The Rules Of Bidding

There are no “rules of bidding” of course – you’re the client, therefore you can choose how you’d like to engage suitors, but I’d like to take this opportunity to share some thoughts on the construction bidding process that may benefit you in your search for the right homebuilder.

The weakened economy has benefitted those desiring to build a new home in several ways.  Firstly, the abundance of builders from only 3-4 years ago has been thinned as the “wheat has been separated from the chaff” – that is, many builders haven’t survived the times.  The wiser, more reputable builders have remained, and the risk of contracting with someone less qualified for the task has been diminished.  Secondly, the competitive nature of the bidding process has been ignited, as opportunities are fewer, resulting in aggressive proposals and tightened margins.  And thirdly, those builders who once had waiting lists may now be available on a moment’s notice, with reduced workloads leading to more concentration on fewer simultaneous jobs.  But the bidding process is still a delicate one that isn’t to be taken lightly.

In times like these it’s only natural for consumers to take advantage of the competitive market and stretch their dollar to the limits.  We compare prices, quality, warranty and service.  We pit one vendor or shop against another, knowing that someone out there wants the sale worse than the next guy.  But this approach may not always be best when it comes to building a custom home, as this purchase is significantly different than most.  Building a home may likely be one of the largest investments you make in your lifetime – financially and emotionally; it requires a year or two for planning and construction; it requires multiple years of follow through service; and it requires a mutual, trusting relationship – one that will demand much interaction for an extended period of time, before and after construction.

In simple terms there are two basic approaches:  The Team Approach and the Competitive Bid Approach.  The Team Approach consists of an owner, designer/architect, builder and other support members, i.e. engineering consultants, interior designers, and other specialists.  These parties work together as a team from the onset towards the mutual goal of maximizing form, function, finances, creativity, and joy of building a new home.  In contrast, the Competitive Bid Approach separates the builder and his or her support specialists from the initial processes of plan development.  Once design and architecture is complete, multiple builders are identified, each being provided with a complete set of plans and specifications and asked to prepare and submit a proposal by a predetermined deadline.

Favoring the Competitive Bid Approach over the Team Approach may lead to great frustration, and establishing a level playing field among bidders can be extremely difficult.  Plans and specification documents, if well executed, can define angles, thicknesses, materials and allowances, but rarely are they so complete that all competing bidders actually interpret them the same.  Each competing builder will introduce a host of subcontractors and vendors in the process of bid compilation, with each minor (or major) interpretation inconsistency increasing the difference among final proposals.  To be sure, a grey area in the plans or specifications will oftentimes be manipulated by a bidding party to increase the chances of successful bid, rather than bidding per the ideal desire or intent of the owner.  Another common mistake is made when comparing markedly different builders and respective proposals.  Executive support and interaction, supervisory staff, total experience, interior design services, skill levels, capacity, warranty procedures, company goals and values differ tremendously from one builder to the next.  There is no right or wrong of course, but there is most likely a mix that best suits your personal style and temperament.

So if not competitive bids then what?  My preference and recommendation is the Team Approach.  Narrowing down the field of builder candidates can be tough, but I always recommend several things:  a) stay local, b) identify Builders who are working (or have worked frequently) in the vicinity of your lot, c) conduct personal interviews, d) inspect a job(s) currently under construction, e) apply your own personal “gut check” and f) check references, check references, check references.  Stay local because a local builder will likely subcontract with local subs, which increases accountability and the likelihood of improved performance by all.  Identify builders who are building in the vicinity because they’ll spend more time supervising your job, and less time staring at their windshield in cross-county treks.  Conduct personal interviews because it may reveal a characteristic, methodology or business practice that you admire.  Inspect current jobs to see the cleanliness, fit and finish.  And check references because there’s nothing that compares to a well satisfied client.  Check references of current clients, former clients, local contractors, bankers and businesspeople – don’t simply rely on hand-picked references, but do a little digging along the way.

Once you’ve done these things you’re ready to move forward with your first choice as if it’s “theirs to lose” – that is, if the builder invests his time, provides good counsel, treats with respect, makes a thorough presentation and puts his best foot forward then he will most likely earn the actual job of constructing your new home.  This will likely include a site meeting(s) at your lot, multiple design meetings with the designer or architect, Architectural Review Committee meetings, a mid-design estimate, the development of full specifications to accompany the completed plans, and a thorough and final proposal.  One very significant yet intangible benefit of this approach is the opportunity to establish a mutual and trusting relationship well in advance, that is, prior to the execution of a construction contract. With expanded relationships comes increased accountability, the opportunity to communicate, the ability to empathize and the hope for like-minded goals.  The ultimate goal of which is an increased focus on value and satisfaction of investment.  By this time the Builder has a vested interest, and if after months of team effort the proposal doesn’t line up with prior estimates or the relationship simply doesn’t feel right then it would be good and appropriate to seek a second opinion and/or alternate bids.

So ask me and I say build a relationship first, and then build the house.  As a founding member of the Cordillera Ranch Preferred Builder Group I would be happy to visit in person about your needs and can be reached at office 830.249.3646 or robert@rsthornton.com.  Some builders may request a fee or a contractual relationship to proceed with this Team Approach whereas others may not, but if so the terms may be negotiable – after all, it is a highly competitive market.

Robert Thornton
Great Homes L.P.