Checking Your Contractor's Price (Quotation)

27/8/2019

Pricing your building or renovation project

Image courtesy of Stuart Miles at FreeDigitalPhotos.net3

It's always good practice to get quotations from several contractors (preferably at least 3) for your building work. Prices for the same work can vary hugely. A contractor who has lots of work might be too busy for your building project but they'll still submit a price which is then usually very high. They'll reason that they don't really need your work but if you're prepared to pay there enormous price it will be worth their while to squeeze your project into their schedule since they'll make lots of money if you agree to their inflated price. Frequently contractors make errors and their price could be mistakenly higher or lower than it should be. So obtaining at least 3 prices means that you should have a good spread of prices and be able to compare and check them.

Not all building prices are what they seem so don't be caught out

All quotations (prices) must be in writing. Once the tenders, or quotations, have been received for your building work they must be carefully adjudicated (checked) ensuring that ‘apples are being compared with apples’, like with like. It’s important not to just look at the total price, but rather consider the whole price submission.
Not all prices or quotations are equal, so it pays to check:

That the contractor has priced all the items they were asked to price, and that they haven’t excluded anything.
Their start and completion dates are acceptable. It’s important to note that longer durations could result in additional costs for you if you’re renting alternative accommodation for the project duration. However, shorter durations could strain your cash flow abilities.
They meet the requirements discussed in my article Read This Before Selecting Your Home Renovation and Building Contractor for advice on selecting a contractor and my article Before employing a building contractor ask these questions.
That the specifications of the building products they propose using are acceptable.
The resources they propose to commit to the building project are acceptable and sufficient. It’s useful if the contractor has provided résumés of the senior staff that will manage the construction project so you can assess their qualifications and experience. You don’t want a contractor whose project staff are all new.
Their proposed construction methodology, in particular how this will impact your family if you continue living in the house while it’s being renovated. If the construction method involves using preformed panels and elements it could be difficult to alter the house in the future.

Case study: A few years back we had our main bedroom and bathroom renovated as well as a portion of the upstairs living area. We continued to live in the rest of the house while the work was carried out. The builders constructed a temporary timber hoarding (partition) from floor to ceiling to separate their work area from the rest of the house. They accessed the work areas from outside, causing us little disturbance and allowing them to carry out the construction without hindrance from us. The hoarding also limited the noise and kept most of the construction dust from the rest of the house.

That their payment terms and conditions are acceptable. Some contractors may want earlier, or more frequent payments, upfront payments or they may have added money to items they’ll be undertaking first, which could impact your cash flow.
That the contractor has evaluated all the applicable drawings (sometimes the contractor provides a list of drawings used for their price and these should be checked to ensure that none issued to them have been omitted) you've provided.
They’ve included for preparing designs and drawings where necessary.
The contractor hasn’t included additional requirements which you must supply, such as, cranes, scaffolding, toilets, accommodation or offices. If they have then the additional costs must be factored into your comparison.
They’ve included all taxes.
The contractor understands the project requirements.
They’ve allowed for all testing and quality requirements.
They haven’t got any contract conditions or exclusions which are unacceptable, or that will make their price more expensive than the other bidders.
They’ve complied with the site-specific conditions, which may include items such as working hours, types of hoardings and fences.
They’ve adequate insurance in place. I will discuss insurance in a future article.
That their warranty periods are acceptable.
That the equipment to be incorporated into your finished home comes with suitable warranties and that spare parts and servicing will be available locally. For instance, you don’t want an air-conditioning system where the servicing is difficult and parts not readily available.
The contractor has included for receiving and handling building materials supplied by you.
Their provisional sums and prime cost items and compare these to other contractors. An important topic for a future article.
Whether the price is fixed or subject to change. Another topic for a future article.

Is your contractor's price too low

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

This may seem a strange question? Something that’s often not done is to ensure that the price is fair and achievable. Sometimes contractors make a mistake with their price, or the contractor is inexperienced and doesn’t understand the project fully, so they submit a price which is too cheap. Be wary of prices that are much cheaper than other prices. You shouldn’t become focused on a ‘bargain price’ and award the project to a contractor who then loses money. A contractor that’s losing money will try and save costs, possibly using inferior quality building materials and putting too few resources on the project. In addition, they’ll probably do anything to try and recoup their costs, which could include lodging additional variation claims, some of which may be spurious, which will waste your time to argue them, even incurring you additional costs to engage experts to fight the claims through the legal system. Contractors that lose money may become bankrupt or insolvent part way through the project, leaving you with an unfinished house. But, just because a price appears cheap shouldn’t be reason to discard it, rather be cautious and understand why the price is low – for instance, the contractor may propose using innovative construction solutions which will give you the product you’re looking for at a cheaper price.

Conclusion - it pays to carefully review all prices you receive

By carefully checking the prices you receive for your home building project you can ensure there are no hidden traps and pitfalls which might cause you to pay more for the work than you were expecting, or more than you would have paid if you selected another contractor. It's important to know what you'll be getting for your money.
Always remember to never be swayed by price alone. The cheapest price might not be the cheapest price at the end of the day and the cheapest contractor might not deliver your desired home hassle free.

This is an extract from my new book 'An Introduction to Building and Renovating Houses: Volume 1 Hiring Contractors, Managing Construction and Finishing Your Home' which also contains lots more valuable information to save you money and ensure that your home build or renovation project is a success. Click on the image to read a preview on Amazon. The book is available in paper or ebook form from Amazon and other online stores, or ask your local bookstore to order a copy for you. For tips on designing your new house as well as renovation ideas read Volume 2 - Finding Your Ideal Property and Designing Your Dream Home
© 2019 This article is not to be reproduced for commercial purposes without written permission from the author.

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