The process of bidding and negotiating with contractors is an important part of the construction process and is critical to the success of executing the work and building the house you have designed for your client. Although it can seem like a mere administrative step in getting the project underway, it actually has an important role in first defining the cost of the project and then establishing how the contractors understand the project before they begin to build it. This activity often determines whether the project is a success as it bears directly on cost and ultimately on the quality of the project’s execution. It is important to understand the direct relationship between the way a project is priced, leading to the selection of a contractor, and the context in which the contract for construction will be created.
Bidding and construction of a carefully designed and well-detailed house take a considerable amount of time and require the patience of your client to be completed properly. How much time is dependent on the size, scope, and complexity of the project, but even under optimum circumstances and with a fairly straightforward design, it is a potentially lengthy process when undertaken correctly. With the pricing of the project starting after what your clients may perceive (with some justification) as a protracted design process, the clients are usually beginning to become anxious for the project to move from a conceptual state to a realized form, and knowing how much it is going to cost becomes a major preoccupation in their lives and for their relationship with you. The architect must balance the clients’ motivation for expediency, the need to know a number, while keeping control of the pricing process which is critical to the ultimate success of the construction effort. In this chapter we present the project’s bidding for construction as a process, one that the architect has a significant role in facilitating for the project to be built in a correct and timely manner. In this phase of the project, you and the owner take the idea of the house that you have been creating and documenting together and hand it over to a contractor to price, subject to all the human foibles of any activity involving a lot of people.
On the bidding side, you and your clients have to be prepared to provide the contractor or contractors with adequate time to thoroughly understand the project and coordinate their pricing efforts. To make this possible, you have to provide the contractor with all the information necessary to make a complete bid. Finally when you have the bid in hand, you have to allow yourself enough time to review it carefully for completeness and to resolve any ambiguities, before reviewing it with your clients.
Once potential clients indicate they want to work with you, most architects immediately begin the process of getting an agreement for services or a contract in place. This is natural considering your need to begin invoicing for your professional time spent with the client as quickly as possible; after all, as professionals that’s what we do, sell time for payment. Recently I began to spend a considerable amount of time working with my residential clients on the front end of my relationship with them, before I even had a contract in place. I use this period of initially consulting with them as a time for setting expectations before we have even started design, by taking time to define the project in verbal terms, not drawings, as a way to understand expectations for the size of the project, materials, and finishes. Further, we augment our assumptions with discussion of pricing and budgets, usually bringing in one or more contractors to talk conceptually about pricing and having them create outline costs based on their previous experience. Putting those numbers out into discussion has proved to be a solid way to verify the clients’ comfort with the cost of the project before we ever begin to design it. It takes a lot of time to do this right, sometimes even several weeks, but it allows you to have “expert input” from construction professionals to give the client an idea of what to expect the project to cost. In my experience when I do this at the beginning, before I have a contract and before I’ve started to design, I have been able to begin the design process without the distraction of not really knowing how much the house will cost. This is particularly true of remodels and additions. Creating a relationship in this way indicates your willingness to put the clients first and is a way to develop trust and goodwill before they begin to actually evaluate your design efforts.
This approach does not make sense in any strictly business evaluation. You are using your expertise to define the project for potential clients who are then free to be disappointed with the results and abandon the project, even to go find someone else to work with. I am also aware that this runs counter to the recommended guidelines of the American Institute of Architects and the idea of providing services without compensation. But from my experience, if I spend a fair amount of time up front defining the project and getting a complete understanding of the potential cost before I start, I am more likely to get a meaningful contract signed by the owners and not have any disappointment or misunderstanding when the completed design is priced. It does entail providing what may be characterized by some as free work, and there is a risk you won’t get the job. But it also means when you do get the project, you and the clients are both sharing assumptions, which can then be used as the basis for your contract. In a practical sense, moving forward in the same direction as your clients is good when designing a house for someone who is paying you to do it.
One way to justify this effort at “soft bidding” the project in a professional sense is by pointing out examples of other project types and how you traditionally go about getting the work. If your firm regularly works on architectural projects other than houses, you will know that to compete for a commercial or institutional project often involves spending long hours generating responses to an RFP (Request for Proposal) or RFQ (Request for Qualifications). Once these are submitted, interviews and presentations are used as follow up to further qualify your firm and the team you have assembled for a project. I liken the time I spend determining a budget for the house on the front end of a residential project as much the same thing, the same use of time making the clients comfortable with our capabilities. Being aware there is no guarantee we will get the job does not excuse us from making the effort or spending the time trying to fully understand it. For me it is simply part of the cost of going after the project.
If during this soft bidding process the initial numbers provided by the contractors for the project come in over the clients’ expectations for the budget (which they always do), you have to have time to help them understand why, realize the ramifications of value engineering, and help guide them to a budget that they can live with and feel comfortable with before you begin design work. This is a good time to revise the scope of work to bring it more in line with their expectations, rather than after you have completed a set of drawings and they have paid you a significant amount in fees. Again it is an opportunity to provide value and build trust.
I have a consistent history of projects that, when priced, come in over budget, making everyone unhappy and uncomfortable when they do. No amount of careful planning or candid disclosure of your thoughts regarding the cost can prepare the clients for a project that has a price they cannot afford. Even taking reasonable precautions up front doesn’t fully insulate you from pricing overruns and changes in the cost of construction materials, but it can help your clients understand that you worked together to define the budget and had reasonable expectations it was accurate. For our projects with modest budgets I always try to design within what are typical or reasonable expectations for the materials and quality of the project. Even so, I still have problems with budgets. In part this is the nature of my practice, trying to do the maximum possible with every design opportunity, but also it is so because I just don’t have the opportunity to be fully aware of what is driving construction costs at any time.
By spending time up front I am able to define the job in a budget and programmatic sense, but far more important, I develop a working relationship with the potential clients. My experience has been that every client is different and her or his way of interacting with me varies. Some clients are comfortable with professional service relationships; they have worked extensively with lawyers or accountants and understand the idea of fees for service. Others do not. They don’t see the work we do as a service in support of a process, but more as a commodity, as in the set of plans for building the house being an end result with a price value on it. This initial soft bidding effort and the services that accompany it provide the clients with the opportunity and time to get to know me, what I can do for them, my knowledge, and how I work in a professional relationship. Likewise, it allows me to understand how well the clients can articulate their needs, whether they can understand or read drawings, and whether they have a realistic sense of what things cost, not least of all the fees we are about to charge them. Finally it provides me with a snapshot of what it will be like to work with them and how I will need to prepare for meetings and presentations. It is always time well spent.
If after our efforts on the front end we don’t get the project, we are parting with a relationship intact, due to reasonable financial expectations we can’t meet with our design for what the client can afford to spend, not because I’ve spent a lot of time and their money and disappointed them. They will remember the experience positively and therefore will remain a potential source of referrals.
