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Construction Programs & Results Inc

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Underbidding a Job

by Michael Stone

We received the following note today from our website - this type of situation happens all too often, but not everyone has the courage to face it as our writer has. All identifying information has been removed to protect privacy.

I am a contractor and I have underbid a house by 14000$. I am almost done and just figured that out. I can not afford this loss. What can I do besides bankruptcy? I have copied all the bills and gave them to the homeowner to try to get him to help me out.

My Response:

Sorry, I don't believe in bankruptcy. That, at least to me, shows the individual refusing to accept responsibility for their own action or lack of action. In my opinion, attorneys promote bankruptcies because their meter is running during the whole process and they get their money regardless of how it all washes out.

Next I would suggest you get our Fast Track Estimating program and that will eliminate these kind of errors. It would take a bit of work to adjust the database to suit your company, but based on your note it would be time well spent.

As to what you should do now: I would get back with the owner and tell them what bills you can't pay. Tell them to write a check directly to the supplier or sub-contractor as the case may be and this will probably stop liens being filed against their home.

Most owner's faced with this problem, pay the bills. They yell and scream about contracts and price quotes, but errors in estimating by contractors do happen. The other side of this is if they don't pay the bills, they will have liens placed against their home immediately by the subs and suppliers. If they come back at you claiming a default on the contract, they may or may not be right depending on how the contract is worded. However, being right and then pursuing it through the court will end up costing them a lot more than if they just paid the bills and were done with the whole thing.

Be real careful here and don't agree to sign anything or pay anything unless and until you are very clear what is going on and that you are going to get out of this without spending any more of your own money. Check with your attorney on everything..........FIRST.

Comments

It would seem to me that a guy who is struggling like this may not be able to afford to check first with his attorney, or didn't have one to begin with.

There are many places where you can get free legal advice. The first one might be a bookstore or an office supply store that has publications on legal issues such as this one.

Tough situation and good advice for the next estimate.

Jim:

Thanks for your note. We appreciate your comments.

I personally think that the young fellow that underbid the job has to call an attorney on this. I don't believe he can afford not to. A few hundred dollars is far cheaper than spending the thousands that he left off his estimate or that he will certainly be forced to spend if the customer files a lawsuit against him for non-payment of contractual obligations.

You're right that it's a tough situation to be in. The good side is that he put his ego in his pocket, got busy and tried to find an answer as soon as he knew he was short on his estimate.

That is the smart way to run any business. Stuff happens to us all.

Michael

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