As inspired by the discussion of change orders in the thread "Lowering your price to bid". I don't want to hijack that one with this discussion, nor even stir the pot there, :stirthepot but it got me to thinking... Essentially that part of the discussion there has to do with the fact that some guys will bid the main part of the job ridiculously low, and count on making big profits on the change orders. Really, there's nothing at all new about that. Lots of guy have become rich by doing that in better economic times than these. The angle I'm thinking of though is this--if a contractor is smarter about the job than the engineer; if the contractor has the foresight to identify the shortcomings in the bid documents; foresight that the engineer lacks, and the contractor can tailor his bid accordingly, is it wrong to be rewarded for that? Isn't working "smarter, not harder" supposed to be a good thing? If you're smarter than the engineer.... ? How many customers would you expect to not take advantage of your lack of foresight or simple dumb mistake in a bid? Discuss.
you might be able to do that once or twice...but sooner or later the customer will begin to catch on...and you can expect to not get any more jobs from them in the public sense if you do this and are the lower bidder you will recieve the job, however the state will look at your previous record of jacking up change orders and tell their inspectors to make your job hell just because state jobs have to go to low bidder doesn't mean that the state can't pick favorites like private contractors do....you can tick off a hundred private contractors and maybe be ok...but there is only 1 DOT in any particular state, and if you start to tick them off you had better start looking for work in another state and start fresh with them
First thing is you have to bid low enough to get the job, but I would not count on change orders to make my profit. I think the job should be bid to allow somewhat of a profit margin and then any change orders should be money that is put back for rainy days, like the past year. I read the other thread and I think that is crazy to count on change orders. I also don't mean to hijack this thread but I think when it comes to bids if three companies are within 10 to 15% of each other and someone bids a ridiculously low price that barely covers materials that bid should be thrown out. Just my 2 cents.
True, but there may be dozens of counties, cities, towns and municipal water and sewer authorities.
I personally feel that it is not ethical to bid jobs and bank on change orders. To spin it as out smarting the engineer or good business man is just working the the system. I feel that you need a little of good faith between the customer and the contractor to make it work. If not then you need to hire lawyers on both sides and try and out smart each other in an already complicated contract, which drives the cost up, puts everyone in a how can I get over on the other side mentality. Most jobs have some sort of gray area, and that is where I feel you need to be a stand up kind of guy (or gal) and bid and complete the job in a self respecting way. There are times for change orders, but as far as I'm concerned it is something that is out of the scope of the of the drawings. I feel that is my job to point out any pitfalls or cost savings that I see in the drawings and specs before or contained in my bid. After all the customers is relying on us to be able to complete the job, and be an allie instead of a conniving adversary. Of course this is just my opinion, and no tell others how to run their business.
My experience is as a county employee. The rule is always "low bid gets the job". They spend millions on studies. These architects and engineers are book smart, but never handled a shovel in their lives, so they hire a project manager to look out for the county"s interests (this guys hands are always tied because he comes in after everything has been awarded). The crafty low ballers usually have the most experience and can see out of that small box that the others live in. They build by the final plans knowing full well it needs to be changed. When I come along and start raising questions....the tap dancing begins with the elected officials and everyone they hired. Project on hold. The low baller goes cha ching all the way home. Many, many change orders in government.
dogboneshd where abouts in East Central do you live?...we are bidding a job right now (actually i have it pulled up on the computer as i type this) that might be around you
Pottsville/Schuylkill Haven/Auburn area
x2 Well said. Going in knowing you´re going to fleece the customer in order to make your money is a sleazy practice.
No way is that ethical. Why even give the estimate - knowing you will screw the customer? Not to mention screwing all the companies that bid against you. Saying you will "count on" changeorders implies a knowledge of additional work required that you are not disclosing in the proposal - THAT IS CALLED FRAUD.
Special Tool: so now the contractor has to research the project, despite the specifications, and disclose everything they know about what the project may require, or be guilty of fraud?.. Get a grip!. The courts would be full.
