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Bids on a new construction project

Hi all--I was wondering if you could offer some advice for a dilemma I'm having regarding who will build my house. A few weeks ago, I asked for advice re: HVAC for our new "Pretty Good House." Now, our plans are in engineering and we're getting close to permitting and breaking ground. The company we've been working with is a design-build company--but the two parts are separate. We hired the design part of things and have verbally told the build side of things that we want them to build our house. We've been with these guys for 2-3 months now and, admittedly, have built some kind of rapport with them. Last night, a friend strongly suggested that we take the plans and let at least a couple of other contractors bid on them. It would at least provide us with data on the price estimates given to us by the design-build firm--are they high, low, in the ball park? They apparently have a reputation for doing fine work, but they're expensive. Currently, for 1600 sq. ft., we're sitting at $400K or about $250/sq. ft. Hood River, OR. It's not an extravagant house and a pretty simple build.

So, given that I've traveled down the road a bit with this firm, am I doing the right thing by putting our plans out for bid? We haven't signed a contract yet, but we're getting close to doing so. There's something that ethically bothers me about this, but maybe this is quite common. I feel like I'm pulling the rug out from under them, sort of. We're scheduled to break ground in a month or so, which is another problem. I doubt any other contractor could gear up this quickly.

Did I make a mistake by going down the road too far with this company? Should I get some bids on my plans--even the firm will be upset (I assume?) Thanks for any advice you can offer.

Cheers

Matt

Asked by Matt Mesa
Posted Mon, 05/26/2014 - 23:46
Edited Tue, 05/27/2014 - 08:01

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12 Answers

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1.
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Matt,
Working with a design/build firm is a fundamentally different approach from going out to bid. Design/build has several advantages, but obtaining a rock bottom price is not usually one of them.

There are two elements to your question: an ethical element and a contractual element.

To understand your contractual obligations, read your contract.

Your ethical obligations are more complicated -- but they depend in part on your oral promises, your assumptions, and the assumptions of the firm you are working with.

Answered by Martin Holladay, GBA Advisor
Posted Tue, 05/27/2014 - 07:12
Edited Tue, 05/27/2014 - 08:02.

2.
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good luck

Answered by aj builder, Upstate NY Zone 6a
Posted Tue, 05/27/2014 - 08:49

3.
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If you put this out to bid to others you run the real risk of "lost in translation" syndrome . If something does not work the designers will say it was not done to their spec and you will have a whole bunch of fingerpointing and resolving anything will be a pain in the neck . I have seen it first hand having designed many hvac systems and providing input on envelope details . One source is advantageous because of this , they have nobody to point a finger at and are beholding to make it right if in fact it is not . They must deliver what they promised since they designed it or their integrity will suffer . I for one never allow my integrity to be damaged , hopefully there are others out there that feel the same .
I would certainly be offended if you did it to me and would offer no future help unless contractually obliged to do so .

Answered by Richard McGrath
Posted Tue, 05/27/2014 - 08:58

4.
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I wrote a piece on this subject for Journal of Light Construction a few years ago you might find useful. Competitive bidding doesn't often get you what you think it will.

http://www.jlconline.com/jobcosting/business--still-bidding-after-all-th...

Answered by Dan Kolbert
Posted Wed, 05/28/2014 - 14:28

5.
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I think effective communication is critical.

I think it's perfectly reasonable for you to say to your point of contact within that company "We are really happy with this design, and because of your reputation we'd really like to hire your build side to do the work. But we feel obligated to also check with a couple other builders. Would this offend you? Would this affect our relationship if we do in fact hire you to build the house?"

Give them the chance to level with you. To voice their concerns, share their perspective. It probably isn't the first time they have dealt with this issue - you shouldn't feel pressured because it's yours.

Answered by jim blodgett
Posted Wed, 05/28/2014 - 15:11
Edited Wed, 05/28/2014 - 15:12.

6.
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In my opinion your design/build contractor will feel like they got the rug pulled out from underneath them, regardless of there being no signed contract. And especially if it's the first they've heard of the project being put out to bid. If on the other hand it had been discussed before the project design began then everyone's expectations could have been better managed.
If you decide to put it out to bid it will take several weeks for the bidders to assemble their price, making it difficult to begin construction within the month you mentioned. So a bidding process would likely delay your construction timeline.
A competitive bidding process is something that involves a fair amount of information management in order to end up with bids that are understandable and comparable. This is always made more difficult with drawings and specifications that are anything less than perfectly comprehensive. Contractors always have to make assumptions about the project that are not specifically spelled out in the drawings and specifications. This is where client/architect created allowances take the guess work out of the contractors hands, allowing for more fairly comparable bids.
If I were in your situation I would go ahead with the bid process, knowing it will cause a delay. Be prepared to ask detailed questions about each bid in order to try to figure out if each bid is providing the same quality of construction, timeline, etc. Don't feel too badly, it's probably not the first time it's happened to this particular design/build company. A good designer or architect should have made you aware of the different approaches from the beginning.
As a side note to the nicely written JLC article above, architects rarely in my experience advocate for a competitive bid process. It's best to choose a local contractor early on in the design that best fits a project based on reputation and past work. In most cases the client is requesting the competitive bid.

