Publication Date: Friday, February 18, 2005
Price vs. experience?
Price vs. experience?
(February 18, 2005) It's important to select a contractor wisely
by Lynn Comeskey
We have been working with an architect for over a year and together we have developed plans to remodel our house the way we have dreamed about for years. Based on the recommendations of the architect and some friends we have selected three contractors.
We have received proposals (bids) that appear to do the job according to the plans. Unfortunately, there is a spread on the prices. Two of the contractors have been in business more than five years and have good reputations; the third has lots of experience but has only been in business less than two years. Two of his clients have given us very good recommendations.
The two experienced contractors' bids are within 5 percent of each other but are 25 percent more than the third contractor's bid. The lowest bid is a little more than we can afford. What would you recommend?
This is a no-brainer. I assume you have checked all the usual stuff like insurance and status of the contractor license. I would select the experienced contractor that you feel most comfortable with and work with him/her to eliminate low-priority parts of the job and any parts that are high expense with low value. Also, a creative contractor can be helpful in reducing costs by substituting equal value materials and redesigning how certain details are constructed. The latter should be done only with the architect's approval. It is essential that the contractor and the architect work together.
The two contractors have told you what it will cost to do the project and stay in business. The new contractor is probably still learning how to bid; he doesn't know how much the project will cost and won't know until he is well into the job. If you select the lowest bid, the contractor will proceed to build a job that, ultimately, you can't afford. Once you have selected the low-price contractor, you are committed.
Someone will get hurt. You indicated that this project was to produce your dream house. Dream houses don't come cheap on the Peninsula. I assume that the project will cost at least $200,000. You said there was a 25 percent difference. Depending on which figure you use as a base, this difference could be $40,000 to $50,000. Who's going to cover this amount?
I only know three or four successful, experienced contractors with that much money in the bank to cover that kind of an over run. Contractors only have to have a net worth of $8,000 to obtain a license.
The contractor caught in an under-budgeted project has a number of choices to make it through the job. The contractor can cut corners on materials and workmanship. It isn't easy for the homeowner to notice when this occurs. However, the architect, acting as an independent auditor, can really be helpful here.
The contractor can postpone paying suppliers and subcontractors until the next job and hope that no liens are filed. One hopes that all the bills from the contractor's previous job have already been paid!
The contractor may be able to pay all of the construction costs out of the contract but not have any money to cover overhead -- to keep his insurance in force and to buy gas for his truck or pay himself a salary. If this is the case, the contractor may decide to cease doing business. Then there wouldn't be anyone to come back to correct deficiencies.
I am describing a grim and dramatic situation. The idea, though, is to not put oneself in a position where these kinds of things can happen. Remodeling is difficult, stressful and not for the faint of heart. It is essential to minimize the potential for problems and select the contractor wisely.
Lynn Comeskey continues to work with Mac & Lou Construction Co. in Palo Alto. Readers can write Comeskey care of the Palo Alto Weekly, P.O. Box 1610, Palo Alto, CA 94301.
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