How to deal with contractors

Question

We are planning to purchase a building that needs to be renovated.  We have found a great contractor but his prices seem elevated.  Is it customary to be presented with a contract that does not have a separate line for labor vs materials?  I want to know where the money is going and where I can impact savings.

Brian Pulaski · Answer

How did you determine the price is elevated? I worked for a mid sized GC, however I have no idea how we submitted bids to the owners we were working for. I can tell you that the owner really has no way to "save money" unless they want to work on value engineering some items or take away scope. Your not going to tell the GC that his plumbing quote is $5000 too high and they should reduce or find a new sub. If you go that route the GC will probably pass on the job.

Tom Savoca · Answer

@Anthereca E. Lane I tend to agree with @Matthew Paul. It would take most contractors a cost-prohibitive amount of time to break down the material cost vs. labor cost on every single line item.

When you get down to it, there are really two options:

1. GC it yourself: you'll have total control over cash flow, and will directly collect any savings you are able to create for yourself, but also pay for any miscalculations.

2. Get the outsource GC: you'll likely overpay in some areas, but - if they're good - he/she will also likely net you lots of savings along the way that comes with their professional experience.

It's also important to know that it's definitely a vendor's market right now; a good GC can pretty much name their price. If normal GC markup is +/- 12%, current market rates are closer to 18%.

The most important thing here is to make sure the scope is called out correctly from the start. Hope that helps!

Anthereca E. Lane · Answer

I have a brother who has properties. He has asked this contractor to do small jobs and in his opinion he charges high rates.  I have also had another contractor give another bid on my project. His bid is about 20k less than the original contractor.  The original contractor is more experienced.  I would like to use him.  I just need to know how to negotiate the contract. I like the idea of breaking down contract based on trades.  Thank you all for your input.

Frank S. · Answer

How do you know the price is high? Did you get other bids?

I wouldn't bother asking for an itemized materials and labor for a big job.  It will take a lot of time for a contractor to come up with all that for a large renovation - you indicated a building, right?  Ask for a brake down in trades, perhaps.

Get three bids and have them all to attend the same walk-through.  Get a clear scope of work, use the contractors to help you develop the scope of work. Then, compare costs, don't go for the cheapest guy unless you want change orders.

Matthew Paul · Answer

@Anthereca E. Lane  If your area is like mine here in Maryland , we are swamped with work . Around here you would have to wait 3 to 6 months for a contractor to start . If they could start sooner , they probably wouldnt be on your job every day .

Matthew Paul · Answer

@Anthereca E. Lane  What makes you believe that the prices are elevated ?  Have you hired a professional contractor before ?

I am a contractor , I do not give a material and labor breakdown of a price . I give a price to do a job with a detailed scope of work , payment terms , completion times .   Remember  a good contractor is also a good businessman , every thing they do has a price , every thing they supply has a mark up , as does every sub they hire . Its business .  An example would be a  Permit costs $ 300 , then there is 2 hours filling out the paper work , 1 hour driving to the city to file the permit and an hour back , we add 4 hours of time to that $300  .  Same goes with ordering materials or picking them up , scheduling subs , waiting for inspectors , I build all this into my bid price .  Now that "bid " price is rarely the final price , Your final price is generally higher due to change orders , or due to problems not outlined in the scope of work .

How to deal with contractors

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