Bidding the project refers to pricing the project. The word bid refers to the sum for which contractors, based on detailed estimates they have prepared, are willing to construct a building project. The scope of work of the bid can be an item as small as painting a room or as large as the construction of an entire house. Usually the word bid is associated with competitive pricing where all the bidding contractors begin with the same assumptions and based on their experience and purchasing power provide the best possible price to build the project. Even though the idea of bidding something seems to be commonly understood by many people who don’t work in the construction industry, in a practical sense very few people have experience with the bid process in their daily lives and they don’t really understand its ramifications, particularly as they pertain to the construction of a house.
The lack of experience of most people in actually bidding something is understandable. For most of us, bidding is not involved in many daily purchases. In our society we shop in retail stores where prices are clearly marked, and we make a choice based on our evaluation and need to buy it. Consumers who use professional services similar to those offered by architects (fee for services that are not a tangible product) incur fees associated with the work to be done before they begin to utilize these services. You may get multiple price quotes for a major car repair, but these prices are usually based on a preset fee for the work to be done that is related to the time and the parts required, so it is not a truly competitive bid. In activities associated with the building, construction, or remodeling of things, many people see the advantage of obtaining multiple competitive bids. For example, if you have your house repainted, often you will solicit multiple price quotes and compare them to select what you consider to be the best value. This is also true of landscaping, building fences, replacing heating and air-conditioning equipment, and roofing. Many clients of architects will expect to have the construction work you are designing for them competitively bid. Indeed, many will think that is the industry standard, and this assumption, like many you will address in the design and building of a house, requires you to address it carefully.
I prefer to use the term pricing in lieu of the term bidding a project. It is more consistent with the way the costs for residential projects are created and suggests a more hybrid approach to determining the costs for building a house. I will use the term bidding in this chapter when specifically discussing a competitive bid process among multiple contractors. I will use the term pricing to discuss the other possible ways to develop a cost for a project.
When you are determining the whole cost for a project, pricing (as opposed to bidding) also allows the inclusion of parts of the project that you don’t expect the general contractors to provide as a part of their scope of work. For example, when we are developing budgets for projects, we like to include in the cost items such as our fees and those of our consultants, landscaping, audiovisual systems and equipment, custom items such as rugs or lighting fixtures that may be purchased directly by the owner and not through the contractors. This suggests that the contractors’ price is not the whole price of the project but a component (perhaps the largest, but still just a part) of the overall project price.
The goal you should have for pricing a project, by bidding or negotiation, is to obtain for your clients the lowest qualified price. By qualified I am suggesting this price may not be the lowest bid, or the one with the shortest schedule for construction, but it should be the most complete and comprehensive and a price that reflects a full and complete understanding of the scope of work associated with building the project. On many occasions I have had wonderful experiences working with the lowest bidder on a project. Other times I have experienced firsthand why the bid was the lowest and have tried to successfully administrate the construction of a project with contractors who spend much of their time trying to overcome an incomplete bid. This is the ultimate nightmare scenario in the construction of a house, and the only way to avoid it is to judiciously and carefully qualify the pricing for the project and remember the old adage, “If it looks too good to be true, it probably is.”
The process of bidding (or pricing) the project is complex, and it is important you administer the services associated with this part of the project in an orderly and consistent manner. Too often the temptation will exist to issue the bid documents in an incomplete form or without detailed instructions as to the expectations you have for the format and content of the bids. The result will be incomplete and usually erroneous pricing.
We frequently have projects where the owners will want to price the project to get an idea of where the cost numbers will fall before we have completed our documents. Despite sharing with the clients the dangers or possible problems of this process, they will (again justifiably) encourage us to obtain a ballpark price. It has been my experience that every time we do this, the number produced through this process, for better or worse, becomes the number the client will associate as the cost of the project, no matter how incomplete or how many assumptions are made in its development. In effect, you are asking contractors to price an incomplete project, and you can be sure the final number will change as you complete your documents.
To properly bid or negotiate a price for a residential project, the architect will have to issue more than just drawings. Many residential architects have resorted to streamlining documentation for houses to the minimum required to price, permit, and construct the project; and for many architects this has proved an acceptable business practice. Often this is a reflection of the realities of an inadequate fee to accomplish the work fully, but for residential architecture to be practiced at its highest level of professionalism, thorough documentation consistent with the project, its scope, and scale is necessary. The small numbers of drawings that are typically used by the home-building industry to permit and construct a new home to some extent have been accepted as a standard level of documentation for residential projects. To provide a meaningful level of service that is representative of your design efforts, working with your clients requires a greater level of documentation than the housing industry’s norms unless you are dependent on or expecting the contractors to generate all the details of construction.
As the architect, you will determine the materials that will be issued to the contractors to bid or negotiate the project. Unless the owner has an exceptional role in this part of the process, you will provide the drawings, specifications, and Instructions to Bidders required for them to properly price the job. I can provide guidelines based on my professional experience, but only you will fully understand your design and its myriad subtleties well enough to communicate them properly. In addition to the materials listed below, it is good to step back and look at your design with the eyes of someone who did not develop it over time and for whom it is not a resolved “whole” composition in his or her mind. Try to think about the nuances of the design, the key elements and details you expect the house to express when it is built; and with this in mind, look carefully at your drawings. Does the intent come through clearly with the materials you are providing? Can reasonably informed persons fully understand your intent from the things you are giving them to price (and ultimately to build from)? If the answer to these questions is in any way ambiguous, or an outright no, then you need to provide more in the way of drawings, details, specifications, or instructions.
We all wrestle with how much documentation is enough, especially when we don’t have what we perceive as an adequate fee to fully document the project. I suggest it is we who don’t perceive we have an adequate fee because my experience has been our clients will always feel like the fee is more than they want to pay. Our clients will not know if the documentation is adequate; they will expect that your drawings and specifications to be professionally adequate to price and build the project. To answer these questions for ourselves in a satisfactory manner requires three possible paths for consideration.
First, did you design a project that was consistent with the budget and fees given to you to provide the professional services? For many of us there is a tendency to make the most of every design opportunity and to extract the most from the project in a spatial and artistic sense. In doing this, even if it is consistent with the budget expectations for the project, you may be creating additional work for yourself in terms of documentation and detailing in order for the contractors to fully understand and price the project. If you have clients who are allowing you to do this level of exploration for their project, then it is reasonable that they should provide you with the necessary compensation to document it properly. If not, then you have to evaluate the work to be done and make a decision to go beyond what is suggested by the fees to help resolve any ambiguities.
