Recently a listener emailed me with a question that I thought would be good to share on the podcast and website. It has to do with the bidding process.
Getting bids is the process of getting cost proposals from subcontractors. To get an accurate bid, at a minimum, we need to give each subcontractor a set of house plans and specifications. The specifications describe the specific materials needed for the job and the methods for construction. We’ll talk in more detail about the bid process next week in a mini lesson. But right now, let's go over the question and the answer I gave.
Here's the listener's question:
"I've enjoyed listening to your podcast as we are in the pre-construction phase of planning to build our own home. However, in the past couple of weeks our subcontractor bids have been coming in and we are starting to get concerned. I sent MULTIPLE bid requests to subcontractors for each trade, and even though all of them haven't come in, we are trending well above what it would cost to go through a builder. What am I doing wrong? Do general contractors have some underground network of cheap laborers that I'm missing out on because I'm not a GC? Any advice would be helpful!"
Here’s my answer…
I don’t think you are doing anything wrong. Unfortunately, subs (and building supply companies, for that matter) will sometimes (but not always) give better prices to GCs. That’s because the subs assume those GCs will be building several houses per year and could give them more business in the near future. Most owner builders will only build one or two custom houses in their lifetime. Here’s what I would do:
1. Ask the subs if their bid represents their best price and if they give a builders discount for owner builders. Maybe in exchange for you being a reference for them in the future.
2. Ask your favorite sub (if he is not the lowest bidder) if he can meet, or come closer to the price of the lowest bid.
3. Cash talks !!! If you are in a position to pay the subs cash, they will usually discount their prices.
4. If you are still not getting “acceptable” bids, you might ask a local builder if you could hire him as a consultant to help you with the bid process. Then see if he can get you better pricing. Pricing for consulting will vary, but I've heard $100 per hour is reasonable.
5. If all that fails and you still get significantly higher bids without a builder, you might consider hiring a GC for your project. Run the numbers. If you are spending more money by doing it on your own, hiring a builder could be worth the builders fee.
Building without a GC can often save money. Not always, but often. Remember to take into account the money you’ll save not only in not paying the builders fee, but also in not having markups on materials and labor.
So that was my answer to her.
After learning that it’s usually significantly cheaper to start construction in the Fall, which is the off season for homebuilding, it might make sense to get bids in this Autumn, if the project can wait a few months. If you haven’t listened to last week’s episode about why the fall might be the best time to build, take a listen/look to episode 117 called When Is The Best Time To Build A House?.
Finally, when getting bids, let the subs know you’re looking for quality work, but you are also looking for the biggest bang for your buck and you’ll be getting several bids and comparing costs. This will hopefully encourage them to price your job competitively. You might also ask subcontractors in one trade to recommend subs in another trade. Ask them who does good quality work for a fair price. This should get you a few more names to put on your list of potential subs. I know you’ve heard it before, but get a minimum of 3 bids per trade, and preferably around 5-6 bids per trade, if possible.
Before I go, I want to thank Chicnhed for your 5 star iTune's/Apple Podcasts rating and review. She says, in part, "I’m in the lot purchasing phase of our project and This podcast has been beyond helpful in thinking about my future plans. My husband is convinced that I can act as our general contractor after he listened to a bunch of your episodes. We both have learned so much. Thank you for doing this podcast and please keep them coming."
Thank you Chicnhed for giving me a boost of confidence with that review. It will also boosting the podcast’s popularity as you’ll letting others know that you find the content valuable. Thank you for that. I wish you all the best on your project.
Well, that’s all I have for you this week. If you have any suggestions about how to handle pricey bids, leave your suggestion in the comment section below. Thanks for joining me. Come back next week when we go over the bidding process in more detail.
Please remember that the purpose of this podcast is simply to educate and inform. It is not a substitute for professional advice. The information is based the only on the opinions, research and experiences of my guests and myself. That information might be incomplete, it’s subject to change and it may not apply to your project. In addition, building codes and requirements vary from region to region, so always consult a professional about specific recommendations for your home.