned, but I’ve always figured I’m in business to be of service to those who call me for help. First and foremost that means being as honest as I can with them, right from the beginning. And sometimes that means telling them it’s not in their best interests to pay me to do what they want me to do.

Does that cost me money?

In the short run, certainly. I “talked myself out of a job” today. And I’ve talked myself out of other jobs by being honest about the true cost of the project when the customer was just aching to hear and believe the rosiest “low ball” picture they could find.

In the long run? I don’t know. And in truth, I don’t care. In my fifteen years in this business I’ve learned it’s far more important to me to be able to look at myself in the mirror in the morning and like what I see than it is for me to be able to look at my bank account and like what I see.

And while that might make me poorer in the wallet, I can count myself richer in spirit, for I am fortunate enough to be able to call many of my long standing customers “friend.”

Technorati Tags: dishonest contractors, contractor ethics, service trade ethics

“I have had X contractors look at my project and none of them want to do it. Why?” I’ve heard some form of this several times in the last few months — sometimes as direct question, sometimes as an offhand comment — so it seems only appropriate that I address the issue here.

When a contractor or the contractor’s job estimator looks over a new project, they’re looking at a lot more than just the results that the property owner wants to achieve. From a builder’s perspective, all projects look pretty much the same and require the same skill sets with only minor deviation.

But the business of contracting is made up of much more than demolition and drywall, so to speak. And when looked at from a business perspective, there are lots of reasons why a contractor might say no to a project. Reasons that can be boiled down into three broad categories.

Time frame: The customer’s job just may not fit into the contractor’s schedule in the time frame the customer wants the job completed.

Fit: The job may not fit the company business plan. In larger metro areas contractors tend to be much more specialized than up here behind the Redwood Curtain. In the metro areas its not uncommon to find contractors that only do bathroom remodels, kitchen remodels, decks, siding, windows, and nothing else!

Up here contractors tend to be more generalized, but they still have certain ideas about what “fits” them well. Some don’t like small jobs, for instance. Others only do new construction. Some focus on remodels, others prefer commercial construction, and so on.

Risk: All construction is risky. Our legal system system makes sure of that. But some jobs are riskier than others. To put it simply: the greater the number of unknowns, the riskier the job is likely to be. This is why many contractors stick with new construction. What few problems that do arise are (usually) easily remedied. It follows then
that renovation projects have a greater number of unknowns, and thus a greater degree of risk. And usually, the older the building the greater the risk.

The property owner(s) are also a factor in the risk calculus. Once the project’s risk factor is determined, questions going through the estimator’s mind are: Does the property owner have enough money to cover the likely contingencies? Are they going to be a “hard to please” customer? Does it seem to the estimator or contractor that a good working relationship with the property owner can be established and maintained throughout the project? For many companies, an answer of “no” to that last question automatically puts the project in the rejection bin. For others, it’s simply one more factor in the overall risk assessment of the project.

So yes, it can be difficult at times to find just the right contractor for a project. Especially if your project falls into the higher risk category. When you couple the needs of the contractor with your need to feel comfortable with the contractor you hire, it can be harder to find the right contractor than family physician.

Technorati Tags: remodel, renovation, new construction, choosing a contractor

I’ve been getting so many questions about “how projects go” that it seems an essay on the subject is in order. My hope is that it will help folks who are contemplating either a new custom home or business project or a major renovation of an existing home or business.

I’ve written this in a plain talk question and answer interview format based on the subjects I’ve been repeatedly asked about. By “plain talk” I mean, I’m telling it as it is, like I would if we met on the street. No flowery language, no sales soft talk.  So go grab a beer (or whatever turns your Twinkie) and read on!

How does this work? Where do we start?
You start by finding someone who can take your ideas and put them to paper in a way that makes sense to other building professionals and, of course, to the bureaucracy that must bless them. I’ll give you my thoughts on how to go about finding that person below. In the mean time, let me address the “how this works” part.

Building regulations vary from state to state, from municipality to municipality, and quite often from inspector to inspector. In some places a very simple set of plans (blue prints) is acceptable for even very complex projects. In other places they want an insane amount of detail for even simple jobs. Then there are the non-building regulations that may affect your project. Here in California we have the California Coastal Commission to deal with, among other lovely agencies. You might have a few special jewels in your area too.

