In an open book bid process, what should one expect, in terms of how the costs are defined for the owner? What I mean is, when you are looking at the bids, especially the ones by the MEP, is it reasonable for those particular trades, to list the scope of their work, followed by the number for their contract, or would you expect to see costs for each portion of the work - not the actual nuts and bolts, but what floor drains cost, plumbing fixtures, etc - so as to get a sense of whether or not their numbers seem in line?
I have a Kitchen Equipment Contractor and they list all of the items for the kitchen, followed by an associated cost, and the labor to deliver and install. I've got a Mechanical contractor, listing the work general scope, and equipment, no costs for those items, only the cost for the contract. The same thing with plumbing contract. Then there's the Electrical contract. He actually does break down the contract, fixtures, installation, demolition, allowance for electrical upgrade, etc, plus two alternates for fixtures, and then the total contract amount. Sounds all good, right? Here's the thing. The electrical lighting package that I scheduled in the drawings, came in at nearly a 80-90% mark-up? What the hell? I had the fixture layout, completed by me, and reviewed by a lighting house local to me, and they came up with cheaper fixtures and saved me a shit-ton of money. The lighting bid by the electrical $14.5k - not including $10k installation, the same package by the lighting consultant - not including installation, $8.5k. Do you feel that kind of mark-up is justified? The alternate 1 package used builder grade led fixtures, and with install, was $18.5k, and the alternate 2 was a builder grade incandescent, or halogen, with installation for $17.5k. I'm trying to figure out, how much should I be pissed off, and how much profit should I allow? I'm pretty protective of my client, they're young, and inexperienced in this area, and I want to be their architect going forward on future projects, in other states, but I don't want to needlessly upset them, if I am being a bit off, but I also don't like the idea of MEP contractors, with their hands in my client's pockets, either by not telling them what things cost, or by gouging them with obviously inflated profit margins.
To top it all off, the listed numbers on the bid form, was inflated by the GC, to a tune of about $5k - contingency they said - but not listed in the contingency number they had for the project. My thing is, if it's contingency, then list it as such, because if those trades don't use that contingency, then that's monies that could be used elsewhere. Also, why doesn't each trade list the contingency as part of their number, especially if it's their work?
What do you think? I'm pretty pissed, but I don't want to be unreasonable, and if I heard a plausible explanation, I'd be able to calm the fuck down.
Ask a contractor how much he should charge for a specific scope of work and he will reply, "As much as I can get." :) What are you pissed about? I'm assuming this was a negotiated bid? CMAR? The GC was probably the best value from the others in the pot. Are they not entitled to make a profit and who is the Architect to determine what is price gouging when they notoriously don't know how to run a business?
The reasons the MEP and other contractors are not breaking out their line item costs is because of your second paragraph. They don't want you to ask the question, "Do you feel that kind of mark-up is justified?"
I've been on plenty of projects with "open book" cost analysis and it seems to me this GC simply does not have the experience to hide it correctly from you and the owner. If the GC was selected in a fashion you both agreed to, they've met all the prequalifications you've put forward for them, then what's the problem? Seems like an effort in futility to go chasing the numbers on the bid. Maybe review the change orders with this kind of scrutiny, but after the bid, why revisit the bid number?
If I was the electrical contractor I would tell you, "My price is my price. If you want to adjust quantities? Then we can add or remove fixtures. But I provide a value to this project above the level of commodity, as do you, and my price is reflective of that." I wouldn't get pissed about it. Just because you priced out the cost of what electrical fixtures cost, doesn't mean you know the cost of getting the correct fixture, in the correct quantities to the job site at the right time.
The are things to the cost of a fixture other than the cost of the fixture. How is the fixture getting to the site? Does someone have to pick it up? Does it get delivered to the subs warehouse and then delivered to the site? There are costs associated with that process, including the depreciables like the cost of the delivery vehicle and the cost of gas plus the cost to manage the process. Fixtures just don't magically show up on site at the correct time and quantity. Ask the electrician why your costs and his costs are so different. Then you'll have a better handle on pricing.
Architect's billable rates are usually similar in design. If I'm paying so and so $35 dollars an hour to complete this work than I need to bill them out at 2-3x that cost in order to keep the doors open.
