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Whether you have decided to hire a full service builder or manage the home building process yourself, be sure to get a minimum of three bids for any work you intend to hire out. Prices vary considerably from one company to another. This variance can translate into thousands of dollars in savings by taking the time to get multiple bids.
But isn’t the cost of a roof for a given house plan the same no matter who installs it? There couldn’t be much difference between roofing contractor prices could there? Believe it or not, prices for the same piece of work in residential construction can vary up to 50% or more. The last granite kitchen countertop we bid out had a 50% difference between the lowest and highest bidder. Here are some of the reasons that bids vary…
Overhead Structure: Some companies operate much more efficiently than others. Take the roofing company example above. If a given contractor has had safety violations or employee injuries on the job, their workman’s compensation insurance costs could be much higher than usual. This is just one example of how overheads can vary from one company to another. Other examples include office lease expense (some companies work out of their home), employee benefits, company vehicles,…etc.
Bad Estimating: The estimating task for many of the small companies in residential construction is performed by the owner-operator. For some of these guys, the only time they have available to do estimating is at night because they work on the job site all day. When performing an estimate, they may be tired or distracted by family matters and miss a few key items.
Schedule: A contractor may charge you a big markup because they have too much work at the moment, where another company may need to fill a void in the schedule to keep employees working. In addition, companies that have high fixed cost like a truss plant may be content to take a lower paying project in order to keep the machines working and loans paid.
Differing Materials and Methods: If you don’t provide any detailed information, your bids will come back very different. For the roof example, there are many material and quality items that can change the price of a bid. Is the contractor going to haul away the debris? Are they supplying the material? What kind of roof shingle do you want? All of these details should be in your Scope of Work that you give to each contractor for pricing. By specifying exactly what you want and how you want it done, you will be able to compare bids properly to get the best price.
Quantity: Some companies get big quantity discounts from suppliers because of the large amount of work they do. Suppliers like to take care of the companies that purchase from them to keep them coming back. They do this through rebates and discounts. Some contractors will pass this savings on to customers and some will not.
Insurance: Hiring companies with the proper insurance is a must. There are some small companies out there that either don’t have the money to buy insurance or they just don’t think it is important. This can translate into a lower bid. Don’t get fooled into hiring a company without the proper insurance to protect you.
These are just a few of the reasons that bids can vary dramatically from one company to the next. Be sure to get a minimum of three bids to make sure you are getting the best price out there. And remember, price isn’t everything. Always do your due diligence to make sure the company you are hiring has the necessary experience, insurance, qualifications and desire to build nothing but quality per your schedule.
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