All that said, the basic track of a new project remains the same in many respects. Your architect or designer will take your ideas and put them into a nice neat form that both of you can see. You can request models — 3D computer models or physical models, or both — make changes and manipulate things until you’re happy with the result. Then the technical work begins as the structural details of the design are worked out. Finally, the final plans are produced. For many projects, a plot plan will have to be produced, and unless the building site is flat, a slope survey will have to be conducted. In rare cases a surveyor may have to be hired. Obviously, “site work” does not have to be done for condo jobs.

Once the final plans are completed, the engineering is done and the surveys are wrapped up, your architect or designer will start the documents through the regulatory process to obtain the building permits. In the mean time, unless the designer is a design/builder, requests for quotes will be put out (RFQs) to start the bidding process by builders.

Finally, once you’ve accepted a bid, the actual construction can start.

Who do I get to do this?
In some states, and in some jurisdictions within states with different rules, only “design professionals” can do architectural drafting and design. A “design professional” is a licensed architect or engineer.

In many other states (including California) the vast majority of residential design work is done by contractors and unlicensed design professionals. They’re usually cheaper than an architect.

I’m on a tight budget. How do I prevent cost over-runs?
As you probably know, construction projects are famous for going over time and budget. And not just residential projects. All construction projects, even government contracts. I’ve seen architects turn in designs that cost two and three times the budgeted amount to build more than once. And getting those projects parred back down to budget size costs in both time and money.

With that under your belt, if you want your project to fit into your budget, don’t ignore this advice (like many clients do, to their detriment):

1. Play to the bottom end of your budget bracket. You’ll be glad you did, believe me! In other words, if you have a $200k to $300k budget, keep your designer working in the $200k range. Nobody, and I mean nobody, is going to be able to tell you exactly what its going to cost to build your project until you actually see the numbers on the bid papers. Everybody from your designer to the engineer to the building department will be working with numbers based on experience. They’ll be “in the ball park”; they’ll also be wrong — usually on the low side. Play it safe. Keep it low, it’ll come in about right.
2. Keep a tight reign on your enthusiasm. It’s easy to catch design fever. Design is fun, both for you and your designer. It’s fun to dream; it’s fun to see a dream come alive. But in the building business small changes can add up to big bucks real real fast. You are responsible for managing your emotions. Don’t expect your designer to be the parent and tell you no. That’s your job.
3. Ask questions and listen to the answers. Keeping in mind number 1 above (nobody can tell you exactly what your project is going to cost), there are expensive ways to do things (and expensive things to do) and inexpensive ways to do things. Anybody whose been in this business awhile knows the difference. Your designer might show you a really pretty castle-rock facade and you might love it. She might also not bring up, or only mention as a side note, that rock facades of any kind are really expensive to install (compared to more normal siding options). So ask questions and make sure to pay attention to the answers. All the answers. If this is “expensive” and that is “expensive” and two weeks ago she described something as “expensive” don’t be surprised if you come in over budget! Which reminds me:
4. Don’t expect answers in dollars and cents. Even if you got them, they’d be wrong because prices of building materials are volatile. More useful for your purposes in design are adjectival answers: Expensive, high, average, low. In the same vein: Don’t expect your designer to give you a “line item budget”. You won’t get one, because nobody has one. (See “getting a budget” below.) Even if someone did produce one for you A) the numbers would be wrong by the time you got to bid (see my first sentence above) and B) you wouldn’t understand all the technical lingo in the 100 odd page document anyway.
5. Don’t succumb to sticker shock. Despite everybody’s best intentions, projects often come in much higher than the designer thinks. Some of this is due to the ever increasing demand for building materials. Some of it is “the fever”. Whatever. The point is, it happens; it’s normal; it’s nothing to lose sleep over. Does it mean you and your designer and his team may have to rethink a few things? Sure. Will it cost a bit more to do that rethinking? Yes. You know what? It happens on more projects than it doesn’t happen on, both industrial sized large projects valued in the millions and on small ones. It’s the part of nailing down a design everybody hates because it’s disappointing. It’s where you have to par your dreams back into the reality of your budget. Do your poor designer a favor: Hold your nose, buckle down, and help him get ‘er done! Then move on.