Second, you can look at your pricing materials and evaluate whether the amount of documentation will leave large gaps in the thorough explanation of the project that will require you to have significant additional input in helping the contractor understand your intent during construction. In other words, is it better to put it all down on paper in advance or to do it as the job is built? My experience has been that ambiguity leads to inadequate pricing efforts, and that during construction if the contractors feel they did not have the information to price something thoroughly, they may ask for a change order which could put you in the position of explaining the ambiguity to your clients and their incurring additional costs. Depending on your contract and the way fees are allocated for the construction administration process, you may also have to provide a great deal of unintended service just to fill in blanks in the materials the contractors are building from. It is good to remember that if you care about the outcome of the way the project is constructed, you will have to fully explain your intent, and doing it in the field under the pressure of a construction schedule and budget can be difficult and painful. If your construction administration fees are a part of your overall budget and you have gaps in your documentation, you will be using a greater percentage of the fees providing answers that might better have been documented during the construction documents phase of your work. If your fees are hourly and you have the ability to invoice for all your time spent once the construction starts, it still puts you in the moral position of evaluating whether the work you are billing your clients for is fair or should have been completed during a different phase of the work. Either way the result is the same: you will be using your time and your professional fees to provide answers to questions that arise because of inadequate documentation in other phases of the project.
Third, no matter what our fees would prudently allow us to do in terms of documentation, we need to evaluate whether we have adequate materials to properly price a project. If we don’t, we must resolve to answer the question, Do we feel a professional obligation to provide it for the success of the project? By using success in this context I am talking about the complete execution of the house we have created with our clients in a way that fully realizes the design intent and spatial qualities of the project. This is no less than our professional duty as architects when we agree to design a project for a fee for our clients, no matter how unreasonable we may feel the amount of money is. Do we see opportunities within the project and our professional obligations that require us to go beyond our fees? It is a straightforward question to ask: are other considerations in place that require us to provide additional materials to properly price the project? The answer to this question can help you to determine what materials need to be created to properly price the project.
The typical materials used for bidding and pricing a project are Instructions to Bidders, drawings, and specifications. These are time-honored materials that document the project being priced; they are industry standards in the United States and generally the minimum expected by contractors pricing the work. Each of these is created in a different way and has a different role in the pricing and construction process. It is not unusual for one or more of the three items listed above, usually the specifications and Instructions to Bidders, to be omitted in a typical residential project, but doing so can lead to problems elsewhere in the project. Below is a description and discussion of each of these items and their role in the pricing process.
Provided when you issue the drawings and other materials for pricing, the Instructions to Bidders contain much of the critical information related to the bidding process. The information in the instructions includes information regarding when the bid is due; the date, time, and place; and how the bid is to be delivered. The Instructions to Bidders will contain information such as whether the bid can be e-mailed or faxed or if a hard copy is required.
Instructions to bidders usually include the format in which you expect the bid to be provided. This could include a sample form (if necessary) for the contractor to fill out and what items you would expect to see broken out individually in the price and in what categories. For comparison reasons, sometimes you will break the project bid form into categories using the Construction Specifications Institute (CSI) format, and this format is covered in detail below. On some occasions you may want only certain categories broken out of the price so that you and your clients can fully understand the ramifications of certain design decisions. When you are evaluating a price, it is helpful to know what parts of the project (which design decisions) are the highest in cost to execute and what parts of the project demand the highest utilization of resources. Having certain items broken out by cost can help with these types of evaluations.
It is also important to indicate how you want the price to be stated in a written format when the bid or price is submitted. For example, do you and your clients want a lump sum including all the work adding up to one number, or do you want it in parts or scopes of work? We often ask for the work associated with the construction of the house to be one price, another for the contractors’ general conditions and profit, and finally a breakout of the hardscape (walks, drives, and swimming pool). With these numbers you can then add other parts of the cost of the house (as outlined above) not necessarily to be provided by the contractors and come up with a total price for the project.
If there are alternates to be priced during the pricing/bidding process, we identify them in the Instructions to Bidders. Alternates can be for added prices or for deductions, commonly described as add or deduct alternates. It is helpful to provide as full a description as possible for these alternate items for the contractors to price them completely. An example of a deduct alternate would be the cost savings of going to an all-stucco exterior finish in lieu of an all-stone exterior finish. The projected savings of the materials and labor would be the basis for the deduct alternate. An example of an add alternate would be going to hardwood wood flooring instead of carpet as a finished floor material in all or a part of the house. We itemize these add and deduct alternates in our Instructions to Bidders, number them, and ask to have them included in the bid form, listed by number.
For remodel projects or projects with remote locations, the contractors will want to visit the site, often multiple times with different subcontractors and trades, and will need to know whom to speak with to obtain access to the site. We provide this contact information and any guidelines controlling access in the Instructions to Bidders.
Finally we use this document to identify the person at our office to call with questions, clarifications or coordination items that arise during the bidding/pricing process. We clearly state who will be responding to any questions, how that person will be keeping track of the questions asked, and how we will transmit any clarifications, discovered errors, or inconsistencies to the other bidders. By having this role served by one person from your staff, clearly identified in your Instructions to Bidders, you make sure that there is a consistent message given to everyone calling with questions. With commercial and institutional projects we often try to limit the people contacting our office to the general contractors and their direct staff, to limit the calls and possible incomplete or conflicting answers. For residential projects we usually allow anyone who is pricing the project to call our office. Our experience has been subcontractors who are pricing specific areas of the work often identify questions that are important to the overall design, and we like to hear and understand them firsthand. Residential projects usually have a limited number of contractors, subcontractors, and suppliers pricing the work, and these calls do not usually prove to be an undue burden on our time.
In an earlier chapter we discussed how to determine what drawings need to be done as part of the set to fully document the house for design and construction. With these drawings now completed with the specific purpose of describing the scope of work for the contractors to price, you will issue them as a tool to achieve an accurate understanding of the house to be built.
It is important to consider that the drawings you have made illustrate the scope of work of the project, what your expectations are for its components, not how to build it. As tools in the design process for you to use in communicating your design intent to your clients, the drawings were primarily for the communication of spatial layout and design intent. Now during pricing they will literally be used by the contractors with their subcontractors and suppliers to identify the materials and quantities required to be used in building the house. After pricing when the project moves forward into construction, the drawings will be used to provide layout and dimensional tools for the contractors to actually build the house, but again not how to do the work itself.
The accuracy of the drawings at this stage in the construction process is important primarily because they are used as tools to determine the components of the house and to estimate how much material and labor will be needed to build it. Further they will have the purpose of identifying where materials and finishes will be used and your expectations for details. When used in pricing, the drawings do not have to convey each of these things precisely and often contain coordination errors which could be serious during actual construction; but they do need to fully and completely illustrate the work to be done for accurate and complete pricing. The contractors and their subcontractors and suppliers will use the drawings for quantity surveys or takeoffs. For building and construction materials, creating these estimates are literal exercises in determining the amount of each item used in the construction of the house. Used in this context, the term takeoff refers to someone (usually the contractor or an estimator) “taking” the dimensions “off” the drawings and then doing simple geometry calculations to obtain square footages of the specified materials to be used. These areas are then multiplied by the unit cost of the materials (usually on a square foot or linear foot basis) to obtain a cost for the materials. Similar formulas are used for calculating the labor required to install or fabricate the different parts of the project. To do this work, the person doing the estimate will usually rely on the scale drawings and not on the dimensions themselves.
