Getting the right price
When you decided to build, the first thing you did was check your accounts to see what you could afford and what your budget would be. Then you passed this to your architect, who produced a design supposedly to meet that budget. Now that the drawings are finished, you ask your architect, “How do I get this project built for the best price?”
“Well,” he says, “you can either select someone you think is the builder you want to work with, and have us develop a good price with them, or we can ask for competitive prices.”
After some thought, you ask which is the best choice.
“It all depends. Each has its advantages, depending on your objectives.”
Now you are as confused as you were before, so you ask the architect to please explain the differences between the different ways of choosing the contractor.
You can ‘nominate’ a contractor
Many clients simply choose a builder based on the referral by someone they trust or from previous experience. They trust that the price they arrive at is fair. In some instances, the architect is asked to review the price and comment, but without some measuring stick agreed beforehand, this usually becomes a test of bargaining skill. While the average home-building client may well survive this level of risk, larger projects should be wary of this method. To reduce the level of risk and the dependence on his bargaining skill, the architect may suggest the employment of a quantity surveyor or cost consultant, who will use one of a variety of cost-control methods to help arrive at a fair price. For example, he might suggest the development of bills of quantities, or of a schedule of rates, both involving the creation of a shopping list of the components of the project, to be priced by the contractor, compared with similar projects and agreed before the price is committed to a contract.
This type of cost consultant control would ensure that the price agreed is fair to begin with, and that changes made during the construction are negotiated fairly. But it would not ensure that you would get the lowest price possible in the marketplace. Builders with a lower profit target or lower overheads could possibly produce better prices. Therefore, in many instances, your architect might suggest you seek competitive bids.
There are two basic types of competitive tender: the open tender and selective tender.
The open tender invites anyone with an interest to submit a bid, on the understanding that the owner has the right to reject “any or all” tenders. This is the type of tender most often used by government agencies, and is responsible for a majority of the problems that seem to plague government contracts. While it allows the widest possible participation by the building community, something the public seems to think is fair, it does not ensure competent work or good prices. In this system, the onus is on the design team to weed out the incompetent bidders and to determine which of the bids are proper. This is an unfair position in which to place consultants, although they would seldom complain.
This system is even less reliable than simply selecting your builder and negotiating with him, since it does not usually offer the consultant the chance to work with the builder selected, whom he might not know, before the selection is made. This type of tender often results in the owner accepting a low bid that leaves the project incomplete, the builder bankrupt and the owner looking for additional funds to complete the work. Most architects would advise against ever using this form of tender.
On the other hand, the selective tender begins by selecting only those builders the architect can advise are competent to build the project – both construction wise and financially – and advising the owner to accept the lowest bid submitted without an error. After all, each of the builders would have spent a lot of money to put their bid together, and it is not only the fair thing to do to select the lowest bidder, but it is the only thing that makes the process work.
Armed with this new understanding, the prospective homeowner can now sit down with the architect and begin the process of finding the right price and the right contractor for their project.
• Patrick Rahming & Associates is a full service design firm providing architectural, planning and design services throughout The Bahamas and the northern Caribbean. Visit its website at www.pradesigns.com and like its Facebook page. The firm’s mission is to help its clients turn their design problems into completed projects through a process of guided decision-making, responsible environmental advice and expert project administration.