How do I get the best person for my job?
The standard government answer is: Ask for references and samples of prior work, and ask for quotes. Then take the lowest bidder with good references. It probably works for some people. I’ve had people give me that grill. In my opinion it’s terrible advice!

Ask yourself this: Would you ever knowingly list someone as a reference on your resume whom you thought would give you a bad reference? Didn’t think so. So if you’re going to follow the “get references” advice you might as well save yourself some trouble and just ask for a company advertising brochure. No company is going to show you work they’re not proud of or give you contact information for a reference that’s going to say something bad.

And as for choosing the lowest bidder: Would you say the quality of work the government gets by using the “lowest qualified bidder” is stellar? My father was a government contractor. He once got into hot water with the government for not using the “lowest qualified bidder” method for selecting subcontractors. So, for the next job he did. The quality was so bad he had to call the subcontractor back twice and the job was still substandard. He never did it again—and was never asked to do it again by the contracting government agency.

A much more sensible approach, at least as far as I’m concerned, is to call around and talk to folks. Then call the one(s) you liked back and talk some more. Pick there mind, get to know them, how they think, what they think about your project. Ask around a bit and see what kind of reputation they’ve got. If you hit it off with one and they’ve got a good rep in the community, that’s the one!

Design/build or design/bid/build?
As is now pretty much common knowledge, design/build has quite a few build in advantages over design/bid/build. That said, I personally don’t like locking clients into a complete design/build with no escape from the contract. So in my design/build contract I state that I will provide a construction budget, and that budget has to be approved by the client. If the client doesn’t like my price, they’re free to go hire someone else with no penalty payment due me.

Sometimes I may not be the right builder for a job, even though both I and the client had every intention of me doing the build after finishing design. Because I’m just that way, I’ll point the customer client to a better option. Sometimes I might even do the leg work for them in getting my replacement.

How long should it take to get a budget after the construction documents are completed and filed?
Producing a construction budget is no small task! It takes a half a dozen people a minimum of forty man hours to produce the initial budget documentation for the prime contractor (the one you’re hiring). Many prime contractors will put in about forty hours of their own at the same time to produce a quality control estimate to compare values too. Then, after getting the outlying budgets, they have to work those number, another 40 hours. So it can take three weeks to a month to get actual numbers that work for your project. And remember nobody is getting paid to do this! Estimating (as it’s called in the trade) is part of every company’s overhead cost.

Se be patient. And don’t expect to see a “line item budget”. You won’t. Those are internal company documents written in constructioneeze. What you’ll get is a price.

Is there anything I can do to minimize delays and get the job done on time?
Short answer: Nope!

Everybody complains about delays—including me. In fact, sometimes I get downright rude at the causer of said delay.

And that gets right to the point: No matter how many laws get passed, no matter how many regulations are promulgated, there are going to be delays. Temper fits or no temper fits; rules and regs or no rules and regs.

Whatever deadline is set, it has about a 30% chance of being met, and I have no idea why! Nobody has any idea why (though politicians will pontificate loudly as though they’re certain they do). There are so many moving pieces in every project that it’s impossible to point at one ahead of time and say “that’s going to hold us up.” I’ve had company estimators disappear on vacation after promising to get me a complex “take off” (a list of materials and prices) “in about a week.”  I’ve had engineers over book themselves and then have trouble finding suitable subs to take my job. I’ve seen building departments grind a whole job to a stop half way through because something already approved on the blue prints is suddenly now not okay. So government engineers and the engineer of record get into a fight over what the codes say and whose right and whose wrong. And while they’re fighting, the job is shut down. Storms close roads and shut down building sites. The flu cuts through work crews like wild fire, slowing progress. A truck load of needed materials get stuck in a blizzard in Canada on its way to the job site, causing a work stoppage.

The list of stupid, inane, silly seeming things that can cause delays is nearly endless. And trust me, some of them will probably happen on your job.

So there you have it. A short Q and A about custom building projects.

construction, design/build, design/bid/build, custom home