Finally Bought Some Land

[Mabouya]

Some pallets and a Big Agnes tent and you're good to go.

[jesseth]

We just got the bid specs from the architects. One 40+ page (18x24") engineering document and another 80+ page detail (door knobs, faucets, etc) document. Kind of overwhelming. These now go to the contractors who will bid on the project. We'll see what we get back. We've already had one contractor tell us they "don't do competitive bidding" which sounds like an effing prima donna to me, but whatever. I guess they have enough work they can stick their nose up at us, even though they are the smallest operation up there. Ironically, the one contractor who has the best reputation and has built the most modern houses in the area (two in Hillsdale alone) was pretty psyched about the whole thing and really eager to see the plans when my expectation was we'd be told to get in line, you know? So you never know what's going to happen. And part of this process will be visiting finished and in process buildings for each contractor to see first hand the quality of their work. .

I'm not a contractor, but not doing competitive bidding is a completely fair business practice, especially for high design complex architectural projects. It's not about being prima donna typically, it's about the dangers of working with architects on complex projects where the technical & finish details might not be as well figured out as the architect and client think they are.

What they typically mean is "we'll give detailed estimates, but we won't be in a race to the bottom with a fixed price that is inaccurate at this point in the process".

Bidding vs Estimates is a deep topic, too much to cover here, but no set of architectural project documents is actually complete enough to bid exactly, even if weather and hidden site conditions weren't also issues to be dealt with. No architect draws every fastener in a project for example, it's not a manufactured object where large production quantities lead to completely detailed fabrication documents with every object specified and cost estimated with prototypes created in advance.

The major issues with competitive bidding is that it aggressively incentivizes not scrutinizing documents thoroughly. The lowest price put on the table has a huge advantage in winning the job, whether everyone admits it or not, and the best way to produce the lowest price is to not spend a lot of time looking through a document set searching for complex issues that may or may not yet be solved. Instead, the best course of action is to put a low price forward and then use discovery throughout the construction to change order anything you "didn't see during estimation" or might be a slight coordination issue inside the documents. Or just blame it on the subcontractors...

We've seen it over and over again, the contractor who puts in the most work on the estimate or bid often has the highest (and most accurate) price, but loses the job to someone who has the deal the client just can't pass up.

We recommend our clients on complex and unique projects to use the estimation process as a time to evaluate the various contractors' accuracy and estimation process and proposed working methods, so that they can then advise how to best construct the project as a team member who has skin in the game. Architects (ask me how I know...) often come up with complex and impossible ways to put together projects. There's too much money at stake for one part of the team to make all the decisions, and the process needs to have an opportunity for the best thinkers to come up with improvements. The hard bidding process sadly is not designed to get that to happen in our experience.

Lowest price, commodity building types, weeding out corruption, sure, that's what bidding can be good for. But boutique custom homes aren't public schools and shouldn't be hard bid. It can get ugly and complicated really quickly, often not because of malice, but just out of inexperience. "How hard could this project be?" are famous last words on the job site.

Just another opinion for the pile.

[Mabouya]

So on projects like this, where firm, fixed price is impractical, how does the homeowner prevent cost + from completely blowing him out, once he has 99% of his available money in the project and he's told, "Well, there were unexpected expenses here, here, and here, but another $200k and 6 more months should take care of that."

[j44ke]

I'm not a contractor, but not doing competitive bidding is a completely fair business practice, especially for high design complex architectural projects. It's not about being prima donna typically, it's about the dangers of working with architects on complex projects where the technical & finish details might not be as well figured out as the architect and client think they are.

What they typically mean is "we'll give detailed estimates, but we won't be in a race to the bottom with a fixed price that is inaccurate at this point in the process".

Bidding vs Estimates is a deep topic, too much to cover here, but no set of architectural project documents is actually complete enough to bid exactly, even if weather and hidden site conditions weren't also issues to be dealt with. No architect draws every fastener in a project for example, it's not a manufactured object where large production quantities lead to completely detailed fabrication documents with every object specified and cost estimated with prototypes created in advance.

The major issues with competitive bidding is that it aggressively incentivizes not scrutinizing documents thoroughly. The lowest price put on the table has a huge advantage in winning the job, whether everyone admits it or not, and the best way to produce the lowest price is to not spend a lot of time looking through a document set searching for complex issues that may or may not yet be solved. Instead, the best course of action is to put a low price forward and then use discovery throughout the construction to change order anything you "didn't see during estimation" or might be a slight coordination issue inside the documents. Or just blame it on the subcontractors...

We've seen it over and over again, the contractor who puts in the most work on the estimate or bid often has the highest (and most accurate) price, but loses the job to someone who has the deal the client just can't pass up.

We recommend our clients on complex and unique projects to use the estimation process as a time to evaluate the various contractors' accuracy and estimation process and proposed working methods, so that they can then advise how to best construct the project as a team member who has skin in the game. Architects (ask me how I know...) often come up with complex and impossible ways to put together projects. There's too much money at stake for one part of the team to make all the decisions, and the process needs to have an opportunity for the best thinkers to come up with improvements. The hard bidding process sadly is not designed to get that to happen in our experience.

