When you’re working with a general contractor on a remodeling or construction project, one of your biggest concerns will be cost. You will want to find a contractor whose estimate fits well with your budget (which, by the way, doesn’t always mean just choosing the cheapest guy for the job). At this point in your project, you are probably collecting bids from several contractors and working to find the person who you think will best manage your building project. You might be wondering why there are vast differences in price between various contractors and you might think they seem to get their numbers from thin air.
Well, they don’t. Contractors have procedures in place to arrive at the final estimate price. There are a couple of different methods that contractors choose to follow and often, they combine these methods to add things up.
One important thing to know about estimates - they aren’t a guaranteed number. You could end up paying more or less when the project is over. The accuracy of the estimate greatly depends on the contractor’s level of experience. That’s why it is important to let price only be one factor in your selection criteria, not THE factor.
Here’s how a general contractor bids out jobs:
1. He will assess the situation.
When you come to him for a job, he will look at the future building’s location or the space in which the remodel is being done. He will make an assessment of the scope of the work and he’ll probably take some measurements and other notes. If there is anything unusually hazardous about the potential job, he may turn it down.
2. He does his calculations to create the estimate. There are a couple of routes he may take.
Estimating by the Stick
This type of estimation is the most accurate, but it takes a wealth of knowledge on the general contractor’s part. When estimating by the stick, a contractor will create a highly detailed breakdown of costs by adding up the exact cost of each material used (and how much of that material is needed) and the amount of labor he needs. In this method, a contractor will need to know how fast his crew usually works on particular tasks.
Estimating by Unit Pricing
In this method, a contractor has a unit pricing guide that he has created himself. By using historical data for labors costs and the latest bids from his material suppliers, he is able to use estimating software to create “unit prices” for items such as a square foot of flooring or for more complicated construction tasks such as installation of elevators, for example. Estimating by unit pricing can lead to a quick but accurate bid, as long as the contractor has good historical data. As he continues to use the method over time, his data becomes more accurate, therefore his bids are more accurate. This is a great reason to choose an experienced general contractor.
In his estimate, you will also see bids from subcontractors. You will want to see a detailed breakdown of costs from each subcontractor, as this can make up a large portion of overall costs. Often, these bids from contractors are fixed in price, meaning they will not change.
3. He adds in his profit margin.
Your contractor has to make money, of course. He will understand what it costs him to do business and he will add profit on top of that. Usually, his mark-up is a certain percentage of the entire project’s cost.
Once he finishes developing the estimate, he will present it to you, the customer, in the hopes that you will choose him for the job.
One added tip - If you are receiving bids from several contractors be sure that they are in the same format so you can easily understand the costs. Also, make sure you don’t tell one contractor something different from another contractor. If you explain an added perk that you would like to see in your final building to one contractor and not the others, it will be included in the bid and you won’t be able to accurately compare.
Now you have seen a behind the scenes look at how contractors bid out jobs. Hopefully you have a better understanding of what you can expect when you gets those estimates.