9 Little Known Reasons Why Construction Bids Can Be So Far Apart.

9 Little Known Reasons Why Construction Bids Can Be So Far Apart.

It’s well known in the industry, but how about the rest of you? I’ve had a couple clients come to me after having done a single project where they learned a lot, but they’re expectations sometimes are a little unrealistic based on only that one project. For instance, a previous project was done while the economy was slower and/or they got bids that were very close (within 10% of each other). Both of these situations can set an owner up for some surprises later.Bids apart question mark image

In theory, it would be nice if all materials and labor costs were the same in any particular area, but they are not. There are averages, but that means it’s within a range, and it’s important to realize that the one group of contractors may be near either the low or high figures or across the whole range, and thus large disparities.

The reality is that there are very practical factors that influence the numbers you get from contractors and thus a certain amount of variance to the answers you get depending on which contractor you ask and more importantly, when.

  1. Frequently, one contractor will have several jobs on the calendar lined up nicely with an additional project being the icing on the cake while the other contractor will have just finished a large project that soaked up every work crew he has, and is very much wanting to keep everyone working. This is a very strong influence, and depending on the contractor a very objective monetary cost to ‘mobilization’: the movement of equipment, materials and people.
  2. PROXIMITY: A contractor may be motivated by the how close the project is to where they live, their base of operations, if the project is next to another of their work sites, or some other aspect of geography.
  3. General Contractors (GC’s) and subcontractors have a better relationship with their material supplier and thus get a better price. For example, a local lumber supply has something like 20 different discount levels depending on your volume and relationship with them.
  4. Changes in staffing/work crew changes the effectiveness of teams. Subcontractors estimate risk and efficiency then make bids based on their ability to deliver.
  5. Depending on the type of work (intense framing or heavy foundation work) a contractor is more cost effective depending on the mix of specialties that the teams have. For instance, one supervisor might have a background in fine cabinetry and thus be a better cost.
  6. The contractor has benefited from a previous project by the same architect and, consciously or not, this influences the estimates or bid.
  7. Some contractors use more subcontractors than others for basic work such as framing. This has differing results, it depends on the type of results you expect, it usually means less quality, but if that’s what you’re looking for, then it’s a benefit.
  8. Insurance costs, recent employee injuries, can either add cost or change effectiveness.
  9. Do they use Union labor?

By contrast, the regular market reasons that effect all contractors more evenly:

  1. Demand has increased or decreased
  2. Material costs, have gone up or plateaued (rarely go down).
  3. Real Estate Market up or down.
  4. Lending Rates, and regional available capital.

In the search for contractors, keep these factors in mind and even ask about them, because you may be surprised to learn the answers and how the effect your project.