Lowest price, commodity building types, weeding out corruption, sure, that's what bidding can be good for. But boutique custom homes aren't public schools and shouldn't be hard bid. It can get ugly and complicated really quickly, often not because of malice, but just out of inexperience. "How hard could this project be?" are famous last words on the job site.

Just another opinion for the pile.

This is very smart advice, and it is where we've arrived at this point through our close reading of the bid spec documents. We've also spent some time asking people in the trades about contractors on our list and gathered as much information on past projects as we can. Obviously my earlier reaction to rejection of the bidding process by one of the contractors was not well informed, but I did understand from the get-go why someone who did quality work would want to avoid a bidding process. Sort of a no-win situation for them, especially someone who has spent a lot of time solidifying their brand as a high quality builder. I think we are leaning towards requesting informational interviews with several contractors and see how we can modify our approach so we get the right quality contracting management.

So on projects like this, where firm, fixed price is impractical, how does the homeowner prevent cost + from completely blowing him out, once he has 99% of his available money in the project and he's told, "Well, there were unexpected expenses here, here, and here, but another $200k and 6 more months should take care of that."

This is the +million+ dollar question.

[j44ke]

So on projects like this, where firm, fixed price is impractical, how does the homeowner prevent cost + from completely blowing him out, once he has 99% of his available money in the project and he's told, "Well, there were unexpected expenses here, here, and here, but another $200k and 6 more months should take care of that."

I think you treat the bid/estimate as one of several criteria in the qualification process. I like jesseth's concept of "bid accuracy" rather than lowest bid. What I want to be able to do with each candidate contractor is not only look at their bid but go see some of their past projects and if at all possible talk to former/current clients. We are always going to have to watch expenses, because if we don't, no one else will.

[davids]

I've done big projects both ways.

Fixed-price bids work best when you've got either a very detailed document describing the project, or a team of lawyers who will force the work to be completed on price (this happened with the last phone system I implemented...)

As far as my home renovation, we set a budget and chose our GC carefully. He got the project done on budget and on time, with any of us arguing over how many fasteners were needed.

[znfdl]

Jorn, thanks for starting this great thread. I will be breaking ground in around 3 years for our retirement home and have learned a lot by reading this thread.

[ides1056]

I always liked this detail in architectural plans: vif. Means "verify in field." I do use a tape measure, but the empirical method works best.

I think architects who have swung a hammer have a thorough understanding of the process. A childhood friend, Peter Pfau is a case in point. I'd check him out, Stuart.

[j44ke]

I am glad it is helpful. It sure has been helpful to me. It gives my wife no end of anxiety though, because she is afraid I am going to ruin our architects' careers with some misunderstood comments and/or details. I'm just trying to capture the learning process, so I guess I should reiterate periodically -

Our architects are great! Super collaborative, highly creative, fully invested, and always (as in even 1AM) available for worries comments and questions. I cannot recommend them highly enough.

[mnoble485]

Jorn,
I am probably biased in my opinion being on the contractor side of things but I have done hard bid and negotiated jobs. Our current format that we are using on my current job is a GMP (Guaranteed Maximum Price)> We have developed a team with the owner, architect, subs and us. Contingencies are placed in the budget for unforeseen items that are controlled by the owner and are returned to the owner if unused. We also return any savings that are accrued at the end of the job. This is a large health care facility that has been a client for 20 years. Trust on all sides is invaluable.

RW can probably offer more advice than I can but I guess what I am trying to say is cheapest is seldom the best or the smoothest road.

Mike

[j44ke]

Jorn,
I am probably biased in my opinion being on the contractor side of things but I have done hard bid and negotiated jobs. Our current format that we are using on my current job is a GMP (Guaranteed Maximum Price)> We have developed a team with the owner, architect, subs and us. Contingencies are placed in the budget for unforeseen items that are controlled by the owner and are returned to the owner if unused. We also return any savings that are accrued at the end of the job. This is a large health care facility that has been a client for 20 years. Trust on all sides is invaluable.

RW can probably offer more advice than I can but I guess what I am trying to say is cheapest is seldom the best or the smoothest road.

Mike

That's interesting. So if we were actually interested in talking more with the contractor who declined our invitation, would you suggest discussing what sort of relationship they envision as optimal for conducting our project?

I want to be able to look at price of course, but I don't want that to be the only criteria. I do not want the quality builders who price accurately to feel penalized by a price competition. I want to be 73 years old and standing in my living room thinking, "Sure glad I spent the money."

[j44ke]

I always liked this detail in architectural plans: vif. Means "verify in field." I do use a tape measure, but the empirical method works best.

I think architects who have swung a hammer have a thorough understanding of the process. A childhood friend, Peter Pfau is a case in point. I'd check him out, Stuart.

