This discussion came about in Oldtankers thread about pricing out a building. It's a discussion worth it's own thread and I would like to get others comments on both types of project delivery and your comments/experiences on the different ways one prices projects. To kick it off, here is my post from the other thread -
We do both of those kinds of work and I would like to add one more. Now I'm not sure what you would call it but we do work for a major home builder in our area. They tell you how much they pay for each service you provide. In this kind of work the pay is not as high per job but there is a lot of work to be done. Basically you may only get 1200 to dig a house but you can dig 3 or 4 a week Pluse utilities.
Buckfever, I can see how that could be easier to secure work but my initial reaction is that if a GC is offering that kind of contract to subcontractors there must be an awful lot of competition for it in your market. IE, a lot of guys that do the same thing you do. I know that where I work that kind of offer wouldn't fly because as soon as a sub you wanted told you he wouldn't do it for that price, you'd be thisclose to doing it yourself. haha there isn't enough subs around here to solicit work that way. But I can see easily that it would work in a bigger market.
AustinM It's a very good way to make a living when your a small company around here. A one or two man crew with a couple pieces of equipment can work all year long. Pluse the fact that they cut checks every two weeks and only hold your bills for thirty days makes it nice for smaller companies that don't have a lot of capital to work from.
I completely agree buckfever. I work for a medium sized company (50-100 employees depending on the season) and sometimes I think it would be so much simpler to be a 1-2 man operation and do similar work to what you describe. Yeah you carry more risk, but you also control more of your own destiny and if it doesn't work out for whatever reason you could always go get a job with a bigger outfit.
I agree Buckfever and it sounds like you have a good thing. Getting paid every two weeks is huge. I am on 45-60 day pay with 10% retainage but the margins are higher and should be because they are using my money to finance the project. I am just a two man crew as well, me and another operator. Our projects are small retail/fast food jobs. I like these size jobs and we self perform the erosion control, demo (if any), storm drainage and grading. We usually pick up extra work from the GC and other subs who need ditches dug or rock spread. These jobs are all hard bid and competitive, however the same GC's bid and build these projects over and over again. Once on their bid list they send you any projects in your area they are bidding on. With the current state of the economy, it has worked well considering the circumstances that up until recently there hasn't been much residential work going on, however that is changing. A real estate developer that I have known for years contacted me a few weeks ago about several residential projects he is currently looking at to develop. The housing market has picked up in our area and the developed lots left over from the housing crash back in '08 have slowly been used up. This work will be totally negotiated, which is something I have been trying to get back too. One has to build value in your services in order to gain a steady stream of negotiated work. The value I like to bring to the table is the pre-construction phase of the project - creating budgets/estimates and value engineering. This time is not billable per se but can go a long way in creating relationships and thus a steady stream of work. Instead of me spending many hours estimating jobs I don't get, I would rather spend the time helping a client get the most bang for their buck on the project they are considering. Time will tell. I have bids out on a few projects, some hard bid and others negotiated.
I do both... and have had contact with a residential developer and a waste water treatment authority using the same tactics as buckfever mentioned. So far, I am simply unwilling to work on a price dictated basis. My experience has been that there are often far too many variables in the site phase of a project for the dictator to accurately assess a fair price at which point things tend to go sideways. I can also see how it would be a great arrangement if each site was a slab lot, and the majority of the variables had been addressed in the infrastructure development process (IE mass graded slab lots during the grading of the roads ect) in the sewer business there's simply no way it works, and the entity I spoke of above has been slowly and painfully learning that as the contractors continue to tell them where to shove their price schedule. I pretty much ditto everything you have said CM1995... we have been slammed for the last month on the residential side, and it's piling up more every day. It's just really hard to imagine wanting to grow my business beyond our 3-4 man show after the terror of the last 5 years...
Amen on that! I'm nervous as a whore in church about taking on too much debt and too many employees after going through the collapse of 2008.