Answered by Scott McCullough
Posted Wed, 05/28/2014 - 15:30
Edited Wed, 05/28/2014 - 15:31.

7.
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A contractor's opinion: a good design/build firm has two contracts, one for design and another for build. At this point, you should have signed the first one and they should have no expectation regarding the second one, unless you have told them clearly that they are also the builder. You hire them to design, you pay them for it... and it's your design to do with as you please. If that means you want to shop for bids, you can. They are free to react to that however they want, including saying "we don't want to do competitive bidding"... which would be foolish on their part because they should know they already have the inside track.

Competitive bids are rarely apples to apples. If you ask contractors to "bid" the job, and they give you a lump sum number, there are all sorts of assumptions baked into that number that you may not see. Those often only come out on the table once the job is underway and you say "hey, I thought X" and they say "well, we assumed Y." One number might be lower than the others, but that hardly means it's the better value. That's what makes it so hard to homeowners to compare companies using bids. It can still be worth doing.

What I would do is ask a couple of companies for quickie proposals that have job costs itemized into a handful of categories, and a fixed fee for project management, overhead, and profit. Maybe they can give you concrete/carpentry, mechanical/electrical/plumbing, finishes including doors/windows/interior, and a few others. Tell them to estimate rather than put the whole thing out for sub bids. Make sure each person uses the exact same categories. If your project is typical of what they do, they can do this fairly accurately (~10%). Once you have a few of these in hand, compare them and talk to each company about what you see, and what they see. Spend as much time talking to the actual project manager/superintendent as possible, less with the company owner (unless they're the same person).

Personally, I am always happy to "bid" in a situation like this. I don't want to spend a ton of time soliciting sub bids and shopping materials lists in order to price a job I might not get, but I will definitely spend the 2-4 hours it takes to do what I described, especially if I like you, like your project, like where it's located relative to my shop, etc.

You might very well end up with the d/b firm doing the work.

Answered by David Meiland
Posted Wed, 05/28/2014 - 15:57
Edited Wed, 05/28/2014 - 16:00.

8.
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Thanks all for the replies--they have been very helpful. In the end, I feel that we are too far along in this process with the design-build firm. And, we have made a verbal (email) commitment that we wanted them to build the house. There has been good integration between the architect and the build-guys and both have been at every meeting we've had. Perhaps the biggest concern I have is delaying our timeline. This is something that cannot happen. Ethically, I think it's best if I stick with the design-build firm. We have nothing against them--just that nagging feeling that we could save money by bidding the project out. I do not feel like the firm is taking advantage of us and I have no reason to believe that other contractors would be dramatically lower than the firm's estimated cost. So, I shall hold course and I thank you all for your time and insight.

Answered by Matt Mesa
Posted Wed, 05/28/2014 - 16:01

9.
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Matt, Good luck with your build. I'm going to chime in here just to add another perspective for others who may be following the discussion. There are numerous advantages to using a design-build approach, but what is missing compared to the traditional separation of the two phases is that an architect's role once the building starts is to act as an advocate for his client. Not only does he inspect the scope and quality of work being performed, but in the case of conflict he can act as your expert spokesman to make sure your interests are taken care of. When you have the same firm drawing and interpreting the contract documents, who is on the owners's side?

Answered by Malcolm Taylor
Posted Wed, 05/28/2014 - 22:16

10.
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Malcolm--great question and I guess my answer would be that the architect is on my side--I think they all are, but as a team. To me, there seems to be a separation between these guys--the architect certainly has been running the show during this stage and I think he has a vested interest in seeing his project completed as planned. I've had no reason to assume, so far, that this firm doesn't have our best interests at stake. In some respects, I take comfort in seeing that there is a mutual interest and grounded internal working relations between all these guys--the team seems solid and together. The bottom line is that I think we're going to get the house that we want, with the standards we set, and for a price that seems reasonable. I'll let you know in the future whether we were right! Again, thanks all for your time and insight--it was very helpful indeed.

Answered by Matt Mesa
Posted Thu, 05/29/2014 - 10:11

11.
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Matt, I bet a good, conscientious team will more than pay you back for what little extra this project may cost. Again good luck.!

Answered by Malcolm Taylor
Posted Thu, 05/29/2014 - 20:14

12.
Helpful? 0

Paul Eldrenkamp has a great response to the "comparing bids" question - hire them all, have them build the same project, and wait 20 years.

I think the goal should be to come up with a budget, then have the architect and contractor help you design to it.

Answered by Dan Kolbert
Posted Fri, 05/30/2014 - 10:42

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