phase 5: contractor selection

(BIDDING or NEGOTIATION)

This is a separate phase but it typically occurs alongside other phases of the work, especially if the contractor you’re seeking is in high demand. There are typically two means of selecting a contractor – by competitive bidding or by negotiated contract.

BID CONTRACT:

We agree on two (or more) contractors to competitively price the construction documents. This results in a fixed bid price for construction based on the drawings and specifications, what we refer to as the contract documents.  The bidders must be of equal quality because high-end custom builders and production builders will naturally arrive at different numbers and make the process less useful.

Bidding requires a tight set of drawings with no room for confusion or interpretation. Any undefined scope of work is an opportunity for a bidder to make an assumption (which is always based on cost) and that’s an opportunity for a change order during construction. As you might imagine, these detailed coordinated drawings take more time to develop.

With a tight set of drawings, the materials are known quantities (windows, doors, finishes) and the only real differences between bids should be the individual builder’s varying overhead and profit percentages. This number is typically a negotiated percentage.

The bidders will submit their prices and list of subcontractors to you and together we’ll evaluate the bids and award the contract to the contractor of your choice. This does not have to be the low bidder.

(+)

• Validates the cost of construction among a pool of builders

(-)

• Adversarial build process – more change orders, finger pointing

 

• Subcontract quality is subject to the quality of the low bidder (GC’s choice)

 

• Low bidders may feel pressure to compromise quality

 

• Up front drawing/design fees are higher to ensure drawings are complete

 

• Some local Contractors won’t participate in the bid process at all

 

• More time to conduct the bid process and award the contract

 

NEGOTIATED CONTRACT:

Also known as a T&M (time & materials) or Cost-Plus contract, this arrangement bills for the actual cost of the work plus an agreed upon (negotiated) fee. It’s a collaborative process that involves the Contractor in the design process helping to develop and refine pricing along the way. It guarantees them the contract at the end of construction documents phase and builds trust between all parties.

The contract can be structured either with or without a guaranteed maximum price and incentivized in different ways.

(+)

• Collaborative build process

 

• Bigger pool of qualified contractors available to choose from (this is the locally preferred means of construction)

 

• Lower design fees, things can be worked out in the field without change orders.

 

• Develop a working relationship and trust through the design process

 

• Saves the time of the bid process

 

• Flexibility – changes reflect real costs not low bidder making up for his low number

•  

(-)

• Schedule is everything with this structure, without a fixed price ceiling delays can quickly increase the overall cost to build

 

We prefer the negotiated contract because it’s more collaborative and seeks to quantify a competitive cost throughout the process with an engaged builder. Most local contracts are negotiated contracts – some have not-to-exceed maximums and some don’t. With either structure, we’ll assist in negotiating and fine tuning the costs involved and facilitate the signature of the appropriate AIA contract agreement.

Having a good contractor on board will help to price your project fairly and make the construction process much less stressful – even enjoyable. Building consensus, mutual respect and an investment in the project means we’re all working toward the same goal, which inevitably results in a better project for you.