November 2, 2009
This winter, custom home construction will be extremely slow in our corner of country (far northeast). Almost every builder I talk to is actively looking for work. Those that have enough work for the winter are counting their blessings, and many builders who haven’t missed a day in 15 years are looking at an empty winter.
How can you (somebody who wants to build or remodel a home) take advantage of this.
For many years we have steered our clients away from using fixed price bids for a number of reasons--but primarily because it was a bad climate for bidding. The good builders were busy enough that it was unlikely they would really “sharpen their pencils” and give you a good price.
That has changed, so the economics of bidding some kinds of projects may make sense again. Generally these would be projects that can be clearly defined (like a new house) and are big enough to make the additional cost of bidding worth it. We usually estimate that our fees increase about 20% on a bid job,
and there may be a hidden cost to you. For bid documents we try to figure everything out in the drawings. And we are working without the input of the builder. We make the decisions, the winning bidder executes them. Hey, we’re good at this, but we aren’t out in the field getting the feedback from the work every day--the builder is, and as such it’s better to have a builder on board during the construction document phase so we can build that experience into your drawings. Doesn’t happen in a bid process, and I think that can hide significant inefficiencies in the project.
(Check out the article I wrote on this a while back)
So bidding makes more sense today then it did a year ago, but if you like the idea of a more collaborative process, how can you do that and still get the advantage of a more competitive marketplace?
I would go to the builder you want to do the project and say “Larry, I don’t really need to build this winter, but if you can show me some really good reason to do it--- I will.”
I like this better than haggling, which creates the wrong kind of atmosphere where you feel like maybe you didn’t get as good a deal as you could, and the contractor feels beaten down.
If I was Larry, I would go out to my subcontractors and suppliers and say. “Boys, things have changed. I want work this winter, and I’m cutting my overhead and profit amounts so I can stay busy. So are you. I want better proposals. When we get a backlog of work again, we can put those rates back up, but for now I need to see better numbers.”
Then Larry our hypothetical builder can come back with a better price. If it’s good enough, he’s talked you into building now, if not, you wait. But the onus is on him to get creative and get his subcontractors and suppliers to do the same.
How much can you expect things to come down? That’s the subject of a longer article, but I would say the short answer is probably not more than 20% unless you can look out the window and see lots of guys standing on street corners with apples for a penny, and fortunately we aren’t there YET.
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