When building the house, the contractors will fabricate on-site, or cause to be built, certain elements that will be made up as unique products of labor and materials specific to the site. These elements are things such as the foundation, concrete work, paving and walks, framing (wood or steel or a combination), the plumbing and electrical system of the house, masonry work, gypsum board and plaster finishes, and roofing. Parts, products, and pieces are assembled into definable parts of the house. These all require assembly of various raw materials to make a complete construction.
The drawings also indicate the items that are part of the house and have to be priced individually from specific manufacturers or suppliers, as opposed to items the contractors will fabricate. Often these are called buyout items, because the contractors or their subcontractors “buy” them from suppliers and vendors. A partial listing of some of these items includes windows, doors, appliances, architectural woodwork, lighting fixtures, and air-conditioning and heating units. The drawings you have made will indicate the number and sizes of these items, and the physical counting of these is an important part of the estimating process.
Another role the drawings play in the pricing of the house is that they help to define the limits of the construction and the access and boundaries of the site. The site plan will indicate other structures that will be present on the site, driveways or curb cuts and setbacks or major site features that cannot be violated. It can materially affect the price of the project if the site has limited access or is too small to easily stage deliveries of materials or if parking for workers is limited. This may require more frequent deliveries of materials or staging of concrete pours or other activities. If there are trees that are to be protected during construction, these may create access problems. All these considerations factor into the price of the house, particularly into the schedule and general conditions.
If the drawings illustrate scope and quantity of what is to be built, the specifications answer the question of what you are building. The specifications are the detailed directions, instructions, standards, and expectations you have for the project. Used properly, they work in tandem with the drawings to guide contractors as to what the components and assemblies of the building are and what standards for construction you have for them.
Usually these are bound in the form of a book or manual and are divided into sections using an industry standard set of guidelines for categorizing their contents. At a minimum you can provide two sets, but some contractors will want more to provide to their major subcontractors. If you provide two full sets and the contractor requests additional copies, it is reasonable to request the contractor to pay for these.
The most frequently used industry standard for organizing the specifications is the one defined by the Construction Specifications Institute (CSI). It breaks the categories of construction into areas or scopes of work based on roughly organized but inclusive categories of materials and labor. Each of these categories is given a numerical designation, and then the specifications are organized within these. Further breakdowns are included under each category number, and these can go down with increasing levels of detail to the individual components or assemblies of every part and piece of a project.
These are general categories and are grouped together for usually obvious reasons. An example of this system would be Division Six which is wood. Included in this division (among other things) are framing, framing materials, framing labor, cabinets and millwork, wood flooring, wood trim, and trim labor. Depending on the design of the house, some of this work would be completed by the same subcontractors, but not all of it. The subcontractor that provides the framing would not typically do millwork or the finished wood floors.
Specifications are often omitted from the materials provided for pricing and construction of single-family houses. Many architects see this level of detail as unnecessary in the documentation for a house. I have actually had residential contractors tell me they never look at the specifications in books and would prefer that I include the specifications in the drawings themselves. To some extent this is possible, and for certain types of residential projects this is practical and makes sense, but not for all. The information still needs to be provided, but in the design of houses there is a trend to use specifications to indicate a material or product to be used and for the subcontractor or supplier to provide the details and methods of its installation.
I have noted elsewhere in this book that some of our residential projects are really like small commercial or institutional projects, often with budgets of several million dollars. These same projects use exotic and expensive materials, assemblies, and equipment, none of which are in common use in many houses and are often unfamiliar to the subcontractors and suppliers who will be buying and installing them. In many cases the conditions outlined and required in the specifications are what qualify the subcontractors for the work to be done. It is the conditions for the work that are stated in the specifications and the contractual obligations they expressly imply that make some subcontractors decide the project is not appropriate for them to price, let alone build.
With many of our projects, we and the owners identify certain trades or work scopes that the owners will be providing directly to the project. Often these are subcontractors or suppliers selected for their special skills or expertise in an area of the project important to the owners or for some aspect of the design of the house. We try to limit these selections to key parts of the project as our role in the administration of these subcontractors becomes more critical and there is not always a corresponding increase in our overall compensation for the work that comes with selecting and coordinating them. Specific examples of areas where we feel this kind of preselection is logical include architectural woodwork, ornamental and custom metalwork, specialty finishes (faux finishes, marbling, Venetian plaster), mosaic or inlaid marble, and stone flooring. If we are using contractors with whom we have experience, or whom we have prequalified and whose work we have seen, then other trades capable of doing the work should be selected and qualified by the contractors as a part of their scope of work.
In our practice it is not uncommon for the millwork, kitchen cabinets, and other architectural woodwork to be purchased directly by the owners. This is also true of items such as appliances, decorative lighting fixtures, landscaping, swimming pools, security or AV systems, and specialty finishes (faux finishes, Venetian plaster). We indicate in the Instructions to Bidders, the drawings, and the specifications what these items are and what our expectations are for the contractor regarding this work.
Predetermined subcontractors, suppliers, and vendors need to be identified in one of two ways to the contractors so they will know to include these items in their price. In the first case, it is your clients’ intent that they be identified as subcontractors whom the contractors must utilize in the construction of the project, but they will work for the contractors directly. Simply put, the owner will select specific subcontractors or suppliers for the contractor to use, and the contractor will obtain pricing and include the work of these subcontractors in their contract and as a part of their scope of work. In this case you are specifically identifying the resource—the subcontractors or suppliers—and instructing the contractors to include them in their price to build the project. It will be their responsibility to contract with the subcontractors, to pay them according to the contract terms they agree to with the owner, and to coordinate and warrant the work when it is installed. For the contractors this requires understanding the scope of work fully and including any items not provided by the predetermined subcontractors or suppliers in their bid to do the project.
In the second case, the owners provide the work of these subcontractors and vendors at the owner’s cost, under an agreement executed directly with the subcontractors and suppliers. In other words, the subcontractors or suppliers will work directly for the owner. The contractors will need to understand this type of agreement fully so they know not to price this work scope on their own. Additionally contractors will need to provide funds in their pricing to pay for their time to schedule and coordinate these subcontractors and suppliers when they are doing their work on the jobsite. Finally contractors will again need to know what work associated with the scope the subcontractors will not be doing so that the contractors can provide for the cost in other areas of their price. For example, if the owners select and intend to pay for a subcontractor to do faux finishes on walls within the house, the contractors will need to know to what level of preparation the walls are to be completed. Will the subcontractors require a smooth surface already taped and bedded, or will they want to do this work themselves? Will sizing or a primer coat of paint be required before they do their work? Will protection need to be put in place by the contractors for other adjacent work near the areas to receive the special finish so they are protected? The work the subcontractors are not planning to do will need to be provided by the contractors, and so a thorough explanation of the scope is necessary.
