“Why is my proposal priced this way?”
If you’ve spoken with several companies about your project, you might be wondering why they’re quoting different price ranges for the same work. If there’s one thing to take away from this article, it’s this:
Every contractor quotes the price they do for a reason. It’s your job to find out why and decide if that reason aligns with what you value.
This article will help you find that “why” with contract elements that should be consistent with every proposal you receive. However, keep in mind that there are a lot of intangibles that can’t be listed on a contract. A company’s professionalism, communication style, and dedication to craftsmanship should all be considered when you’re deciding who is a good fit for working on your home.
Do not read this article unless you’ve nailed down the following for the contractors you are considering:
Compatibility: Do you have compatible personalities? Do they build to the level of quality you’re looking for? Do they have a clear schedule for completing your project?
Track record: Do they have a solid track record for projects like yours? Do they have a record of completing quality work? Do they communicate well and respond to you quickly? Are they known for completing their projects on budget and on time?
Do not pass go and do not collect $200 unless your homework is current to this point. These all have major impacts on the outcome of your project and should be kept in mind while comparing proposals. Don’t consider working with companies that don’t fit with you and what you value.
The remaining contractors have a high likelihood of being able to serve you well. With that being the case, let’s talk about how to compare proposals.
To start, your proposals should all include a consistent:
Scope of work
Policy on change orders
Workmanship warranty
Insurance status
All of these things have an impact on your experience and the final cost of the project to you. Here’s how to make sure that these are consistent between proposals.
Comparing Scope of Work
Your contract should be crystal clear about the scope of work that will be included in your project. It should also be clear about what is not included in the project.
Ask your contractor how they make decisions about materials selections during the project. Ask how you’re going to know what the final project will look like. Each quote should have comparable selections at the level of quality you’re looking for.
Comparing Change Order Policies
When the scope of work changes during your remodel, your contractor may come to you with a change order. A change order will outline what has changed on the project, what additional work will be done, and what those changes will cost to you.
These often pop up when something unexpected happens on a job - for example, if during your kitchen remodel they tear out a wall and find rotten wood or a damaged sub floor, you’ll receive change order paperwork showing how they will fix those new problems.
Make sure that they have a process in place for change orders and that that process is comparable between companies. Asking “How do you handle change orders?” or “What if something unexpected happens during construction?” is a great way to start a conversation about their processes.
Comparing Insurance
All of the major contractors in our area should be licensed and insured. If you’re considering working with a smaller company or a handyman-type, check their licensing and insurance status online before talking more with them.
You can check a company’s licensing & insurance information in Idaho here, and their information in Washington here.
Insurance status is extremely important to consider. If they aren’t insured and an accident happens on your property, you’re liable for the medical bills and other expenses of the injured party. That’s a risk no one should take.
Comparing Workmanship Warranties
Many contracts will include a provision for workmanship or “workmanlike manner”. These are guarantees that your work will be completed to a certain standard. There may be an express warranty written in the contract, guaranteeing a certain standard of construction quality. You may also see a warranty covering installer error for a period of time after the job is completed.
Some companies may include coverage for damages that are a result of their error - for example, a roofer may cover the cost of repairing a leaking roof, but not the drywall damage inside as a result of the leak. Make sure you know what your exposure is and what situations the contractor will cover you for.
Comparing Price
“The sad truth is that the bid a contractor gives you and what you’ve paid when it’s all said and done is often worlds apart.”
Price should only be compared after you make sure that the previous considerations are consistent in all of your bids. Keep in mind that each type of bid (Time and Materials, Cost Plus, and Fixed Bid) comes with its own pros and cons. For a refresher, see our previous article showing how each type of bid works.
You may have several proposals that are in a price range that you’re happy with paying. Take a moment to consider what you value in a working relationship, and what outcomes you value for your home.
Design and construction can be a lengthy process and the level of service, quality of finish, and clarity of process your remodeler can provide to you can completely change what your experience is like. A remodel is a long term purchase, and extra expense up front can mean a lower cost over time when you consider the value of your time during the remodel and the cost of potential repairs in the future.
Remember, if you’re considering a bid that is in the lower end of the range:
Low bids can be lower because the scope of work isn’t the same
Low bids may be missing materials or using lower quality materials than other bids
Less experienced contractors often underestimate the true cost of a job
The job may be priced to get you to agree before you’re surprised with excessive change orders or surprise fees
If it looks too good to be true, ask lots of questions and find out why.
Unlicensed or uninsured contractors can charge less because they don’t have the overhead of paying qualified employees or building to code, or sometimes even paying taxes. These situations are rare in our area, but they do happen. Be very careful if working with a less established company or handyman-type builder on smaller scale projects.
“A remodel is a long term purchase, and extra expense up front can mean a lower cost over time.”
Protecting yourself with each bid type
No matter what the type of bid is, there are ways you can protect yourself from poor outcomes.
We’ve listed general approaches under each major type of contract below.
Time and Materials Bids
Ask for a “Guaranteed maximum price” that the job will cost you. Chances are, if this bid is significantly lower than others, the contractor hasn’t put the work in to know what your project will actually cost.
Cost Plus Bids
Remember that with a Cost Plus bid, the contractor doesn’t have an incentive to keep building costs down. They are guaranteed to be paid for their expenses. You can help protect yourself by paying a bonus if they come in under budget or including a penalty if they go over - 10% of the difference is common.
Fixed Price Bids
Make sure that the scope of work includes everything you expect. If it isn’t explicitly stated in the contract, it will require a change order to complete.
Final Considerations to Make
If there's one thing to take away from this article, it’s this: Every contractor quotes the price they do for a reason. It’s your job to find out why and decide if that reason aligns with what you value.
The company you choose to work with will be a part of your life for months to a year, and the work they do will be a permanent part of your home. Making the choice of who to work with is just as important as the design decisions you make.
Because of this, it’s vital to have a solid relationship with your contractor before you start work. Make sure you feel comfortable working with them and confident in what they will do for you.
If you don’t feel confident about your contractor, here are several questions you should have an answer to before making your choice.