How to Bid with a Contractor

Regardless of the type of bid, it should feature a line-by-line breakdown of the components of the job, including labor, materials, and time to complete. Another thing: Estimates are not bids, which are firm prices unless otherwise indicated. If a contractor can only give you an estimate, cross him off the list.

In a competitive situation, bidders should come in at the lower end of their price range-exactly what you want-to try to win the business. Even if the pricing on each of the bids is acceptable, they can probably do better. If you like one of the contractors but not his bid, don't try to browbeat him into lowering his price Unless he is desperate it won't work, and if he is desperate he probably isn't any good. Instead, calmly explain that his bid is too high, ask him to sharpen his pencil and try again. The worst that can happen is he refuses. In the end you may decide he is worth the extra money anyhow.

Time-and-materials bids With a time-and-materials bid, you need to pay attention to both the hourly rate and the estimated time to complete. Sixty dollars an hour for a carpenter sounds high, doesn't it? Well, it covers overhead, insurance, idle time, profit, and spiffy new tools. In the end, the hourly rate is not all that important-time to complete is the key. If the contractor knows what he is doing, he should be able to deliver on his estimate. If not, you eat the extra expense. The best way to limit your exposure is to specify a maximum allowable charge, known as a cap.

Unlike hourly rates, mark-ups on materials and finished goods are pure profit to the contractor. Mark-ups vary considerably, from 20 percent to 70 percent. For finished goods, such as appliances, you can lower your costs by purchasing them yourself and arranging for delivery. On raw materials, however, mark-ups are part of how contractors make a living. You have the right not to be gouged, but don't try to play materials supplier. It will create more problems than it's worth.

Fixed-price bids

Fixed-price bids are firm prices for the completion of the job. You agree to pay and the contractor agrees to assume the risk of cost overruns. Because cost control is so important, there is a moral hazard in fixed-price deals: cutting corners on materials. Only unscrupulous contractors would deliberately substitute inferior quality materials in a job (unethical and illegal). More commonly, contractors will push certain products over those you selected. Sometimes their choices actually are better or more costeffective to install. Other times, contractors are merely trying to fatten their profits through a better deal from a particular vendor. If the logic sounds fishy, ask the other contractors what they think. Remember, you are the one who will have to live with it; be adamant if you feel strongly about a specific material or product.

In fixed-price arrangements, "change orders" (where clients change their minds about something midstream), are the bane of contractors. They cost time and money and often lead to finger-pointing about who is to blame for the inevitable delays. Even small changes can be expensive. When a change order crops up, put it in writing as an amendment to the contract that is dated and signed by both parties. The amendment should describe the change and-this is important-how much extra it will cost.