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Construction Programs & Results Inc

We Like to See The Good Guys Win!

What It Costs to Be Lowest Bidder

by Michael Stone

Why would any serious construction-related business owner want to be the lowest bidder on a project?

If you're able to build a job for a lower cost than anyone else, or if you have little or no overhead (unlikely) or don't care about making a profit, being the low bidder can work for you. But let's look at what that means.

How can you build the job for a lower cost? By cutting corners. And when you've burned enough clients with your cheap, corner-cutting jobs (but at a very low price), you'll be out of business.

How can you have less overhead than another contractor? There are many things that a construction-related business owner can do to reduce their overhead expenses, but in today's market, most owners have already taken those steps. Some overhead just can't be eliminated, like advertising, phones, licenses or insurance. Even if you want to pretend your overhead doesn't exist, the bills will still show up in the mail. And if you choose to eliminate some of the more expensive items, like insurance, you're playing with fire.

Can you live without making a profit? Yes, until a job comes along that causes a few more problems than you expected, and you don't have a financial cushion to fall back on. Without a cushion, one job can put you out of business and deep in debt.

The truth is that given any set of plans, whether a kitchen or bath remodel, an addition, a new home, or even just a new furnace, most contractors can get the job done. If they all follow the same plans, the job will be exactly the same regardless of who built it. That is reality. And, all other things being equal, their prices will be in the same range.

So – you can either learn how to present yourself and your company so that you are the company that clients will want to work with, or you can hope they buy from you because you're the lowest bidder. If you don't know how to present yourself, learn how. Profitable Sales, A Contractor's Guide, it could be the best $40 you ever spent.

Comments

I came across this blog post on costhelper.com (http://home.costhelper.com/deck.html). I thought you all might find it interesting just how ridiculous people are. Anyway, here is the post:

"The best option is to research the type and materials you want, plan out the deck yourself, buy the materials from HD or Lowes, and reward your friends with BBQ and beer for helping you put it up.

As for the contractors, get a quote for the work before you agree. The quote should include a bill of materials with cost, labor cost, overhead (5%) and profit (no more than 7%) on top.

Any contractor that wants to charge you for supplying their cost and a bill of materials you should not deal with. Most bidding for construction work requires this type of breakout (their are exceptions) so they should not be unfamiliar with supplying this.

I have made a good living for the past 20 yrs because bad apple contractors. Owners pay me to negotiate construction contracts and manage contractors to ensure they are getting what they pay for. If the business wasn't so shady I wouldn't have a job."

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