What do you need to solicit a quote

Whether you are hiring an architect or a general contractor, in order to ensure you receive a good comparable quotes, there are certain key pieces of information you must include with your solicitation.  If you are missing any of these items you could find that your quotes have a wide pricing spread.  Don't just assume that the high number is wrong, make sure that the basis of all bids is the same.  You can do this in hindsight after the bids come in, but best practice is to ensure that your initial quotes are all on the same basis.  Ensuring that your solicitation includes the following elements is a good way to make sure you get comparable bids.

Scope of Work

The most obvious piece of information is the scope of work.  Your scope of work depends greatly on what type of services you need and what phase of work you are in.  If you are just starting your project, you might need to have some preliminary work done in order to help document the scope for your Architect.  In later phases of work, your Architect's drawings become the scope of work. 

Scope of Services

Another piece of information you will need is the scope of services.  The difference between the scope of work and the scope of services is that the scope of work reflect what you want to build, the scope of services reflects how you want the services performed.  For your designer, this document should address how many design milestones your require, how drawings are to be presented to you, and what level of interaction your Architect is expected to have with the local building department.  For the GC, this should address, site clean-up, working hours, and parking.  These are just a few examples of the topics that should be included.  

Schedule

Another key piece of information that you will need to solicit a quote is your project's schedule.  It's important to let your consultant or contractor know what kind of time you have in mind for the work.  This could impact the amount of resources needed and how quickly they will need to mobilize.  When you are communicating your schedule you don't need to be very detailed.  All you need to have is your key milestone dates identified.  For example, you may only know that you want to start design on a particular date.  You may not know when construction will start or when construction will end.  Alternatively, you may have a specific need date in mind.  If so, communicate your intended end date and allow the bidders to plan the intermediate dates accordingly. 

Contract Terms

Contract terms are another key piece of information when soliciting a quote.  Make sure you know what form of agreement you expect to use before you even asking for numbers.  This will ensure that everybody is meeting the contract terms or at least they're aware of them.

Bid Form

Another key component of a good solicitation is a bid form.  This is less about information for the bidders and more about your ability to compare quotes.  It's not a good idea to allow bidders to submit their quotes in any format they choose.  There is no standard way to quote a project.  Invariably, what will happen is that you will be forced to try and reconcile the differences on the back end.  That can sometimes be impossible and you may find yourself working harder to confirm details with each bidder.  In the end, you may still be left with uncertainties and may be making an uninformed decision.

There are a number of best practices that go along in creating each of these documents.  I'll tackle each of these individually in future postings.  Regardless, the main idea here is that all of your bidders should have the same complete information on which to base their quotes.  If you are not clear, the bidders may make assumptions which could be reflected in higher or lower quotes.  This could lead you to bad award decisions.

Why you need a budget

So you have decided to take on a construction project.  You have a clear vision of what you want and you have a dollar limit in mind for the work.  Are you ready to move to the next level? 

If you have not sat down to estimate the cost of your vision the answer is no.

It is important to note that an estimate and setting a dollar limit are two different things.

Your budget should not be based simply on how much money you have available.  Your budget should be based on a well-developed estimate that meets the scope of work you want.  

You will need to do a little legwork in order to be ready to develop your budget. 

Make sure to invest in preliminary studies and conceptual designs to document your vision. 

Don't be discouraged if your first concept comes in higher than you expected.  There are a number of design options to help lower costs without compromising your vision.  Work with your concept designer to modify your concept until the design has been optimized. 

If your optimized design still exceeds your available funding you have three options:

1. Shrink your program.  If your vision was too grand, you might want to consider a smaller version of your vision.  Perhaps you can do with less square footage or one story instead of two.

2. Phase your project.  Do you need everything all at once to operate, or can you build a portion now and the rest later?  Consider a phased approach which allows you to begin operating while you generate revenue and save for phase 2.

3. Can you secure financing?  There are a number of financing options that can help you reach your dreams.  Perhaps you can finance the cost of the project and actually hang on to more capital.

Preparing an estimate will arm you with the information you need to anticipate your funding needs.   You don't want to start the project unless you know you have the funds to finish the project and you wont know this without an estimate.

Let me know your thoughts and write me if you have questions.

How to avoid change orders on roof replacement

A couple recently came to me upset that they were forced to accept a change order on their roof replacement project.  The value of the change order was 50% more than their initial quote. 

The contractor presented them with the change order only after their existing roof tiles had been stripped off the roof.  He told them that the change order was for extra unknown work required by the local building code.  He said that he could not install the new roof without first replacing the existing plywood decking.  A local fire ordinance required fire rated plywood that was installed prior to 1992 be replaced with new fire rated plywood.  The house was built prior to 1992 and the code requirements did apply.

The couple argued with the contractor which caused the contractor to call his men off the roof and stop the work. 

The couple stood their in front of their home with their roof exposed and a pile of old roof tiles on the front lawn.  The contractor produced his contract which excluded replacement of the decking and another document that cited the code regulation.

For anyone caught in this situation, this can be gut wrenching.  You have no choice.  The contractor could charge anything he wants and you would be obliged to pay.  The alternative would be to go back out and find someone else, but you would have to deal with an exposed roof and maybe even have to cart away the debris the first guy leaves behind.  Basically, there is no choice but to accept the change order and move on.

So what went wrong and how could this have been avoided?

First let's see what the couple did right.

This couple did solicit multiple bids, so they were not relying on a single proposal.  They did solicit quotes from local contractors familiar with local regulations.  In this case the couple also had unit pricing for new plywood, so the contractor had to honor that rate.  One would say they did go about this the right way.  They claimed that all of the solicited contractor's excluded replacing the plywood decking.  They all stated that they could not know if the plywood needed to be replaced without taking up the tiles.

There are a number of subtle changes that this couple could have made which would have resulted in better results.

1. They failed to request the proposal on the same bidform.  When they solicited proposals they did not present the contractors with their own bid form.  This gave the contractors freedom to present their quotes in whichever format they chose.  In turn this made the homeowner's work of comparing the quotes more difficult.  Before you solicit a quote always create a bidform and require that the contractor presents their price on your form.  Ask for as much detail as possible.  I will post an article on how to build a bidform in the near future.

2. They failed to ask for a fixed price.  All of the contractor indicated that there was a chance that the plywood would have to be replaced.  In hindsight, it seems obvious that they all were aware of the local ordinance and simply were not forthright with the owner.  Anytime you have a potential for a change order, the way to deal with this is to ask for a fixed price (this is called an add alternate price), in this case the couple had a unit price.  Fixed prices are better than unit prices because a fixed price is more predictable.  Make sure your bidform includes a line item for add alternates, but make sure you describe the scope of the add alternate in as much detail as possible.

3.  They failed to invest in preliminary studies.  It may seem unreasonable to spend money on an architect for a simple roof replacement, but for a few hundred dollars, an architect could have informed the couple of the local ordinance and could have inspected the plywood from inside the attic to determine if it needed to be replaced.  In this instance the Architect's cost would have been less than 5% of the total cost of this work (inclusive of the change order).  The Architect could have also advised the couple on how to breakdown pricing on their bidform and helped draft the description for the add alternate.

These simple subtle changes would have saved this couple the gut wrenching drama they experienced.  I also think that they might have paid less overall (including the architect's fee).  Soliciting prices from contractors is more than picking up the phone and asking for a quote.  Even the simplest remodel or repair work deserves some level of investigation and preparation.

Tell me your stories.  Have you experienced similar circumstances?  Do you think these simple changes would have helped you?