In both cases it is necessary that the contractor be able to communicate directly with the predetermined subcontractors and suppliers to fully understand their expectations for the project and what the subcontractors are agreeing to do. Reviewing the scope of work directly with subcontractors and suppliers is a form of due diligence for the contractors and helps to avoid possible misunderstandings later. If the contractors do not have this opportunity to understand the scope of work directly from the subcontractors or suppliers, conflicts or areas that are not covered in the bid/pricing may arise that in good faith could not have been foreseen by either party. Unfortunately these conflicts will not be identified until the work is ready to be installed, possibly during actual construction.
We find that providing the contractor with a copy of the soils report is useful, even if our structural engineer has incorporated the recommendations into his or her foundation design and specifications. The soils report includes information that can be helpful to the contractor in understanding why the structural engineer has selected the foundation type and why it is detailed the way it is. This is also helpful to combat the unpleasant contractor tendency to find the structural engineer’s foundation design “overengineered.”
Depending on the part of the country where you are building, the soils report also provides useful information for the contractor for parts of the project beyond the foundation of the house. It will contain recommendations for site paving and the attendant soil preparation. It is a useful tool for pool contractors to know the conditions in which they are about to price and construct a pool. If your project requires the contractor to make utility connections, it may be helpful for the subcontractor providing this work to know the conditions to be dealt with when excavating and placing pipes and other lines.
When we design subsurface construction into our projects (basements, partially submerged rooms or spaces), it falls on us to specify and design the waterproofing system that will protect the spaces from moisture and condensation. The soils report can provide information that is helpful in the selection and design of these systems and how we handle subsurface moisture and drainage. If for no other reason than to help the contractors understand our design criteria, we provide this information to them.
The adage there can never be too much information is always true in pricing a residential project. Providing conscientious contractors with additional materials for their evaluation and understanding of the project should help in the creation of a complete price. Other miscellaneous items that may be helpful based on the site and its individual conditions are discussed in the following sections.
Most incorporated entities will require their permit sets to include a site survey with a legal description of the property showing meets and bounds as well as any other easements or encumbrances on the property. As suggested in an earlier chapter, it is useful to have this drawing incorporated as part of the cover sheet for the project. We usually ask our clients to provide a topographic survey of the site as well; in the best case it is part of the same document. A topographic survey is useful for the contractors to understand the conditions of the site, particularly if there are significant grade changes or potential drainage conditions they will need to take into consideration during the construction of the project.
We often provide a map to the site where our project is being constructed. We always include a map of the area with the site identified, but if the project is in a remote or rural area, for instance, a second home on a lake or rural property, providing a map and directions to the site is a courtesy that is helpful to the contractors.
With the availability of Internet-based mapping websites, such as MapQuest and Google Maps, it is relatively easy to provide this information in complete and graphic detail to the contractors.
Most of our work is constructed in a large urban metropolitan area made up of dozens of incorporated communities or entities, each with their own permit and approval processes and expectations for the contractor. An important part of our Instructions to Bidders is the intention that the bidding contractors familiarize themselves with the specific rules related to the particular community in which we are building and to include the costs of abiding by these rules in their pricing. Providing the contractors with the address and pertinent contact names at the permit authority having jurisdiction is useful and often helpful. We like the contractors we are working with to know the rules and regulations associated with building a house or doing a remodel in the jurisdictions where we are designing.
Examples of the kinds of information that the contractor needs to know and understand when working in a specific location include rules regarding foundation surveys before pouring a new foundation to ensure it does not encroach on a setback or property line; whether there is a designated trash hauler required to be used in a community; requirements for placement of stormwater management and erosion control; and at what stages in the construction process inspections will be required. Some of these requirements have cost and schedule impacts for the contractors, and we feel it is valuable for them to have an understanding of these when they are pricing the project.
At various times in my career I have been involved in projects where the contractor paid for the drawings used to bid the project. But my experience has been that for houses at least two to three sets should be made available to each bidder, and the owner has traditionally paid for these. Additional sets beyond these two or three are generally done at the cost of the contractor.
Some architects will require the unsuccessful bidders to return the sets of pricing materials after pricing is complete. In theory, this allows those sets of bidding materials to be distributed to the successful contractor, to whom the project is being awarded, saving on the cost of reproduction. My experience has been this practice is rarely useful; once a successful bidder is selected, there will almost always be revisions to the set that will render the bidding documents obsolete. This is also true after the project is permitted and any pertinent comments from the permit review are incorporated into the set. Waiting to create a set that is “issued for construction” is a good practice to make sure the contractors are starting construction with all the materials they need in place to work. Holding off on signing the final contract until this set is in place is a useful practice too.
The process of residential construction pricing is often hard to fully understand, even for those of us working in the profession each day. Depending on the contractors and how they price their work, much of the work may be done by a small group of subcontractors, unlike in a commercial or institutional project where subcontractor specialization is the norm. It is not uncommon in the construction of a house to have subcontractors loosely characterized as “the framers” who will dimensionally lay out the construction, frame the house, apply exterior finish materials if they are siding or panel products, install the windows and doors, hang sheet rock, do the finish trim work, and install the roofing. This kind of generalization is not uncommon in residential construction and is often a competitive pricing edge for some contractors whereby they can use their own or a limited number of workers to build the house.
In a volatile construction market, the cost of building materials and labor can fluctuate rapidly and render inadequate and incorrect any early budgeting expectations you and your clients have for the project. How the project price is derived by the contractors, through a competitive bid or negotiation, is often directly reflected in the number you get for the cost of the house. In bidding a job, the contractors are by nature more willing to go with what they can clearly see in the bidding materials as opposed to asking questions and filling in any perceived blanks with their assumptions that could put them at a competitive disadvantage with a possibly higher price. Another important factor is the experience and understanding of the contractors who provide that pricing. Selecting the appropriate contractors to price the project is critical to obtaining an accurate and representative number for the cost of the house.
Selecting the contractors to negotiate a contract for construction or bidders to competitively bid the project is an important task that the architect usually undertakes in the process of getting the project built. Most clients do not have ongoing relationships or experience with general contractors whom clients are able to suggest as possible resources for building their new house. Even if they know potential contractors, clients will not understand how to evaluate whether contractors are qualified to build the house. Clients will naturally rely on your professional experience to identify potential contractors based on your knowledge of the contractors’ work. Hopefully you will have contractors to recommend for pricing or bidding a project where your experience is gained firsthand in building other projects with them. If not, you will be integral to the process of selecting and qualifying the potential contractors.
