5 Steps for Comparing Bids
Have you ever had a project’s final price be higher than expected, without a change order, or ended up with a finished product that wasn’t quite what you were expecting? If so, you’ve experienced the frustration that comes along with choosing the wrong contractor for the job. When searching for the most suitable vendor to complete your projects, most folks are looking for the same thing: someone capable of performing the work without any delays, headaches, or hidden costs. These five tried-and-true steps will aid you in choosing the best of the best for your upcoming projects.
1. EVALUATE YOUR CONTRACTOR
This is a must! Though there are numerous companies in the multifamily world, not all of them offer the same services and quality. By properly evaluating your contractor, you will have confidence that they can effectively complete the project you are proposing. Before inviting a contractor to bid your project, attempt to answer the following:
- Does the candidate have proof of license & insurance for the work you want to complete?
- What do previous customers say about them? Can you find reviews online?
- What are some of their recent projects, and are they similar in scope?
- How long have they been in the multifamily industry?
- What are their payment terms?
- How will they manage the project? (A contractor can be much less expensive if they expect you to manage the project for them.)
2. BUILD A COMPLETE BID PACKAGE
Having a general idea of a project is one thing, digging deeper to define details is another altogether. If you don’t put together a detailed scope, the contractor may not fully understand your expectations of the project and underbid. Although a lower price may seem enticing, the final product might not be what you had in mind. For example: if you expected granite countertops following your reno, but failed to specify this in your scope, the contractor may have selected a cheaper alternative when drafting their bid, and now it might not be feasible with their approved budget.
If you are unsure of how to build a complete bid package, call the contractor you trust the most after evaluating them. Work together to build a solid bid package that includes scope of work, material specifications, drawings, measurements and anything else you think may assist with defining scope. Vagueness and lack of details can lead to unexpected end results.
3. OBTAIN A MINIMUM OF THREE BIDS
When preparing for an upcoming project, it is important to get multiple opinions. Obtaining multiple bids helps you establish an accurate and realistic price range for your project. Be careful though - having too many companies bid your project may be overwhelming. Collecting multiple bids not only exposes you to the pricing of different contractors, but it also lets you preview their professionalism and communication. The bidding process will likely be your first chance to evaluate each contractor on these qualities. An excellent finished product is a top priority, but you also want a contractor who is easy to work and communicate with.
4. BID LEVELING
What’s next after all the candidates submitted their bids? Bid leveling. In this phase of planning, you are directly comparing bidder A vs. bidder B. It is important to completely break down each bid, ensure every detail matches the requested scope, and understand the “hard” and “soft” costs at play. Hard costs are the clear-cut prices, including the cost of the subcontractor and materials. These costs are fixed and will not change without a change order. Soft costs are expenses that can be difficult to predict or see; these include you and your staff’s time, delays that may lead to rent loss, and the effect on the property’s reputation if the units are not completed (and ready to rent) on time. It is important to discern which contractor has a better reputation and to factor that information into your bid evaluation.
By going with the lowest bidder, you may be subjected to hidden costs. Leveling the bids provides clarity around what you are actually getting from each contractor. For example, be sure to check if license trades, permits, or inspections are included in the quoted price. Follow up with your candidates if you see any significant discrepancies, and make sure they understood the scope fully. Ask them to provide any additional information you may need upon review. You don’t want to be surprised by hidden costs! Work with your contractors until you feel comfortable with your leveling spreadsheet.
5. CHOOSE THE BEST CONTRACTOR FOR YOUR PROJECT
Congratulations! You are ready to make your selection and start your project. Make sure you understand the quality they are capable of providing. Sort out the services offered in each bid, and see which one will give you the most for the price, while also taking work off your hands vs. being self-managed. Don't forget their presentation too! Which bids are organized, detailed-oriented, clear, and delivered on time? This is typically a good indicator of how the project will be run if awarded. Organization and presentation are extremely important. Do not fall into the temptation of just going with the lowest bidder.
This article was written by Maria Martinez with Fincor, as a part of the XCEL Committee's goal to provide regular, educational, posts for TAA's blog.