Comparing Contractor Proposals

In the previous post, we gave you some information on our process of selecting a general contractor.  This post is about the results of that process.

First, we want to express the very real appreciation we have for the contractors willing to provide us with an estimate.  It takes a lot of work to put these together.  There is risk to the contractor in terms of making an estimating error early on that creates problems for them later and the risk of working on a project you do not know you will be hired for.  We thank them for putting up with our process and your investment in time and experience.

Second, we realize this blog is a bit personal and a little cringe inducing at times.  We're attempting to be transparent as possible because there is community value and interest in that.  We also recognize this remodel is expensive, privileged and gentrifying.  We are trying to save a large, old, decrepit home.  The numbers will be large.  On the other hand, we're working hard to keep them down because we'd like to be able to afford to live in the house when we are done instead of driving by and wondering how the new owners are enjoying it.

The numbers we are showing are the initial estimates.  We've anonymized the data.  The actual project budget will be substantially different.  We are going to need to put some things on the chopping block or defer some work into the future to get the numbers down.

These estimates were only part of the criteria we used to evaluate general contractors.  There was no exact science to it, but our general goal was to weight the selection based on:

50% on how well we worked with them during the estimating process

25% on how flexible they appeared to be

25% on the cost proposal

The reason we didn’t weight pricing higher is because the pricing we were asking for was just a starting point.  We also recognized that it would be hard for us to know exactly how a number was arrived at making price alone a less useful point of comparison.

For instance, one contractor might include framing the deck in a ‘framing’ line item on their estimate while another would include that in a ‘rebuild the deck’ line item.  It would be difficult to then compare two numbers labeled as ‘framing’ not knowing exactly what was in them.

We also had to acknowledge that contractors would be including and excluding different things based on our comments to them about us being open to departing from the specifics in the plans.

Some contractors included things we were planning on contributing to the project ourselves such as plumbing fixtures and appliances so we removed those to 'balance' the estimates.

Here are the numbers:

Category A B C D E
Basement 136,000 114,000 73,042 143,384 159,601
Siding 41,500 37,500 33,630 51,714 88,910
Demo 23,000 22,850 31,447 9,126 59,904
Windows 95,000 80,000 33,276 61,671 52,589
Framing 75,000 65,000 62,540 73,418 267,611
Plaster & Drywall 39,800 39,800 35,400 45,045 42,878
Paint 20,000 18,000 17,110 54,405 66,840
Plumbing 20,750 20,750 14,160 47,011 37,386
Electrical 22,625 22,625 18,290 34,223 55,868
Flooring 32,550 14,500 49,560 71,593 39,726
Deck 33,200 27,800 20,060 49,465 38,338
Gutters 4,500 3,800 3,186 3,744 0
Trim 39,000 24,000 25,960 37,279 68,101
Exterior Doors 12,000 9,000 3,540 0 30,267
Interior Doors 6,300 6,300 0 11,115 33,546
Stairs 5,800 0 0 7,488 37,834
Bathrooms 20,200 10,000 11,505 16,965 68,101
Kitchen 47,150 30,350 35,400 82,485 73,145
HVAC 22,500 13,500 22,538 35,568 57,999
Insulation 15,250 12,000 15,340 9,945 15,007
Carpentry 0 0 0 38,025 0
Drywell & Drainage 5,500 1,500 5,310 4,095 0
Other 0 0 0 17,433 0
Project Mgmt 15,000 15,000 18,386 77,350 96,035
Estimate Remodel 732,625 588,275 529,680 982,545 1,389,686
Contingency 73,263 58,828 52,968 98,255 138,969
Loan Outstanding 545,000 545,000 545,000 545,000 545,000
Total Borrowed 1,350,888 1,192,103 1,127,648 1,625,800 2,073,655
Target Appraised Value $1,688,609 $1,490,128 $1,409,560 $2,032,249 $2,592,068
Monthly Payment 7,960 7,118 6,777 9,417 11,790

Here are some things to know about the numbers:

