Wolgast Blog

The Good and the Bad of How Contractors Lower Their Bids

Posted by Cory Sursely on 9/30/2013

good-and-bad-of-bid-cuts

In a competitive bid situation, contractors can go to the extremes to lower their bids, especially when work opportunities are scarce.  In the end, a business owner may like the price, but may not like the final results.

The Bad

      1.       Materials  Using non-commercial grade materials is definitely a money saving tactic, but in a commercial setting where you have repetitive use from staff and customers, durability is important.  Maintenance or replacement costs can make these materials more expensive than using quality/commercial grade materials in the first place.  Be sure to ask questions about the materials included in a bid and do your research.

      2.       Labor  A contractor can be inexpensive because they’re inexperienced, ill equipped, or uninsured, which will lower their bid price.  And even if your general contractor is qualified, he may choose subcontractors who aren’t.  Their work, in many instances, can slow down a schedule with redos and end up costing more money as the schedule drags on and through maintenance costs in the future.  Find out if your contractor and subcontractors are bondable and have insurance and warranties on their work.

      3.       Change Orders  Change orders happen for various reasons, for instance, an owner wants to make a change during construction, a design element doesn’t translate exactly during construction, an unknown environmental issue reveals itself during construction, or something known was omitted in the drawings and specifications.  Reputable contractors will attempt to avoid change orders for every job they bid by obtaining clarifications prior to the bid submission, to minimize additional out of pocket expense for the customer.  Some contractors will use change orders to make up for the profit they lost by bidding the job too low.  Trusting business owners may believe that they’re getting everything necessary to build their building, but eventually find out that the contractor didn’t account for known municipal codes or unclear drawings and specifications.  It isn’t possible to avoid change orders 100% of the time, but be sure that you compare your bids “apples to apples” and ask questions about discrepancies before you select your contractor.

The Good

      4.      Value Engineering  This is the practice of a contractor reviewing your plans and specs and doing their research to find economical ways to build without losing the level of quality or design elements that the owner worked out with the architect.  By offering voluntary alternates, the general contractor finds comparable materials, applications or time/money saving measures to provide the same quality product the owner expects.  This is the “good way” to lower a bid and the best value (quality + price) when comparing bids.

 

Wolgast is a general contractor in Saginaw, Michigan who works throughout Michigan.  We strive to provide the best value to our customers and eliminate surprises, so that they will continue to work with us in the future.

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Topics: Professional General Contractor, the Wolgast Way, Good for Business, Risk Management