Since the beginning of this, I have accumulated a small collection of items in our car. 200' tape measure, fluorescent tape and flags, a shovel, a small hand sledge, pruners, saws, and a GPS app for converting different location formats on my phone. I've reacquainted myself with using a compass. All of this to be better able to "see" on the land what is drawn on a sheet of paper. I have a really good spatial sense - I remember how to navigate by the geometry of things around me rather than street names or map legends. But now I am having to attach numbers to what I sense is going on, which is an interesting challenge.

[BSUdude]

Something important to note (which it sounds like you understand) is you're a private party, so you are not obligated to take the lowest bid. I'd make that clear to the bidders, including the one who shied away. You are looking for a great end product, with price being part of the consideration as well as their qualifications, schedule, or any other criteria you choose to define (you should ask for a proposed construction schedule with the bid). Its perfectly acceptable to ask for references with their bid, and talk to the references they give you. I assume you are going with a general contractor, and not trying to hire trades independently (not recommended for the inexperienced).

As has been referenced, whatever the bid comes in at, you should plan for 5-10% of that amount as a contingency in your personal budgeting. No set of plans is perfect, and you'll probably end up in a situation during the project where you want to change something in the plans after you see it in the field.

I'd also recommend you consider using an AIA A101 contract with the contractor, which references AIA A201. These are industry standard documents for the commercial construction industry. They are generally not used on your average personal residence, but a good contractor would not shy away from using one. Your wife (lawyer I think) may find it useful to look them over. They protect you, the architect, and the contractor and assign responsibilities to each party fairly. If a contractor is scared by using an AIA contract, you may want to tread carefully...

[bking]

Jorn, I am a subcontractor, we do work (steel framing, drywall and paint) in several states here in the west. Years ago we did a significant amount of residential work, but strictly production housing. That said, I've done custom homes for friends, built my own home, but I'm not a custom home expert...still I have lots of opinions, worth about what I'm charging you for them;)
Jesseth makes some good points. Your home is not an easy home to build, and the only way you win in the end with low bid is you get really, really lucky. Competitive bidding is fine, but only if you've prequalified all the bidders--and without experience that's not easy to do. If it were me, I'd spend all the time you'd have to spend to qualify 3 or 4 bidders, and find the one best contractor--best by reputation (get and follow up on references, as many as you can), by completed projects, pays his bills, and you like him or her. Sit down with him with your plans, specs, schedule and your budget, and see if he can do it. Negotiated contracts are very common, especially with complex or large projects, and I would have thought most of the better custom homebuilders worked primarily with negotiated contracts...but as I said, not my field.

[BSUdude]

I just don't think you can go wrong with the approach of hand picking a few qualified bidders (your architect should be able to help point you to some), doing your homework on them, interviewing them, interviewing their references, etc. Be up front with them that the lowest price may not necessarily win, and the selection is based on whatever criteria you choose in addition to price. Keep the number of bidders low (3 or 4 contractors) so they all feel like they have a good shot to get the job. You will end up with a qualified contractor if you do your homework. The bid makes them sharpen their pencils to get the job. A little competition keeps everyone honest, and will get you the best price. On bid day, a 5% or so variation between bids means you have a good set of plans and contractors are comparing apples to apples. If you have an outlier on the high or low side, they probably didn't want the job very bad (high), missed something (low), or took it upon themselves to value engineer something (low) to try and get the job. The bid just gives you that good info that you won't get with a negotiated contract. Also if you ask for a schedule of values with the bid, you can see where your money is going. It makes the bid slightly more transparent, and can help further compare differences between bids. If one overall number is much lower than the others, and the contractor's schedule of values shows his electrical number is $10,000 lower than the other guys, you know he is value engineering some lights or something.

[dashDustin]

The major issues with competitive bidding is that it aggressively incentivizes not scrutinizing documents thoroughly. The lowest price put on the table has a huge advantage in winning the job, whether everyone admits it or not, and the best way to produce the lowest price is to not spend a lot of time looking through a document set searching for complex issues that may or may not yet be solved. ....

We've seen it over and over again, the contractor who puts in the most work on the estimate or bid often has the highest (and most accurate) price, but loses the job to someone who has the deal the client just can't pass up.

this is so true. as an estimator full time now, going from being a highly detailed mechanic full time to estimating projects, i had to cut myself way back. as i have been told numerous times "gotta miss it to get it"...implying you have to overlook various parts of the project and be the low number to get the job.

hell, i'm estimating a small apartment complex right now and am deliberately skipping wood window trim.

[j44ke]

This is all great. Thanks a lot. Helps us in our process of reinventing the wheel.

[rwsaunders]

Don’t ever allow your estimating skills to be used to play “bid day bingo”, as that game spells certain death for a contractor.

[xjoex]

I closed on this last week, so now I have some land as well! The backyard trails are coming together nicely. Had to pick up a chain saw though for trail blazing.
The flag came with the house, I dig it.

The house down there.

[devlin]

Envious. Would love to live somewhere like that.