|How To: Navigate The Home Bidding Process
With a little careful planning and organization, you can get your home built right, and at a price you can afford.
Bidding consists of a well-established sequence encompassing six steps:
It’s important to cover the steps in this sequence if you want to take much of the frustration and risk out of building.
Preparing your design. Too often, log home enthusiasts start with only a general idea of a design, often nothing more than pictures from a magazine or a floorplan from a catalog. While these may be useful for obtaining rough estimates, they often lead to very inaccurate bids, which can lead to serious budget overruns. Before you request bids, develop a detailed home design that includes at least accurately dimensioned floorplans and elevations. (back to The Science of Bidding index)
Developing specifications. Specs are the detailed listings of construction and finish details that accompany design drawings and final blueprints. These include your preferences for things like the number of lighting fixtures in a great room, the type of cabinets in a kitchen, the type of drywall installed in interior rooms, and so forth. Some of the construction specifications often appear on blueprints, but there are many specifications contractors won’t know unless you provide a separate list. There are several ways to build and finish a log home. Prices vary widely and unless instructed otherwise, almost all subs and contractors will base their bids on the simplest and least expensive materials and methods available. At the same time, don’t make your specifications so detailed they sound as if an attorney wrote them. Most subcontractors have encountered nightmare clients that wanted to direct how every nail was set and had expectations for materials and methods that were far beyond what they could afford. If a sub suspects that a potential client presents such a threat, he may inflate a bid to either discourage the prospect or to ensure that he will make enough money on the job to cover the extra time and effort. To avoid this, just clearly communicate your needs without offering excessive detail. If you need help developing specifications, start with one of the generic specification lists available in books on constructing log and conventional homes. (back to The Science of Bidding index)
Identifying potential general contractors and subs. This step will be simplified if you hire a general contractor (GC)—that person will contract with the subs. To choose a GC, start by identifying three or more prospects. Ask the company providing your log home package for recommendations, or talk to local building supply stores, lenders and log home owners. When checking potential GCs, review references from at least three recent clients, as well as the GCs’ banks and building supply stores. Also verify the GC has liability and workman’s comp insurance, and be sure the GC uses only insured subcontractors.
If you will be acting as your own GC, you’ll need to assemble a list of potential subcontractors. Start by identifying the types of subs you’ll need. Not all houses require the same construction trades. For example, a home with a masonry fireplace will require a stonemason, which is not the same thing as a block mason. Once you have put together a list of trades, the procedure for identifying potential subs is similar to that for identifying potential GCs. (back to The Science of Bidding index)
Requesting bids. General contractors will provide a bid for your entire project unless you request otherwise. Since they usually provide turn-key service, they may actually work with you to prepare specifications. To help potential GCs develop their bids, provide dimensioned floorplans and elevations, along with all specifications you have prepared. Be wary of GCs who ask few questions and make few notes as you discuss your project.
If you plan to work directly with subcontractors, break up your specifications according to each trade and provide each subcontractor copies of your floorplans and elevations, and those specifications that apply to them. Be sure to include a copy of the log company’s construction manual if the sub will be working on part of the log package. Keep a list of all subs from whom you request bids so you can follow up if they don’t respond.
Ask bidders to note how much lead-time they need to begin work and whether this changes according to the season. Many subs have regular clients that occupy much of their time at certain points in the year. A sub who is readily available in September or October may have a lead-time of 12 weeks during the spring. (back to The Science of Bidding index)
Reviewing bids. Wait until you receive all bids for a particular construction activity before trying to compare. If the spread between the low and high bid is great (more than 15 to 20 percent) contact all of the bidders and review your specifications. The low bidder may have left out something important while an extremely high bidder may have included something that you didn’t want. If you haven’t done so already, be sure to check the bidders’ references and insurance. (back to The Science of Bidding index)
Awarding bids. Select both your winning bidder and a "backup" in case your first choice falls through. Notify your backup first. Backups may be willing to negotiate on price when they hear they are close. Finally, notify the bid winners and tell them when you plan to start your project. If a bidder requires an initial payment to begin work, try to avoid paying more than a third of the bid in advance. If possible, withhold the initial payment until 30 days before you need the sub. But be aware that some subs are so busy that the initial payment becomes a "booking" fee to hold a place in their calendar. Make sure you understand the subs’ refund policy in case your project is delayed. (back to The Science of Bidding index)
The Art of Bidding: The science of bidding is straightforward. However choosing good GCs and subs is also an art that depends on a general understanding of construction and the people who do the work, as well as good instincts for judging character.
Most GCs and subs operate as small, independent businesses. Some are one-person businesses that contract only for the work they provide. Others have one or several employees. If a contractor has employees, find out how long they have been with the contractor. A great deal of turnover in construction and a crew of entirely green employees suggests the possibility of a poorly managed business. It also means that work may proceed slowly with frequent delays since workers haven’t yet developed the skill for working as a team. Subcontractors operate at the mercy of the weather, architects, home owners, materials suppliers and the labor market. It takes skill, experience and sometimes luck to provide accurate bids and stick to a construction schedule. When assessing a subcontractor’s competence, always ask several references about the worker’s reliability, bid accuracy and ability to follow a schedule. One bad reference doesn’t mean a bad subcontractor.
Realize that bids have a short life span. They are dependent on many factors, some of which are beyond subcontractor control, such as season, weather and economic cycles. For example, several years ago a hurricane destroyed one of the largest plywood manufacturing plants in the United States, doubling plywood prices overnight.
Most bids are valid for 30 to 90 days and this life span should appear on the bid. If it doesn’t, be sure to ask about time limits and write the answer somewhere for future reference. If the bid doesn’t include any qualifying statements regarding price increases for materials, be sure to ask about that also. While it might seem like a bonus to receive a bid with no price increase protection, remember that when the profitability of a job disappears often so does the subcontractor. At the very least, you may find your project delayed while the sub gives priority to profit-generating jobs.
Be wary of brief or loosely worded bids. An overly general bid leaves much of the work open to interpretation. That may lead to substantial costs you thought were included in the bid. This doesn’t mean that the sub is trying to take advantage. He may simply be much better at construction than communicating. The bidding process actually holds the key to accurate cost estimates and project success. Avoiding the temptation to rush this vital step can eliminate much of the stress and save frustration and unexpected costs during construction.
Note from Jim Cooper: The first time I went through the process of obtaining bids on a log home construction project, it reminded me of the old Abbott and Costello comedy routine of "Who’s on first?" The hardest parts seemed to be figuring out who was whom and where to start. After building a few log homes, the process looked less formidable although it remained challenging. As I came to realize, gathering bids from subcontractors or general contractors is both a science and an art. The science deals with the organizational procedure of preparing, obtaining and evaluating bids, while the art involves an understanding of the practices, idiosyncrasies and cultural characteristics of the construction world. It’s important to know how to do both parts if you want to hold down costs and get your home built on time.
Jim Cooper is a former log home builder-dealer and author of Log Homes Made Easy and The Log Home Project Planner. If you have a question for Jim, write him in care of Log Home Living, 4125 Lafayette Center Drive, Suite 100, Chantilly VA 20151, or email email@example.com.