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Time to Rethink the Three-Bid Contractor Rule?

It’s been a standard school of thought for many years that when choosing a builder, three separate bids from three separate contractors should be procured. While under certain circumstances, this system can have its merits, it can also hide some serious issues that may only become apparent to homeowners during the latter stages of the construction process.

We have examined a few of the pitfalls associated with competitive bidding and offer some solutions for homeowners wishing to hire a building contractor for an upcoming project.

While budgeting is usually one of the most important concerns for a homeowner considering a construction project, generally speaking, competitive bidding can be a very unreliable way to assess costs.

Even the most professional of architectural drawings can be open to interpretation. This means, while all of the competing contractors may be bidding from the same plans, they are viewing and interpreting them very differently. If they are aware they are bidding competitively, cutting corners in material choices or omitting unspecified items in the drawings are just two ways they could gain an edge in the form of an initially lower price. Of course eventually the unwitting homeowner will have to pay for these items in the form of change orders or additions to the scope of work, but that will be long after the contractor with the “lowest bid” has won the job.

The homeowner does have the option of supplying the competing contractors with architectural drawings containing exact specifications, finishes and material lists for each and every necessary item. However, it’s likely the associated design costs would far outweigh any possible savings that may be gained from the multiple bid process.

Research shows the three values consumers look for most when hiring a building contractor are trust, quality and safety. Unfortunately, by its very nature, the competitive bidding process encourages contractors to cut corners in all of these areas (at least if they want to have a chance of being awarded the job).

Especially in tough economic times, projects put out for multiple bids are often under priced by one or more of the competing contractors. While a bidding contractor’s eagerness to bend over backwards in order to win the job can seem empowering to a homeowner, once the contract is signed and the reality of the construction process is underway, if the job has been underbid, the contractor’s initial eagerness can quickly turn into frustration, an unwillingness to respond to customer concerns at the most vital stages of the project, a mountain of unforeseen change orders and costs, or all of the above.

So what can a homeowner do to protect themselves while hiring the best man (or woman) for the job?

After you’ve checked that the contractor has a valid license and carries worker’s compensation on employees (you can do that at the Contractors License Board and follow their steps to help ensure you end up confidant and encouraged by your choice.

First Hand Referrals

Always obtain referrals whenever possible. First hand referrals would come in the form of friends, neighbors, relatives, colleagues.

Ask them… Who do they know in the construction field? Who have they used? Are they happy with the workmanship? Was the project finished on budget and on schedule? Were the employees respectful and courteous while on the job?

Positive feedback from your own contacts is without a doubt, the surest way to find the right contractor for you and your project.

Non-Personal Referrals

Non- Personal referrals would be in the form of online reviews (such as Yelp) or references provided by the contractor. Also, make sure you check out your potential contractor’s online presence.

Interview your potential contractor

Ask him about previous projects and clients and address concerns you have regarding your own project. A confident and capable contractor should be willing and able to answer your questions patiently, clearly and to your satisfaction. Answers like “Don’t worry about it” are usually a very good reason to worry about it.

Like your contractor

Your contractor doesn’t have to become your best friend, but let’s face it, you’ll probably be talking to him a lot more than you’ll be talking to your best friend over the ensuing months, so at least a little rapport is ideal.

If necessary, most homeowners are happy to pay a little extra to hire someone personally recommended with whom they are comfortable working in their home. This fact alone renders the competitive bidding process redundant.

In short, competitive bidding can work for those willing to cut a few corners in order to get the cheapest possible bid but a savvy consumer looking for quality work to fit their budget, will first research and interview a potential contractor and then refine budget and scope of work with their ideal candidate to achieve their desired outcome.

The advantages of working with a Design-Build Contractor for all your construction needs are numerous, but we feel the two most significant aspects of this process is the ease of communication and the ability to remain within the client’s budgetary requirements.