How do you identify who will be bidding the house? When we bid or negotiate a project, we try to match contractors with the project. Different projects have a variety of components that make them better suited for some contractors than for others. Some of the contractors we have had experience with are considered a good value relative to their cost and provide a serviceable product at a modest cost. Put another way, they are a lower-cost, but competent provider able to deliver a certain kind of product and meet specific expectations. These contractors would not necessarily be right for an elaborately finished house with many specialized conditions that require careful execution of refined details. For projects with these requirements we look for those contractors who have a project management base and supervisors with experience pricing and executing complex projects, with a strong component of craftsmanship in their work, as well as a thorough understanding of how to read and analyze plans to anticipate the construction activities necessary to execute the details correctly. The prices for any given project would be much different from each of these providers, as would the ultimate results.
When schedule is the overriding concern of clients, we look at how we can facilitate the fastest completion of the project, and a typical residential contractor is not the right resource. Occasionally we design a project we feel would be best executed by commercial contractors, and so we utilize them where possible to help us with projects of this nature. The knowledge and experience they bring to the project, in addition to their ability to move the schedule along in a more expedient manner, make them good choices for some types of projects and clients. Usually they will have higher overhead, and a direct result is they are more expensive to use; but the benefits are to be found in their ability to schedule and coordinate multiple subcontractors which generally contributes to a faster delivery. The subcontractors they will use are likewise often more expensive, but have larger staffs and stronger purchasing power, so these subcontractors can expedite work in most circumstances. If the clients are willing to accept the additional premium to cut the construction time, a commercial contractor may be the right choice.
For various reasons you will not always have an opportunity to work with the same contractors every time you build a project. This is not necessarily bad; you always have to work with someone for the first time, and it is the way you meet good contractors as well as those who may ultimately disappoint you. Qualifying them before they price, let alone build, one of your projects is an important responsibility for you and your firm. When you are considering new contractors for the first time, it is always good practice to go to visit projects done by them to evaluate the work firsthand. In many cases it is good to encourage the owners to visit these projects to see the contractors’ work too. This helps with grounding the clients’ expectations for the final product and allows the contractors to point out areas of the project in which they take pride or where their particular expertise can be seen. Many times we visit projects that from a stylistic viewpoint are dramatically different from the house we are planning for a specific client. Even when seeing these sometimes stylistically disparate houses, we can begin to understand a sense of the attention to detail and quality of execution the contractors can potentially bring to our project. In our practice frequently we work with a contractor who is known for building fine period houses, but when working with our firm is excellent at executing contemporary spaces and details. Unfortunately the opposite can also be true. Many contractors who build traditional homes have become used to having trim and moldings to cover joints and do not have the experience or a subcontractor base capable of executing minimalist or zero detailing.
If you have never worked with contractors, it is also useful to check their references. This process can be tedious and sometimes misleading; you can get very good references from nonarchitects for a contractor who was pleasant to work with but does marginal or careless work. We are always interested in whether they have worked with architects on their projects and at what level of involvement the architect was part of the construction process. If the architect’s responsibilities ended at the completion of the construction documents (which is sadly often the case) and the owner managed most of the process and design decisions, then the contractors may not have the right experience to work closely with us. We like to check references in several ways, besides the obvious request to the contractor for a list of references to call. First, we encourage the contractors to provide the addresses of all their residential work for the last 5 years. This is not too far back to ask for as most houses take between 12 and 24 months to build, which suggests possibly only two to three generations of houses completed in that time period. We then cross-reference the addresses of the houses they list with the names and addresses of the clients they ask us to speak to for references. If the list of actual houses is dramatically different from the addresses of the clients used as references, it is not unreasonable to ask why those clients cannot be called for a reference.
When calling the contractors’ former clients, we find it is best to check the references of more than one. Occasionally we will detect a pattern of only good references, which can be taken as a good sign, or in another reading it represents a careful selection of the references by the contractor to be called. When we call the references, it has been our experience that happy customers will be glad to share in great detail all the things the contractor did for them. Often you can detect in calling a reference when they were not fully pleased with the contractors’ work, but feel obligated to be supportive or at least not negative. Sometimes you just get bad references, and you yourself question why the contractor would give you a contact who might not have good things to say when you call. In the end both good and bad references are helpful, and we like to get a balanced view of the contractor. In rare cases we have visited a house with a contractor where the owners could only point out the problems or disappointments they had with the final result, but to us the house was well done, competently executed, and an excellent example of the contractor’s capabilities. We try to be fair when evaluating what we hear; we have had clients for whom we did very good work who could not be pleased by our efforts, so we try not to hold one bad call among many others that are positive as a deciding condition in our approval. Sometimes the best proof is the house itself, and it is good to remember that we cannot always meet our clients’ expectations. The same is clearly true for contractors.
We are often contacted by contractors with whom we have not worked who want the opportunity to bid one of our projects. If the opportunity presents itself, we have prequalified them, and there is a competitive bid situation, often we will include them in this process. On other occasions we are approached by contractors whose reputations we know from our peers or other clients and whom we are reluctant to consider for our work. Our adverse knowledge would suggest we would not voluntarily work with them. If we know we do not intend to work with them, we try to be honest and tell them it won’t be possible for them to bid our projects. It might seem convenient to allow them to be included on a bid list as a way to allow them to think you would consider them, but properly pricing and bidding a job takes time and resources, and we make it a practice never to allow anyone to bid one of our projects whom we would never consider a possibility to be awarded the project. Neither of us needs to waste time, and we have an obligation to be honest with them about our likelihood of never working together.
On some occasions our clients have approached us with a contractor to whom they fully intend to award the project, but the clients want the contractor not to know this. The expectation is that he or she will provide the lowest possible pricing if they are not sure they will get the job. Often we feel confident that a particular contractor would be a good choice too, but the clients want the contractor to competitively price the project against other contractors to create a sense of thrift and force the favored contractor to provide the lowest price possible. We flatly refuse to engage in this process and try to help clients understand that if they ask multiple contractors to bid the project competitively and use their time and resources to put pricing together, the contractors should out of fairness have the opportunity to be awarded the project. If the clients are really convinced the contractor is right for the job, there are other ways to get the lowest qualified price without asking other contractors to participate in a meaningless pricing exercise.
One type of contractor that our experience has shown to be a challenging match for building an architect-designed house is the typical custom home builder. The word custom, like the word luxury, has a variety of meanings and in today’s use can most generally be taken to refer to a builder who constructs a small number of projects as opposed to a production or merchant builder who is working at the scale of a large development. Although the contractor may have tremendous residential construction experience, it is not in building houses that were designed and detailed thoroughly with specific intent in the way they are constructed and finished. Under most circumstances we would not consider these builders as qualified contractors for our projects. Unfortunately we do have clients who have been referred to these types of contractors by friends or associates and who ask us to consider them for their projects. We begin by explaining to the clients the difference between custom builders and general contractors in the hope that once clients understand the differences in these two groups’ experience and motivation, the clients will allow us to exclude them from bidding.