Wurdan, hence the questions. I understand O & P. However, the markup isn't typically in the range of 80-90%, I think it makes me look bad, when the fixtures I have in my drawings appear from the bids out of line with the budget, and the alternate looks palatable from a price standpoint, yet are completely different from an energy efficiency and aesthetic standpoint.
Wurdan, on second thought, I disagree with most of what you wrote. If I am doing cost estimating, and I us RS Means, I should have some expectation that the electrician is also using some reasonable, and responsible method for developing bids, and not pulling shit out of his ass. As an example, I called a local rep for storefront, to see if what I was designing, was within budget, and responsible to the client, the number I got from the rep was a measuring stick, so when the bids came in for the storefront, I wasn't shocked, and they wound up in line with what I was told.
I should have a reasonable expectation, that the contractor will make a profit, but not have his hands buried in my client's pockets trying to make that profit. I have no problem with labor costs, because that is not as easy to put a number to, but things bought, and labor provided are not apples to apples. When I go to a auto repair shop, I expect that I am not going to pay list for brake parts, but I also don't expect to pay 3x for the part, especially if I drive a Honda Civic.
The fixtures, are the parts for a Honda Civic.
JeromeS, that is one consideration I am entertaining.
Without knowing specific details it's hard to figure out why the contractor's bids are so different from your estimate. That being said, when doing estimating in contracting, we never used RS Means. It just wasn't accurate enough for us.
I would agree that it makes you look bad and understand the frustration that comes with it. Maybe having a meeting with the contractors on their pricing before you meet with the owner to allow for some discussion and negotiation? How where the contractors selected? Hard bid? CMAR? Other? What size project? What type of project? Probably a lot of details you don't want to get into on a public forum... but like I said, hard to tell what is going on without details.
As a contractor, I'm ok with the owner purchasing fixtures,but my warranty is gone. You also better have someone who knows how to manage the logistics of purchasing construction materials. If I show up on site... and the material is not there... cha-ching... change order. My guys go home and the owner gets to pay for it. Now you've also screwed up the construction schedule and depending on when the materials actually show up, could have a trickle down effect.
Wurdan thanks, you're right about the owner providing stuff, it could be problematic. As I think this through, it would seem that the fixtures in my schedule don't allow a margin, where the markup seems palatable, whereas the builder grade fixtures do allow that room.
Mar 15, 15 5:45 pm ·
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Open Book Bidding - Expectations?
In an open book bid process, what should one expect, in terms of how the costs are defined for the owner? What I mean is, when you are looking at the bids, especially the ones by the MEP, is it reasonable for those particular trades, to list the scope of their work, followed by the number for their contract, or would you expect to see costs for each portion of the work - not the actual nuts and bolts, but what floor drains cost, plumbing fixtures, etc - so as to get a sense of whether or not their numbers seem in line?
I have a Kitchen Equipment Contractor and they list all of the items for the kitchen, followed by an associated cost, and the labor to deliver and install. I've got a Mechanical contractor, listing the work general scope, and equipment, no costs for those items, only the cost for the contract. The same thing with plumbing contract. Then there's the Electrical contract. He actually does break down the contract, fixtures, installation, demolition, allowance for electrical upgrade, etc, plus two alternates for fixtures, and then the total contract amount. Sounds all good, right? Here's the thing. The electrical lighting package that I scheduled in the drawings, came in at nearly a 80-90% mark-up? What the hell? I had the fixture layout, completed by me, and reviewed by a lighting house local to me, and they came up with cheaper fixtures and saved me a shit-ton of money. The lighting bid by the electrical $14.5k - not including $10k installation, the same package by the lighting consultant - not including installation, $8.5k. Do you feel that kind of mark-up is justified? The alternate 1 package used builder grade led fixtures, and with install, was $18.5k, and the alternate 2 was a builder grade incandescent, or halogen, with installation for $17.5k. I'm trying to figure out, how much should I be pissed off, and how much profit should I allow? I'm pretty protective of my client, they're young, and inexperienced in this area, and I want to be their architect going forward on future projects, in other states, but I don't want to needlessly upset them, if I am being a bit off, but I also don't like the idea of MEP contractors, with their hands in my client's pockets, either by not telling them what things cost, or by gouging them with obviously inflated profit margins.
