The process for procuring a general contractor to work on commercial construction projects can seem like, and indeed be, a daunting task. A variety of factors are at play when trying to find the best fit for your work.
The first step to consider is your chosen procurement method, which we discussed at length in an earlier post. There are pros and cons to each method and determining whether you will negotiate or hard bid the work is a good first step.
If you decide to proceed with a competitive bid process, also known as a hard bid, there are a variety of factors to consider in order to achieve bids that are apples to apples in terms of scope, as well as matching expectations between the contractor and owner.
Today we will dive deeper into this topic. How can you establish and set expectations for a bid so that multiple players provide a price for the same scope of work? How can you verify that this was achieved once the pricing comes in? After all, lowest price doesn’t always mean it’s the best or most complete price for the work you are expecting to have done.
The Problem with Requesting ‘Standard’ Pricing
Contractors are often asked to provide ‘standard’ pricing for what might be considered typical construction, such as building out an office space inside of an existing building. Unfortunately, there really is no such thing as ‘standard’ in construction. Because there is no such standard, the most difficult part of achieving comparable contractor pricing is to establish the exact scope of work that pricing should be based on. While in theory this seems straightforward, in practice it is next to impossible.
Let’s evaluate a relatively simple scope of work than an owner might request, and then see the myriad of questions that might come up based on what is asked:
A landlord asks for contractors to price out a ‘standard’ TI in a building that only has the core and shell constructed. The owner asks for the following:
1. One single-stall non-gendered restroom with sink and standard restroom accessories.
2. Finish the walls with drywall and paint.
3. Install a reception desk.
4. Construct one private office.
5. Install new ceiling grid, standard lights, sprinklers and HVAC.
6. Install standard commercial carpet and a walk-off mat at the entrance.
This scope seems straightforward and not complex, and it’s not complex. However, there are many assumptions made in the above statement that contractors may not interpret in the same way. Let’s look at each scope item and the questions that may follow each one.
One single-stall non-gendered restroom with sink and standard restroom accessories.
Follow up questions:
- How large should the restroom to be? Minimum dimensions for ADA compliance or another dimension?
- What type of sink is preferred? There are several options:
- Wall hung
- Undermount in a plastic laminate countertop
- Porcelain material
- Concrete or an alternate material
- Above counter sink
- Is any storage required in the restroom?
- Is wainscot desired above what is required by code? What type of material is preferred?
- Should the flooring be sheet vinyl, tile or another flooring material?
- Some restroom accessories are required by code, but others are optional. Are any optional restroom accessories desired?
Finish the walls with drywall and paint.
Follow up questions:
- What level of finish is desired for the drywall? Most common is Level 4, but depending on the lighting and finish preferences, a client may want Level 5, or a lower level finish. They may choose texture instead, in which case, the texture has to be defined.
- Should the walls be primer only, or receive a finish coat? Should the finish coat be in flat, eggshell, glossy, or another choice? Should there be any accent walls and in which locations?
Install reception desk.
Follow up questions:
- What size should the desk be?
- What kind of material is desired? There are many options:
- Plastic laminate
- Solid surface such as quartz, Corian, or other
- Should the reception desk be secured in place or movable?
- Does the reception desk need power?
- Is an upper and lower countertop desired?
- What kind of storage is required in the desk?
Construct one office.
Follow up questions:
- What dimensions should the office be?
- Does the office need sound insulation in the walls or ceilings?
- Should there be any relites or sidelights?
- Where is the office to be located inside the space?
- What kind of door, frame and hardware should the office have?
- Does the office require any special lighting?
- Should the office have window blinds installed?
- Are the finishes in the office the same as the other office areas?
- Does the office need power and data? If so, how many locations and where should they be placed on the wall?
Install new ceiling grid, standard lights, sprinklers and HVAC.
Follow up questions:
- What options would you like for the ceiling grid? Some examples include:
- Color of grid
- Ceiling tile style and color
- Size: 2 x 2, or 2 x 4 or others
- Should the grid run over the top of any new walls, or should the walls run up through the grid?
- Lighting comes in a variety of types. There is no standard. Some options might include:
- LED lights
- Strip lights
- Hanging fixtures or pendant lighting
- Track lighting
- Accent lighting
- Are standard sprinkler heads acceptable? Do they need to be rated for high temperatures or have protective cages on each sprinkler head?
- For the mechanical system, there is no ‘standard’ for HVAC. A contractor can interpret ‘standard’ in any number of ways, so it’s best to have a long discussion about requirements and needs for the space.
Install standard commercial carpet and a walk-off mat at the entrance.
