It’s never easy trying to find a general contractor. You have to do a lot of research and get the word out to your network in order to find builders whose work can be vouched for. No wonder then that so many homeowners turn to the Internet for advice on selecting the right contractor.
While the majority of the tips online are commendable, there is one that is a downright terrible idea: getting bids from 3 contractors in order to finally select one to do your project.
The point of this idea is that you interview several prospective contractors, look over their portfolios, lay out your project plan, and ask them for an estimate — a bid– so you can choose the best contractor. Although, in this case, “best contractor” typically means choosing the lowest bid from the 3 contractors you talked with.
On the surface, this seems like a great idea that benefits the homeowner greatly. After all, choosing the lowest bid means you’ll end up saving more money, right?
Here are five reasons why it’s such a bad idea and why it could ruin your entire project from the get-go.
1. Some contractors may leave things out
If you’ve spoken to enough general contractors, you might get an attractively low bid — but it could be because scope was left out!
Some unscrupulous contractors purposely leave some of the scope out of the final estimate in order to bring down the total cost they submit. That doesn’t mean the work isn’t needed. Just that it was left out of the original proposal. When the time comes for that work to happen, that’s when they hit you up for more money. And suddenly, you’re way over budget.
On the other side, some contractors may be leaving things out due to sheer inexperience or simply not understanding how to price their work correctly. This could stem from the fact that they’re better craftspersons than they are businesspeople.
All the more reason to find a contractor with a proven track record and business experience. The more reputable they are and the longer they’ve been around, the more assurance you get that they’ll stand by their work, and do their best.
2. There are many ways to interpret a project’s scope
Work scope can be interpreted many different ways from the same set of documents. If you give your same requirements to three different contractors, you will have differences in how they understand the scope of your project!
As we tackled in reason #1, different general contractors will have varying business experience, which also affects whether they can price their projects correctly.
The point is: those differences in interpretation will greatly affect how pricing will be calculated. Which results in wildly differing cost estimates.
3. Low costs may mean unlicensed or unskilled labor
If a contractor wants to cut costs and bring down the estimate they present to you, one area they may choose to compromise on is hiring top talent. They might just opt to hire unlicensed laborers, or worse yet, unskilled laborers in order to lower their costs. And believe us, that has a huge negative impact on the craftsmanship of your home renovation project.
Cheap labor often ends up being more expensive in the long run.
4. Low bids rarely result in high quality work or customer focus
The lowest bid never means quality and attention to the client’s needs. There are reasons why the best contractors choose not to engage in a bidding war. And one of them is understanding that customer service takes time and undivided customer focus.
The time that general contractors spend answering questions and guiding you through the various steps of your home project is time that could be spent finding new business, or dealing with other simultaneous projects.
5. Low bids may be a negotiation tactic
Some contractors might just use the low bid as a way to stand out from their competition. Then it becomes a starting point in what will probably be a long, drawn-out negotiation process. They’ll leverage the bid as a way to begin discussions on what it will actually cost. And in the long run, this will be a waste of time and money for you.
What’s the Alternative to a Bidding War?
A better option is to do thorough research on every prospective contractor you seriously think of working with, and then decide. Based on the facts, which group looks like they can do this job for us and give us exceptional quality for the budget we have?
Once the decision has been made and you’re ready to commit to one contractor, that’s when you ask for a project estimate. Why?
- A well thought-out estimate takes time to prepare.
- It will require an on-site ocular inspection so the contractors can see what they’re working with, physically.
- It should include a thorough listing of all materials needed and the scope of the work required.
- It should include detailed explanations on what homeowners should expect during the project, including project milestones, and how progress will be communicated with you.
The Truth About Pricing
Here’s the reality about industry pricing. It is practically the same price for everyone based on an accurate/actual work scope — assuming the contractors have the right business experience.
But there are contractors out there who can submit low bids through dishonesty or plain inexperience. And the question you need to ask is: are these really people you want to work with and entrust your project to?