  • In case it's not obvious, A, B, C, D & E represent the different bids we received from the contractors.  With the exception of column 'E', the order of the columns was the order the bids came in.  Column 'E' is the first bid we received last year in my initial contractor selection disaster.  We wanted to fairly score that bid, retroactively, to see how it stacked up.
  • Each contractor provided a different level of detail and each bid was organized in their own way.  We standardized them for comparison sake by creating the categories you see in the first column and then associating each line item on each contractor bid with one of these categories.
  • They do not all reflect the exact number we received from the contractors.  We removed any cost from our analysis related to plumbing fixtures, electrical fixtures, appliances and roofing.  We did this because these finishings have a lot of variation and it's more dependent on our choices as opposed to contractor pricing.
  • We applied the contractors markup to their numbers.  Most contractors have a markup of 15% to 18% that gets applied to most of the work.  To make for a fair comparison, we added the markup into the appropriate line items so what you see above includes most of their fees.
  • When you see a zero, it's because that line item has already been included in some other line item.  After receiving the bids, we went through them in detail with each contractor to resolve any unanswered questions like this.
  • Some contractors provide specific management services or fees that can vary substantially.  We worked to isolate these on their own Project Management line.  We had to make somewhat arbitrary decisions about what fell into these category.
  • We tried to isolate all costs related to the basement on one line item.  This one line item contains components of other line items.  We avoided counting anything twice, but it's hard to compare the cost of the basement line across contractors because of this.
  • The contingency line is something Umpqua Bank is adding as a mandatory item.  They require a 10% contingency.  Some contractors included this and others didn't.  We balanced this out by adding it to all bids.
  • The estimated mortgage payment is based on $530 per $100,000 borrowed + adding 1/12 of both the estimated property tax and insurance.

Some general observations:

The pricing we received on siding, framing, plaster & drywall, electrical, gutters, insulation, HVAC were all fairly close regardless of the general contractor.  These must be very stable and well understood trades and limited variability on material cost. 

There is a lot of various in plumbing for some unknown reason.

There is a lot of variations in other categories which makes sense based on the wide range of material costs.  Flooring, kitchen, bathrooms are all clear examples of this.

We found that some general contractors specialize in something and whatever that something is came at a higher than average price.  Interestingly, when we were going out as just an individual seeking bids for parts of our project, we found that these bids were sometimes higher than the ones provided by a general contractor.

We also found that some general contractors do a substantial portion of the work themselves and others subcontract everything out.  We didn't see any patterns to this but we did notice that those general contractors that sub everything out have higher management fees.

Some general contractors portray themselves as being "high end".  One thing these have in common is they want to put an on-site foreman who is an employee of the contractor at substantial cost.  The contractors who have their own trades, crews and do work themselves seem to roll this into the cost of doing business as opposed to charge you for this as it's own line item.

But, these conclusions are somewhat meaningless because of the small sample size of 5 bids.

So, who did we select?

We went with contractor 'A'.  This is RMH Bartels Construction.

As you can see it's not the low bid.  It's somewhere in the middle.  We selected RMH Bartels mainly because of the experience we had with them during the review process.

They were the first to delivery a proposal to us.

They asked us to come to their office to meet with them and go over the numbers.

They had clearly read the architects drawings carefully, had identified each departure from the drawings, and demonstrated a deep understanding of how homes get remodeled in their response.

They responded so quickly that we didn't need to push them on the schedule.

After they delivered the bid, we asked for changes which they responded to thoughtfully and thoroughly.

We also paid very close attention to what was said during the process, how it was said and how much listening versus talking occurred.  RMH Bartels scored high on all accounts.  Each of the other contractors had said something that gave us pause.

When stating that we'd like the net project costs to come in at 80% of appraised value, one fo the contracts said...

"let me stop you right there, I can tell you right now that is not going to happen"

That came off a bit arrogant.  The contractor seemed very talented and experienced, but we don't think that you could come to that conclusion until you've done the work and it seems like you are biasing the results by having that attitude going in.

Another contractor said this after we asked for clarifications...

"Before we do that, I just want to know that you are serious..."

This just made things awkward.  Like if we were dating and he was asking us where this was going.  Of course we're serious.  We just walked you through the property, gave you detailed plans and was referred to you by our bank.

We pinged the contractors on their delivery to create a little pressure.  One of them got back to me with:

"as I said, I'll have this to you by ..."

When you talk to somebody like that it's usually because your are a touch annoyed at the question.  We could feel the push back and at this very early stage it made me wonder how that would be when we were deep into business together. 

We also took note of the time it took for contractors to get back to us.  For some it was same hour, regardless of time of day or day of week.  With others it was same day and others two or three days later.

Again, all the contractors, except for 'E', came up with a good proposal, were easy to work with and clearly experts.  It's' a small sample we were working with and lots of things were going on in everybody's lives, so we draw no conclusions about anyone's work from this.  But, it's what we had to go with.

We picked Russ Bartels of RMH Bartels Construction because there was an ease about him, he seemed like he would work with us on our project budget goals, and his pricing was thorough and clear.