Follow up questions:
- Is it preferred to install a glue-down broadloom carpet, stretched carpet over pad, or carpet tile?
- Can a material budget be established? Some examples of material price ranges include:
- Mid-range, fairly standard broadloom: $15.00 – $16.00/square yard
- Low-end carpet tile: $18.50/square yard
- Mid-range, carpet tile: $22.00 – $23.00/square yard
- What kind of floor base is preferred? Some options include:
- Rubber base, either toe base, flat base, or a profile base
- Wood base
- Tile base
- Carpet base
A good general contractor will help to identify the questions that remain. However, this example demonstrates that there really are no ‘standards’ from space to space. If you are hard bidding the work, it’s inevitable that not all contractors will ask the same questions. Therefore, if the answers to the many possible questions aren’t given to the entire group of bidders, it’s easy to receive bids that contain inconsistencies between them.
How to Best Set a Bidding Baseline
The single largest factor in ensuring that bids are comparable between contractors is to distribute a set of design documents that clearly outline the scope of work. Typically, an architect or engineer will be procured to complete the design documents that the contractors can use to determine their pricing. These documents should summarize all of the details that must be considered so that contractors can price the same work. They will outline, among other things, the following:
- Room dimensions
- Framing details
- Ceiling heights
- Specifications for all materials, including exact flooring, paint finishes and colors
- Types and locations for restroom accessories or other miscellaneous fixtures such as coat hooks or handrails
Fully designed drawings are critical for creating comparable quotes between subcontractors. Additionally, these documents are needed not only for helping contractors create bids, but also for submitting to the local jurisdiction for the purpose of achieving a building permit.
Alternatively, there are a couple of other additional ways to achieve a defined scope:
- Hire an owner’s representative to help define the scope of work required.
- Hire a general contractor to provide preconstruction services to help define the scope of work. It is possible to hire a GC for preconstruction services only and then involve multiple bidders when ready.
In addition to basic designs, there are additional investigations that should take place to create complete bid documents, depending on the project type. These might include:
- Geological reports
- Hazardous materials investigations
- Consultations with the local jurisdiction
- Specialty systems designs, such as mechanical, plumbing, electrical and fire sprinkler
- Furniture layouts and connection requirements
- Owner-supplied equipment design and connection requirements
For existing buildings, it may also be wise to complete some selective, investigative demolition work to determine what elements are already present inside the building. These investigations inform the team about constructability issues and how to design the work to accommodate what is found.
Common Issues with Design Documents
While design documents are critical for helping equalize bids, they don’t solve all problems related to communicating the scope accurately to contractors. Just as contractors need the scope to be clear, so do architects and engineers. One common problem that arises is an unwillingness or unawareness of the importance of spending the upfront cost to have an architect fully design the project.
For instance, an owner may choose to have the architect draw just enough detail for permitting purposes, but not enough to define details like carpet type, accent wall locations or electrical elements. In these cases, the contractors will have the same types of questions as we’ve outlined above.
Another common issue that arises is related to using the design-bid-build process where the architect is designing the project without constructability reviews from a general contractor. Optimal construction projects are created when the design team and the building teams are all acting as one team throughout the design phase. Leaving a building contractor out of the process is similar to leaving one leg off of a three-legged stool.
There’s a saying that goes: ‘A penny saved up front is a nickel spent down the road’. We find that this holds true when an owner opts to save money on the design side of the work. Involving your entire team to create clear bid documents is prudent and will lend itself to cost savings at the end of the day.
How to Interpret Submitted Bids
Once the design documents are distributed and an owner collects bids from multiple contractors, it’s important to spend time evaluating the pricing that was received. It’s best to utilize the services of a professional to help with this process, such as an owner’s representative, or your design team members.
Some strategies to help determine whether each contractor has the same scope might include:
- Requesting that pricing be broken down by individual scopes of work, i.e. excavation, landscaping, concrete, etc.
- Identifying rates charged for:
It can also be helpful to have a contractor provide a narrative of what they included or excluded in their price. A reputable contractor will be able to provide this information.
In summary, the work to obtain equal bids isn’t a simple task. In construction, there is no ‘standard’ that can be requested and this fact is a significant downfall of the hard-bid method of contractor procurement.
Project Delivery Types such as design-build, CM/GC or more integrated delivery methods more commonly used in negotiated bid practices involve a general contractor much earlier in the design process. This can help bridge the gaps between design and bidding and ensure that the price received is complete.
If you’re considering a project and need help determining the scope of work, our teams are ready to help you. Visit our website or contact us here.