Completeness of the Estimate
One of the most confusing stages of dealing with a contractor can be “getting bids.” Different people attach different meanings to words, and it can be very confusing to consumers and contractors alike. There are subtle differences between the words bid, estimate, proposal and contract. A bid is an offer to do something, with certain conditions, for a certain (usually) lump sum price. An estimate is a calculation or judgment – a written statement giving the likely price that will be charged for specified work. A proposal is an offer, a proposition (price) for something, i.e. for this money, we will do this work. Some proposals include an allowance. An allowance can be a lump sum number, such as “$8000.00 for appliances.” An allowance can also be for a unit cost of material, such as “$4.00 per square foot material cost for ceramic tile.” An allowance is usually given because an exact product, process, or type of material has not yet been determined. A bid or estimate is usually the first step in determining the conditions of a project, and all it tells you is the projected cost of the project. The bid or estimate is usually followed by a proposal. A proposal outlines all of the other terms and conditions that will be included in the final agreement between the parties. The contract is the final agreement between the parties. The next section of this paper is devoted to the things that should be in the contract.
Homeowners are always cautioned against accepting a verbal bid. Many contractors will verbally tell you what things cost, pulling these numbers from experience or price books they have acquired over the years. The caution applies to accepting a verbal quote as “the contract.” Always do business with all elements in writing in a binding contract. Verbal statements never hold up in court. That is where the expression “he said, she said” comes from. A judge has a hard time knowing who to believe or who is telling the truth. Beware of contractors who refuse to give a written estimate or contract.
A reputable contractor will not give you a sketchy proposal on the back of an envelope. He prepares a comprehensive set of material and labor specifications, carefully estimates costs and offers you a detailed proposal, at a package price, covering every aspect of the job from removal of existing materials to a thorough clean-up when the job is done. Some contractors choose to leave certain items out of their proposal, either because they do not choose to perform that line of work or because they are trying to make their proposal less costly.
Homeowners are always encouraged to obtain several bids, and most contractors will give homeowners an estimate of what they think the project will cost. It isn’t until all of the details have been determined that a contractor can give a firm bid on the whole project. The smaller and less complicated the project, the easier it is for the contractor to put together an estimate. When the project is more complex, involves design and/or has unique specifications, many contractors charge for estimates. Nailing down all of the details, getting bids from trade partners, finding products that satisfy the customer and designing the details of the project take a long time and involve a lot of work. Assuming that all contractors are supplying the same quality materials and performing the same labor, there shouldn’t be big differences in the bids. Even allowing for shrewd buying and greater efficiency on the part of one contractor over the others, there shouldn’t be more than a 10%-15% difference between the high and low bids. View bids from contractors that are way higher or way lower as bids that might be suspect or need extra understanding to explain the differences.
Unacceptable: You are sure to have trouble if you accept verbal estimates because nothing is documented and everything is left to chance. Be cautious if a contractor leaves whole areas of work out of the bid. Some contractors put in very small allowances for things like fixtures or appliances. Again, this could be to keep their bid the lowest. Some contractors minimize the job on the front end and then write a lot of Change Orders for extras, making the project cost a lot more than initially expected.
Good: The contractor listens carefully to the customer’s wishes, offers good suggestions and produces a bid that includes all the elements of the project for which the homeowner asked.
Better: In addition to the above, the contractor has a system for checking off all the elements that are necessary to complete this type of project. The contractor produces a document that makes it clear what the estimate or bid is based on, shows you samples, has you pick out elements of the project at showrooms or on websites and helps you understand what you will get for what you want to spend.
Best: In addition to the above, the contractor specifies in detail the make, model, and color of the pieces of the project. He keeps the design and estimate reflective of each other. The contractor usually has a way to show what the parts of the project cost, i.e. with a line-item estimate, so that the customer has a clear understanding of the elements that drive the total costs associated with the project. The contractor is willing to share constructive ideas with the customers about decisions that will help the project meet budget. The allowances in the proposal are adequate to purchase the products desired in the project.