There is a vast indifference in the knowledge levels of builders and owners when it comes to construction. This vast difference sets up an unlevel playing field between builder and owner.
Couple this with the fact that owners want to trust their builder. They want to believe their builder can do no wrong, can walk on water, change water into brandy, Coors Light or whatever their favorite liquor is, and can heal the sick. And if you do a background check on some builders you will indeed find that they did rise again .... from bankruptcy....
When you buy a vehicle you are trusting that the manufacturer knows what they are doing and you've checked around and compared prices. Fact is you've bought from that dealer before and the guy is a square dealer because he wants your return business. That return business sets him apart from home builders and especially from dealers that sell manufactured homes. Home owners won't be returning in a few years for a new model.... The builders know this.
I recommend a book by Barry B. LePatner, Broken Buildings, Busted Budgets that does an excellant job of explaining what is not right about the business & management end of the construction industry in the USA . I'd love to include excerpts from this book but will let the reader of this blog seek out additional information found in his book. Though this book is written by an attorney (and might not be very exciting to read) and is aimed more at very large construction projects the principals apply to most all construction projects from reroofing, decks, homes, garages and even window replacement. http://www.brokenbuildings.com . There are some excerpts at that site.
So you think you are planning everything to avoid any pitfalls? You got four bids. Builders, remodelers, roofers, and even landscapers have but one shot at getting your business. They know this. They also , almost all of them, know that while a low bid may not have the profit built in that they'd like to make on the job that the bidding stage is the only competitive part of the project. Getting the job is job ONE! After they have the work they can get added compensation for extra's, find a cheaper subcontractor, find better prices on building materials or slip in one of lesser quality, or any other number of ways to make extra bucks.... on large projects such as the "BIG DIG" in Boston the added costs came to over (sit down if you are standing up) $11 BILLION. A project that started out at nearly $3 BILLION ended up costing over $14 BILLION. An extreme case but there is a lesson there.
The bidding process is the only competitive part of a project no matter how big or small. So unlike a football game where the competition continues throughout the entire game ...unless you are playing against the Green Bay Packers (GO PACK!)
Once the bidding is over and the builder has contract in hand, he/she becomes a monopolist. Add to this the huge disadvantage the owner has because of their lack of knowledge about construction and the builder is well on his way to the bank and winning the game.
How does one avoid the monopolist /builder. Good plans aren't good enough, they have to be such that every detail is shown and known. Put it in your bid documents that any deficiency in the plans must be clearly stated with the bid and the bid must include moneys to provide for those deficiencies. Then find the guy that drew the plans and hammer on him and his costs to regain the difference or at least part of it.
Include in your request for quotation / bid documents that you want to know who the subcontractors are and their costs AND if subs are to be changed, you need to know why and any difference in costs and that you are going to share any savings with your spouse....
If you don't have exactly which external finishes, internal woodwork, cabinets, fixtures, and the like selected up front make sure you remain in control of those items. There may be an "allowance" in the bid for those items. The trouble with that "allowance" is that a different subcontractor may install vinyl rather than cement board siding, tile flooring rather than sheet vinyl or carpet and the contractor may have a deal going with his subs or you don't know how much the builder/general contractor is charging and what his costs really are..... or if the general contractor / builder is doing the work his labor costs are more than kinda flexible and who is to say that what he/she charges you is the actual costs and not inflated to make up for the competivie bidding process.... all costs become mutable because the contract was to begin with.
What can you do in these cases? So many things. Barry LePatner discusses them in much detail. One I like is having the builder show you his actual costs / invoices and as part of the contract allowing him a known % to cover his overhead and profit. This may be more involved than you'd like to suffer through but its your money buddy / honey ! Find your low bidder by laying out all the rules of the game up front and let him know you are willing that he make a fair profit and that he is not a monopolist because you are on the field and in the game. Tell him that by the bid documents and plans and specs... not literally that "hey buddy you are not going to be a monopolist!"
If you just hand off the ball (checkbook) and want to watch the game then expect 10 dollar beers and 8 dollar hotdogs...
Some may choose to hire a "construction manager". In my opinion construction managers only work best when they are employed by the owner or are the owner. Second or third party construction managers could mean trouble unless your contract with them makes them liable for everything and be sure they are treating every nickel like it was their last one. And DO NOT base their fees on the projects cost, if you do they have no incentive to hold down costs and every incentive to allow extras and justify them to the owner.
As an inspector I see monopolists at work all the time...
Speaking of time, one of the ways the builder with contract in hand acts as a monopolist is in how he / she times his work. Time is money. The owner has the construction loan and is paying the interest so there is no incentive for the builder/monopolist to move a project along. Some I know don't like to show up some days because they don't have a full days work there until somebody else totally finishes up and they delay the job waiting for them BECAUSE they can go over to another one of their jobs and put a full day in without having to switch jobs.
To make sure your monopolists doesn't run up the interest on your construction loan, add verbiage to your bid documents & contract "that all work shall proceed on a daily basis, weather and building supplies permitting". And make sure materials are ordered and delivered in a timely manner.
No roof trusses? When were they ordered? ........ Why weren't they ordered sooner?.........
So what can you do once you get this builder a contract that seems pretty much in your favor and the builder/monopolists is dragging his feet....You can't piss him off 'cause he just might drag them a little longer. You can't go out and hire somebody else, that might take too long. If you withhold a payment it might just turn into a pissing match because you can bet he's got other work going...
Yup your monopolist may have you over a barrel.
If I might borrow a quote from Barney Fife, "Nip it in the bud". The very first time you see your monopolist / Builder not fulfilling the terms of the contract (to borrow a crude phrase from a builder I know " screwing the pup") have a meeting with him and let him know in no uncertain terms that you will not put up with it.... And the second time he pulls a day when he'd rather be out fishing or whatever have another one of your unsuccessful bidders on the phone.
As a project engineer back in the '80's , I had a "talk" with a contractor in Dallas that had another job going at Texas Instruments and the second time it happened I contacted the next lowest bidder and that guy was on the job working when the would be monopolist came back to my job and I read him the contract language and he packed up and left the site that day. The second lowest bidder put the project back on schedule and saved the day / project / budget .... Guess where they came out of...
Memphis. They kick butt and that's how they make their fair profit and are still in business to this day. They are organized, have skilled workers, know what a schedule is for and work to please their customers. Who are they? IMC . Industrial Mechanical Contractors. I liked to think of them as "Its My Company" because they performed like they were working for me....
So in closing all I can say is stay in control of the "ball", plan to take a few hits, don't be afraid to call "FOUL!", and above all plan on winning and enjoy the game.
If you see a contractor smiling on a job, he better have just heard a good joke.... otherwise he's making too much money.....
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