Time to Rethink the Three-Bid Contractor Rule?

It’s been a standard school of thought for many years that when choosing a builder, three separate bids from three separate home builder should be procured. While under certain circumstances, this system can have its merits, it can also hide some serious issues that may only become apparent to homeowners during the latter stages of the construction process.

We have examined a few of the pitfalls associated with competitive bidding and offer some solutions for homeowners wishing to hire a building contractor for an upcoming project.

While budgeting is usually one of the most important concerns for a homeowner considering a construction project, generally speaking, competitive bidding can be a very unreliable way to assess costs.

Even the most professional of architectural drawings can be open to interpretation. This means, while all of the competing contractors may be bidding from the same plans, they are viewing and interpreting them very differently. If they are aware they are bidding competitively, cutting corners in material choices or omitting unspecified items in the drawings are just two ways they could gain an edge in the form of an initially lower price. Of course eventually the unwitting homeowner will have to pay for these items in the form of change orders or additions to the scope of work, but that will be long after the contractor with the “lowest bid” has won the job.

The homeowner does have the option of supplying the competing contractors with architectural drawings containing exact specifications, finishes and material lists for each and every necessary item. However, it’s likely the associated design costs would far outweigh any possible savings that may be gained from the multiple bid process.

Research shows the three values consumers look for most when hiring a building contractor are trust, quality and safety. Unfortunately, by its very nature, the competitive bidding process encourages contractors to cut corners in all of these areas (at least if they want to have a chance of being awarded the job).

Especially in tough economic times, projects put out for multiple bids are often under priced by one or more of the competing contractors. While a bidding contractor’s eagerness to bend over backwards in order to win the job can seem empowering to a homeowner, once the contract is signed and the reality of the construction process is underway, if the job has been underbid, the contractor’s initial eagerness can quickly turn into frustration, an unwillingness to respond to customer concerns at the most vital stages of the project, a mountain of unforeseen change orders and costs, or all of the above.

So what can a homeowner do to protect themselves while hiring the best man (or woman) for the job?

After you’ve checked that the contractor has a valid license and carries worker’s compensation on employees (you can do that at the Contractors License Board and follow their steps to help ensure you end up confidant and encouraged by your choice.

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