These types of builders don’t usually execute highly detailed projects in the sense we architects think of them. Their subcontractors often do not have the skills or expertise to build to our expectations or coordinate carefully with other trades. Many of these builders construct significant homes with substantial area under roof and elaborate finishes, costing significant amounts of money, so our explanations of why they are not the right choice to build our clients’ house is often not fully understood or appreciated. Many clients will not be able to pick up on the subtleties of this discussion, especially if the custom home builder is able to discuss pricing for her or his typical projects with them. Clients will find it hard to believe the builder can deliver such a high level of finish and so much square footage for the prices they will be suggesting. This situation will put you in the awkward place of educating your clients, sometimes against their will and inclinations, on the differences; and as with any discussion involving money, their emotions will play an important role in how they accept what you are telling them.
If you are forced to include a custom home builder in the pricing process, one way to equalize their numbers is to require them to bid to your plans and specifications without deviation. Ask them to make their suggestions for how to “save the clients money” in the form of specific deductions to be made from a list provided with their bids. When forced to price it two ways, the way you have documented it and “the way they would do it,” you have a tool to use to explain the differences to your clients. Using this list as a comparison, you can have a meaningful discussion based on more than just your professional sense of why the contractor is unqualified. In the end the lower pricing may be too attractive for the clients to resist, and you can be assured you will be going into the construction process with conflict built into the project.
An important consideration for the architect to discuss with clients is the best way to price the project. Several possible scenarios exist and all offer both pluses and minuses. We have had successful experiences with all the methods discussed below and, to be candid, have been disappointed by construction projects that were priced under every one of these scenarios too.
When asked by the clients to bid a project, we like to ask them to articulate for us what they hope to achieve by a competitive bid. Usually they will tell us the lowest price, based on their understanding of the way competitive pricing works. We tell them we like to take an approach that will get them a competitive bid, but not one that will take the lowest bidder’s price without qualification. We discuss with them other possibilities and make sure they understand it is not in their interest to come to contract with an incomplete or erroneous price from a contractor.
Some of the more basic versions of how a project can be priced are discussed below including the pros and cons associated with each. These descriptions are intended as a guide for each method of pricing and provide an outline to be used in discussing these with your clients.
Competitive bidding suggests a “hard” or final bid for the project by multiple contractors using identical sets of documentation to arrive at an estimate of a total cost of the work to build the project. This method is one that is most often taken for granted as an industry standard by clients. Often they believe that competitive bidding is the best way to obtain the lowest price. It has been my experience that in the case of residential projects this is not always true.
The nature of a competitively bid project suggests that the competing contractors will try to gain advantage over one another by carefully trying to determine how to price and build the project in as efficient a manner as possible. These contractors will also solicit bids or pricing from one or more subcontractors from whom they expect a similar approach to pricing. The desired result is a comprehensive cost for a complete project with the lowest possible price. This is the primary advantage of the competitive bid as a way to obtain pricing for a project.
A significant drawback in the bidding process for the architect is the possibility that there are omissions or coordination errors in the documents that can lead to their being excluded from consideration in the contractor’s price. The burden of making sure the bid documents are complete and well coordinated under this scenario falls to the architect. Because of this you as architect should not look lightly on competitive bidding as a thing to be undertaken without knowing your clients may want to pursue it early in the project. If we know that this is the way the project will be priced, we provide a different level of documentation for the project than we do when we negotiate a price. This is not done because we can cover our mistakes or omissions better with negotiated projects; but if our clients desire a hard bid, we need to be prepared to provide an acceptable and complete level of documentation for this to happen.
One unintended consequence of the hard bid process is the opportunity for the bidding contractors to exploit problems within the documents to provide lower pricing, either because they miss the problems and so don’t allow for them in their bid price or because they do recognize them and use these omissions or conflicts as an opportunity to provide lower pricing. Either way the result is the same; when in the course of construction the problem is encountered, it will not be covered in their price and the result will be a change order to provide the work in the project.
A hard bid also requires the architect to manage the bidding process more carefully and to document calls and the information flow in a fair manner to all the bidders. Contractors who find errors and/or omissions or just ask for clarifications and communicate with you about them will have a better understanding of the expectations for the project. By issuing addendums during the bidding process to all the contractors, you can distribute this information uniformly, thus ensuring they will all price it in a consistent manner, based on the same assumptions.
Traditionally when competitive bids come in, they are intended to be a final number for the construction of the project indicated in the bidding materials. We find this to be impractical, especially with houses. Below is an example of a Bid Tabulation form we use with our projects that allows us to present to our clients each of the competitive bids in a format that illustrates the numbers and how they deviate from one another. With the example shown in !Fig. 4.1, you can see that the overall prices vary by about 20 percent between the high and low bidders, but there are a great many similarities between the various categories of work.
When you are looking at the prices provided by the competing contractors, conventional wisdom suggests it is often a good sign if the prices fall within a close range and the competing contractors share what appear to be similar assumptions for general conditions, profit, and the schedule for construction. This allows you to consider each of the contractors based on individual merits and approach to the project and not solely based on price.
When you are comparing various competitive bids and there is a significant discrepancy between prices, with one being particularly lower than the others, you will often have to deal with the very real human response of your clients to want to seize on this attractive lower number. You will want to understand and qualify why the contractor has submitted a decidedly lower bid and perhaps disqualify it completely from consideration. This can potentially put you at odds with your clients, and they may even take a position that it’s too bad for the contractor who made the mistake assembling the price, that by submitting it the contractor is obligated to honor it. While this may be true in the strictest sense of the intent of a competitive bid, it is critical to help clients understand that a bad bid is sure to cause problems during the construction process. The contractor’s financial well-being directly corresponds to the success of the project, and in a business sense it is impractical to expect the contractor to intentionally deliver best efforts while losing money and putting his or her company at risk.
FIGURE 4.1 Typical form for evaluating multiple contractor bids when prices are obtained through competitive bidding.
We also request the contractors to provide an outline schedule for construction as a part of their hard bid pricing. We want to understand how they see the project unfolding and how long they feel it will take to build. This schedule should help to explain their assumptions about the cost of their general conditions, as their estimates of how much time it will take to build the house will have direct bearing on these costs. General conditions are usually calculated on a monthly or weekly basis and include such things as the cost of supervision, insurance, progressive jobsite cleanup, trash removal, and temporary office costs. The longer they anticipate the project taking, the higher these costs will be. This is important when evaluating each of the prices from the competitive bidders. If one or more have considerably longer schedules, it is worthwhile to review this with them and understand their assumptions. Often we have discovered issues with material availability or product specification through a more thorough investigation by one contractor during the pricing process that made that contractor’s schedule a more accurate representation of the time it would take to construct the project.