To top it all off, the listed numbers on the bid form, was inflated by the GC, to a tune of about $5k - contingency they said - but not listed in the contingency number they had for the project. My thing is, if it's contingency, then list it as such, because if those trades don't use that contingency, then that's monies that could be used elsewhere. Also, why doesn't each trade list the contingency as part of their number, especially if it's their work?
What do you think? I'm pretty pissed, but I don't want to be unreasonable, and if I heard a plausible explanation, I'd be able to calm the fuck down.
Ask a contractor how much he should charge for a specific scope of work and he will reply, "As much as I can get." :) What are you pissed about? I'm assuming this was a negotiated bid? CMAR? The GC was probably the best value from the others in the pot. Are they not entitled to make a profit and who is the Architect to determine what is price gouging when they notoriously don't know how to run a business?
The reasons the MEP and other contractors are not breaking out their line item costs is because of your second paragraph. They don't want you to ask the question, "Do you feel that kind of mark-up is justified?"
I've been on plenty of projects with "open book" cost analysis and it seems to me this GC simply does not have the experience to hide it correctly from you and the owner. If the GC was selected in a fashion you both agreed to, they've met all the prequalifications you've put forward for them, then what's the problem? Seems like an effort in futility to go chasing the numbers on the bid. Maybe review the change orders with this kind of scrutiny, but after the bid, why revisit the bid number?
If I was the electrical contractor I would tell you, "My price is my price. If you want to adjust quantities? Then we can add or remove fixtures. But I provide a value to this project above the level of commodity, as do you, and my price is reflective of that." I wouldn't get pissed about it. Just because you priced out the cost of what electrical fixtures cost, doesn't mean you know the cost of getting the correct fixture, in the correct quantities to the job site at the right time.
The are things to the cost of a fixture other than the cost of the fixture. How is the fixture getting to the site? Does someone have to pick it up? Does it get delivered to the subs warehouse and then delivered to the site? There are costs associated with that process, including the depreciables like the cost of the delivery vehicle and the cost of gas plus the cost to manage the process. Fixtures just don't magically show up on site at the correct time and quantity. Ask the electrician why your costs and his costs are so different. Then you'll have a better handle on pricing.
Architect's billable rates are usually similar in design. If I'm paying so and so $35 dollars an hour to complete this work than I need to bill them out at 2-3x that cost in order to keep the doors open.
Why don't you negotiate to include the fixtures as "Owner Supplied Items"
Wurdan, on second thought, I disagree with most of what you wrote. If I am doing cost estimating, and I us RS Means, I should have some expectation that the electrician is also using some reasonable, and responsible method for developing bids, and not pulling shit out of his ass. As an example, I called a local rep for storefront, to see if what I was designing, was within budget, and responsible to the client, the number I got from the rep was a measuring stick, so when the bids came in for the storefront, I wasn't shocked, and they wound up in line with what I was told.
I should have a reasonable expectation, that the contractor will make a profit, but not have his hands buried in my client's pockets trying to make that profit. I have no problem with labor costs, because that is not as easy to put a number to, but things bought, and labor provided are not apples to apples. When I go to a auto repair shop, I expect that I am not going to pay list for brake parts, but I also don't expect to pay 3x for the part, especially if I drive a Honda Civic.
The fixtures, are the parts for a Honda Civic.
JeromeS, that is one consideration I am entertaining.
Without knowing specific details it's hard to figure out why the contractor's bids are so different from your estimate. That being said, when doing estimating in contracting, we never used RS Means. It just wasn't accurate enough for us.
I would agree that it makes you look bad and understand the frustration that comes with it. Maybe having a meeting with the contractors on their pricing before you meet with the owner to allow for some discussion and negotiation? How where the contractors selected? Hard bid? CMAR? Other? What size project? What type of project? Probably a lot of details you don't want to get into on a public forum... but like I said, hard to tell what is going on without details.
As a contractor, I'm ok with the owner purchasing fixtures,but my warranty is gone. You also better have someone who knows how to manage the logistics of purchasing construction materials. If I show up on site... and the material is not there... cha-ching... change order. My guys go home and the owner gets to pay for it. Now you've also screwed up the construction schedule and depending on when the materials actually show up, could have a trickle down effect.
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