Multiple Bids = A Race to the Bottom

Most home-renovation buyers have heard about multiple bids. Lots of people will tell you that you should collect three bids from contractors when you are considering a remodeling project. Is this even good advice?

“Bidding” means that contractors involved in that process are trying to find the cheapest way to complete your project so they will be awarded the job. Do you think these guys are going to bring care, consideration or thoughtfulness to your project? Will they go beyond code to do something “right” not just get it done? More than likely, they will bid low to be awarded the project, then tack on lots of extras as the project develops. In the end, conflicts and arguments arise from the bid process.

Bidding can easily consume 40 or more hours of a general contractor’s time.  Unless it’s being paid for, expect mistakes.  There is no incentive in the bid process to be right – just to be the cheapest.

In the past, Myers Constructs used to involve itself in bid projects.  On one occasion, we were asked to bid a large home renovation.  We decided to get involved with the project because we knew the designers well, and the competing bidders were all local contractors we respected.  We knew we would be talking “apples and apples.”  We wanted one of us three to get this project, and we expected the process to be fair.

The subject house was a 1980’s “builder’s special” with too many doors and bad circulation, but it had good bones and was situated on eight acres on the Main Line.  The project was for a family with extended family members living in the home.  They needed the house to better accommodate their large family’s requirements and to enhance the value of this property.

This is what the bid process looked like:

These three mid-sized, high-quality remodelers and their subcontractors went to the four-hour walk-through with the designers to see the house and talk about the drawings.  We all did this free of charge.  If we had billed for the service, it would have run into thousands of dollars since 15 people were walking around for four hours.

15 x 4 x $100 per hour = $6,000.

We all then went to our offices and put in 40-50 hours on our bids.

40 hours x $100 x 3 = $12,000.

We all submitted our bids and were within 1% of each other.  I know this because I got a look at the other bids.  The difference in a $550,000 project was $4,500 spread between the contractors.

Surely, one of these fine contractors would have been awarded this project?  Nope!  The clients decided to have it redesigned and re-bid by a whole new set of unknown contractors.  The designers didn’t stick up for their first batch of contractors, even though we had all just invested $18,000 in the design they were pitching to their clients, and our prices were clearly fair.

We have not bid a project since.  We prefer a team approach with homeowners, design team and general contractor that starts early in the process of a project’s development.  It’s a win-win-win for all.