I say bid it as indicated on the RFP. Make notations on quote. Cover all your bases for potential problems. The designers are to blame
FRAUD is a bit harsh. The job starts with the planners. They must get their ducks in a row. As the saying goes. Their failure to plan should not be someone elses emergency.
I think fraud is a too strong a term, perhaps 'playing dumb' is more appropriate in this case. I think everybody plays on a level playing field, if the other companies want to bid real or high and then get the extras on top, then they should get screwed. In a way customers get a better deal because they will have to pay for the changes anyway but get a better deal on the original bid. Lets say the original bid from contractor X was for 10 mill and contractor Z bids 12 mill. Contractor X gets the job and in the end it all adds up to 12.8 mill. Now if 'honest' contractor Z had done the job it would have cost 14.8 mill or perhaps 14 mill if the mark up on the changes where not as high a contractor X has. Who is the winner here?
Hendrick your point is true only if contractor X and Z have the same unit cost for items not covered in the original bid. Lets say Z accounted for the changes and it was included in his bid, then the customers didn't get a good deal. My problem is when other contractors are bidding lower than the cost of materials, to me this is a shady practice because at a minimum the material, labor, fuel, and basic overhead has to be covered. I take a lot of pride in not going over my bid, (Unless the scope of work changes) because when I go over it kills my customers budget, and why would they use me in the future in I can't estimate realistic costs
Interesting post That was good reading on your previous post thanks for the link.
I ain't buying that, man. The way the thread is worded, you are then bidding the job at a deliberate loss! UNLEEEEEEESSS - you encounter changeorders (which you have prior knowledge will exist.....FRAUD). And also - you change the nuance of the thread by saying that we must reasearch - in this instance we will expect EVERYONE to put up a low bid because the specs are not realistic to the project.
Yes but Z would include the changes in his bid documents and the customer would be able to take that into account.
The way I presented the question, in my mind at least, is not that you have "prior knowledge" of anything, but that you have a better insight into what's really involved in the job. If you adjust your prices for individual bid items based on your guess about the quantities involved, as opposed to the engineer's guess, you still have a chance of coming out the loser as well. It's a gamble (which, granted, often times the contractor wins.) Thanks Squizzy. I'd forgotten about that one...
Your post, digger242j... :thumbsup OCR
I think it is common practice in other industries. but don't count on it too heavily, the customer might make you justify why a change cost $X+Y when he knows it should only cost $X. you might consider bidding a job with known changes at expenses, but I wouldn't go lower. its a good way to get burned if you're not careful.
Ethics in Business What are ethics in business? it means providing good value at a fair price. Should you anticipate customer's problems and making a profit on it--that is deceptive and bad judgment. Bid the job fairly, ,with a fair and reasonable profit margin. That is what the customer expects. If you treat the customer fairly and the customer treats you fairly, all will succeed together, and you'll stay in business for a long time.
I worked for a company that bid the improvements for a corps lake, roads, buildings water & sewer.... Their bid was 8 mil... the closest 13 mil.... over 5 mil left on the table... they said they would make it up in the paving.... I don't think they did..they bit the dust a couple years later... I look a different bid awards.... it's amazing the wide range on some jobs... with a low of 1 mil to a high of 2.5 for the same job
There are major differences in working for private customers and working in the public works arena. Private work you need to be up front and establish a good working relationship with your customer. If you see problems, let them know up front. The only way to get repeat customers is by being honest and fair. Otherwise it is a one shot deal. In public works, low bid gets the job, if all the paperwork is in order, period. If you see a potential change coming, it is good business to take advantage of it because you can be sure at least a few of the other bidders will as well. If you do not you will loose work to the ones that do. I conclude it takes 2 completely different mindsets to work private or public jobs.
