Down to Bid-Ness
In our part of the world, people get contractors to bid on remodeling jobs. The routine usually goes like this: When you decide you want a new master bedroom suite, you get three bids. Then you throw out the high and the low, and go with the middle bid. The rationale is that the low-bid guy will try to cut corners, and the high-bid guy is overcharging.
Of course, there are exceptions. There are some people who always buy cheap. There are others who aren't happy if they don't pay high dollar. Either of these approaches contains its own punishment.
I'm here to tell you: Putting a remodeling job out for bids is not the best way to decide who's going to work on your house. I say hire the best person for the job, then pay the going rate.
I've got all kinds of reasons for thinking this way. First, we're not talking about going into every shoe store in the mall and finding the cheapest pair of Air Jordans. We're talking about your house. Everything you do to your house will affect how much you enjoy living there. Eventually, you (or your heirs) will sell the place, and all the half-ass work will come back to haunt you. I see it all the time: Remodeling jobs where people thought they saved $5,000 end up costing them $20,000 at resale time.
Another reason to avoid the three-bid route: You do not want an underfunded building contractor working on your house. Have you ever wondered why some contractors disappear right in the middle of a remodeling job, for days or weeks at a time? Usually, it's because they've got to go make some quick money on another job-or go broke. (Sometimes, the disappearance is related to all-day drinking, or other illicit activities. But that's a story for another column.)
Some years back, a neighbor of mine hired a handyman. I'm sorry to say, she did it on my recommendation. The next thing I knew, the neighbor had the handyman bidding on building an addition on the back of her house. He was a complete financial illiterate, a man who had never had any relationship with a bank. In his excitement, he bid about one-third as much as he should have, and he got the job. Well, don't you know, he ran out of money before he had the floor framed. So, he started scrambling around coaxing advances out of his other customers, hoping to come back and finish my neighbor's addition. It was a pyramid scheme, and it crashed. The net result was about a half-dozen jobs abandoned half-finished, the handyman jumping on the first Greyhound to Alabama, and a bunch of my neighbors hunting him the way Dr. Richard Kimble hunted the one-armed man.
Homeowners like the three-bid concept because it makes them feel like they're in control. In truth, experienced contractors are wily veterans of the bid game, and they're much better players than the homeowners. Most of the time, the high-bid guy is the one who did his homework. The low-bid and middle-bid contractors are simply angling to get the job started, knowing they'll be able to bump up their profits as the job moves along.
Change orders happen on every job. Contractors know that they can count on homeowners walking up and starting sentences with, "While you're here...." Every time a contractor hears those words, it's money in the bank. There is a story of a recent job in which a bid of $220,000-the high bid-was rejected. The guy who got the job bid $150,000. But when all the dust settled, the final bill came to $320,000.
This kind of thing happens because people seldom fire a contractor after the job is underway. When the job is half to two-thirds done, and the budget's blown, homeowners don't fire the contractor. They just bitch and moan and go back to the bank.
So, if the trusty old three-bid method isn't the way to go, what is? Open-ended cost plus. Some years back, when my wife Brenda and I were salvaging our half-wrecked house, we paid for the big work on a cost-plus basis, which is just what it sounds like: the cost of materials and labor plus a percentage to the contractor to cover overhead and profit.
There is one thing about cost-plus, though: You've got to trust the contractor. Unless you're a hyper-controlling, ankle-biting sort of person, and you'd actually welcome the opportunity to challenge every invoice line by line, you're going to have to take some items on faith. This is just fine with me, because I wouldn't hire anybody I didn't trust. Of course, I am just a little bit cynical, so I would give the invoices a quick review.
Final warning on dealing with contractors: Never let 'em get ahead of you. Don't pay for any work that's not finished. And never, ever, give advances.