Wednesday, March 23, 2016

Construction Owners False Sense of a Good Price

Are you looking at only the bottom line?

My company estimates Luxury Residential homes ranging from $1M - $3M average. My clients (the builder) presents my project budget to the owner. The owner then takes this budget and compares the number against 3-5 other builders in the area. I typically am in the middle of all numbers but here is what is going on and what I see is a huge problem in our industry;

  • The owner does not understand how to de-scope multiples of construction proposals. They are looking at the bottom line, what will it cost?

  • The other builders that my clients bid against are performing take offs on their coffee table while watching Monday Night Football. Performing this type of take off produces an unqualified proposal that is missing multiples of items and calculation errors.

  • Our proposals are take offs generated by state of the art estimating software that updates unit costs weekly to obtain the most accurate price possible. How could this be compared against a coffee table estimate?

  • Bottom line is the Owners will end up paying for everything one way or the other. Unfortunately when they take the lowest bid it’s done the hard way through change orders. 
" They wanted the lowest price right?"

Most owners are making one of the largest investments that they will ever make in their life time. When this investment fails to perform standards of quality and starts to fall apart in a few years they all wonder why. Why, is the question? Quality and honesty is one of the best traits to look for in a builder, price comes last. However, price is substantially looked at rather than a builder’s reputation. This is where they all go wrong.

If an owner is given five prices for the same project they typically choose the mid-level price without descoping the proposals to qualify that they are inclusive of all shown on drawings and the scope of work. This is where price vs. quality comes in Owners would rather take the middle of the road rather than staying in the fast lane and choosing a well qualified bid due to the sticker shock factor.

Coleman Construction Services offers Estimating,Project Management and Training services to all 50 states.

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