Knowledge is a tool. using that one should get paid more using his knowledge. We need to find a way for engineers, arketks, and planners to be held responsible for their mistakes. If you know of a short fall in a project and baring it up before the bid you will not receive credit in the form of $$ just ataboys. To get paid for your knowledge/experience you must make it by doing a smarter job and if that includes correcting someone else's mistake then so be it. Example, if I was doing a sewer job and could do it using say 4 less manholes out of 20 and save the city money then I need to ask for a change order and get paid for my knowledge. it would be stupid on my part to provide the city with the information needed to do the job before I got the bid. Otherwise how would I get paid for my experience. another example would be if an engineer estimated a job to use so many tons of material and it shoild have been yds of material then a change order is needed and again knowing that it was going to take 50% more material to finish the job I would be foolish to divulge that in advance of getting the contract. It is not fraud it is capitalizing on what you know. I do feel the engineer should be held responsible but they never are.
That's riiiight..... "Oh, our office is not 100% sure that strict adherance to our plan was executed....." Translation - "my name is Judas"
I agree with Dwan's post above. I also find it interesting that many have commented on bringing the discrepancy to the customers attention will reinforce working relationships and trust. Yet the customer is still putting the work out to bid no matter that you have a stellar reputation for fair play. Looks like the love is only flowing one way... Never underestimate the cheapness of your customer...
Well when i set out on this journey many moons ago I was full of the "do the right thing" and now to look back at my naivety and laugh.I priced work spent hours and days on bids analysing all and every aspect of the tender documents ,then bid according to my interpretations .Well I would have to say I lost more than I got. Then when I engaged the services of a QS and got him to bid a job beside what I had done,and was there some difference.The Qs referred to my bid a what the client would like ,and he bid on what he asked for,lets say that they asked for a proton car but I was giving them a Ferrari and charging them accordingly,hence I wasn't winning any work. His idea was that they supplied the specifications and bill of quantities and if they were wrong,well that's what they wanted and when the job was unable to be done as it was their mistake so we could use charge orders day rates etc to sort it out.A lot of jobs here now are using a design build for certain aspects to help reduce these errors.
I view our particular field of business as an allocation of risks. IMO, we as businessfolk "roll the dice" each time we take on an engagement with an owner. The better informed we can be, the better prepared we are to reduce risks (and thus put or increase cash in our pockets at the end of the day) It is often difficult in bidding public works projects to put in disclaimers/caveats in the bid as many jobs are unit priced with clear specifications. I actually prefer these somewhat over the open-ended "lump sum" jobs where it might be difficult to get an apples to apples comparison with the competition (we bid sidewalk as 5" thick, competition uses 4" ,etc...) If we see a scenario at pre-bid stage which we think will jack up overall unit costs that the competition may have missed, we'll bring it up to ensure that we don't get lowballed on bid day. Let's face it, the owner, like us, doesn't like surprises, and to hear a contractor say "that wasn't included in my scope of work" makes the ears ring......At least the owner can prepare for such angst prior to bid opening. Many times we get the "bid the plans as you see them" response..... If we see an opportunity to execute a particular phase of work in an intelligent , well-thought manner, which the competition may have neglected, we may not bring it up to the engineer (if we're sure it's an approved method) because often all questions posted pre-bid are public record for all contractors to see, thus "showing our hand". Rather, if we are fortunate to be the low bidder, we'll engage in "value engineering" with the owner. We're not good gamblers, so we seek to try to make reasonable profits through mechanisms other than "banking" on change orders. A previous poster mentioned an outfit "making it up on paving" and followed up that the firm was now out of business. is it ethical to count on making your profit on change orders? ethical- i'm unsure..... risky- i'm certain...... ps- I've heard some stories recently through the grapevine that some firms are taking projects at "loss" so as to reduce the amount of cash that must be infused into the company (given a set rate of overhead)........hopefully that won't go on too long.....
i don't think ethics has as thing to do with it. make money on change orders as much as you can, but don't count on them. consider your self lucky, not smart, if you find a job that you can predict a change order at bid time and you the bid schedule is set up that you can crank that item way up. i was on a job that we changed ordered a significant quantity of mainline and for some reason, just luck, at bid time we lowered the price of some other items and cranked up the mainline price. what a lucky break.