It is important to remember that these outline schedules from the contractor are assumptions of how long the project will take to build, not an accurate critical path schedule. Explaining this to your clients helps to keep them from being disappointed later when a more detailed schedule is created. As discussed above, in most cases we will not have obtained the building permit at the time we go out for competitive pricing. Once the actual permit process is incorporated into the schedule, it may require a longer time to obtain approvals and incorporate the permit comments into the work of the contractor. Additionally, if the owners elect to make changes in the project after the bids are received, you will require additional time to revise your drawings and the contractor to price these revisions. In most cases this outline schedule will change, and the clients need to be prepared for that eventuality.
Another way to engage with a contractor, and one we prefer for our residential projects, is to negotiate the price and contract terms with a selected and prequalified contractor. In negotiating the project with one contractor, you are agreeing to work closely with the contractor to help price the project consistent with the clients’ goals and expectations for quality and cost. It can be difficult to explain to your clients how this will ensure for them the lowest qualified price, but in our experience it is a more successful process for pricing a house than a competitive bid.
Many of our clients have the perception that a negotiated price does not provide an incentive for the contractor to provide the lowest cost for the work. To help your clients understand that a negotiated price does not allow contractors to charge whatever they want to build the project, and that there can be protections in place that manage contractors’ costs, sometimes requires a prolonged period of education and in some cases some successful examples from other projects you have priced in this manner. We often begin by citing the obvious advantages and how they affect not only pricing, but also the contractors’ attitudes and obligations for the project. This again refers to the importance of the ideas that an incomplete price for the work will potentially lead to conflict during the construction process and that the goal of pricing the project should be to obtain the lowest qualified price. Negotiation of the contract allows the contractor to be an active participant in fully qualifying the price for the work.
While you are working with your clients on the design of their house, you will begin to understand their personalities and the way they best relate and communicate with people. Based on this experience, you will be able to understand which contractors you have had experience with that would be best suited to working closely with your specific clients over an extended period. Some contractors are abrupt and professional, not given to personalizing their relationships with their customers, and for some of our clients this is the right personality to work with them. These clients appreciate professionalism and are not inclined to build a relationship beyond fees for service even with us whom they have spent several months helping to understand their lifestyles, personal needs, and expectations. Clients fully expect to pay for services and receive the value of the work in return, without any long-term relationship other than in a business sense. Other clients are interested in the experiential aspect of the construction process and want to engage with the contractor, having her or him provide input and commentary, and in a case like this a more genial and social person is more appropriate. It is not unusual for clients building their “dream house” to visit the site every day and in some way expect the contractors to take a moment to show them progress or explain the activities underway. If the contractor sees interacting with the client as a burden or a distraction, then this contractor may not be the right match for certain personalities. This is where your experience during design should help you select possible contractors who may best fit your clients’ needs.
Once you have identified possible candidates to build the house, you can arrange a series of interviews and tours and a viewing of other projects. If you fully understand the capabilities of all the contractors and have prequalified them to do the work, then you can allow the owners to select the person with whom they are most comfortable. If the clients still want to add a competitive element to the process before they begin to negotiate the actual cost of the job itself, you can have all the prequalified contractors develop a price for their general conditions on a monthly basis based on their understanding of the project provided by you. Additionally you can ask them to provide the fee they would charge for their profit markup on the subcontractor work and other direct costs of building the house. If you indicate to the contractors that the selection process includes their being evaluated in this manner, there is an element of competition in place and hopefully it will offer some comfort to the clients to know they have obtained a reasonable cost for the work.
Explaining the advantages of negotiating the project with one contractor to your clients should include the following considerations.
First, by negotiating a price with prequalified contractors you are creating a partnership to build with them the project. They are part of your owners’ team, along with you (the architect) and your consultants. The contractors now have a vested interest in thoroughly understanding the scope of work and the various components of the project for them to successfully do their job. Their fee is already established, as is the cost of the general conditions, so you can focus on helping them fully understand the project and completely accounting for all the scope of work.
Second, the contractors now have the opportunity to fully familiarize themselves with the scope of work to be done and to schedule it appropriately to complete it as quickly as the expectations for quality will allow. Since contractors will be interacting with the owners on a regular basis, it is not inappropriate for them to ask for an explanation of the owners’ expectations for quality relative to cost for the work of the project. Contractors are in a unique position to propose the possible range of prices and the corresponding values of the work to be done. With your guidance and input they can be part of the selection process for building materials and components and can help the owners understand the cost-to-value ratio of their choices. This is also true of finish materials, appliances, and other equipment to be purchased for the house.
Third, the construction work on the house itself can start earlier as you are eliminating the time required for the competitive bidding process. With the contractors on your team, you can submit for permit at any stage in the completion of the construction documents that will be adequate for the permit review submittal but not necessarily for the competitive bid. Since the contractors are part of the team, you can distribute work to them as you complete elements of your documentation, not when you have it fully completed.
Fourth and perhaps most important from your point of view as the architect, the contractor can provide real-time pricing for the project as you are completing your drawings. It is useful to you and your clients to know the cost status of the project on an ongoing basis so that value engineering is integral to the design process, not an activity to be done after pricing when the client is suddenly (and unhappily) faced with possible reductions in scope or finishes for the whole project to bring it into an acceptable budget.
To establish the cost to work with specific contractors in a negotiated contract arrangement, we allow the clients to be part of the selection process. We allow clients to interview possible candidate contractors, review their references, and see their work firsthand. We also ask contractors to outline their costs for general conditions and their intended markup for overhead and profit. In a sense this is the competitive part of this process; it allows the owners to understand each contractor’s approach and abilities while at the same time allowing the contractor to come to an agreement on establishing fees from the beginning. Knowing this amount and agreeing to it allow contractors to focus on their work bidding the project properly and not on the lowest price. Based on these criteria a selection can be made of the contractor who is the best fit for the clients and the project. With this agreement in place you can begin to work with the contractor on pricing the house and obtaining his or her recommendations of materials and subcontractors.
Part of your agreement with the contractor can be a requirement that every sub-contractor’s and trade’s scope of work be bid competitively by multiple subcontractors. In essence this ensures that the pricing of each part of the work is competitive, with the contractor here having the role of not only obtaining multiple bids, but also selecting the subcontractors who will be providing pricing and evaluating the bids for completeness and value. Acting in this position, the contractor is able to preselect and prequalify each subcontractor asked to price the work so that only those able to deliver the expected quality are pricing the project. The contractor is now less concerned about having to obtain the lowest price and therefore looks only to truly qualified subcontractors who can execute the work, whereas in a bid situation the contractor might have to include others, possibly less qualified, who would be more competitive from a cost point of view.
The primary disadvantage of the negotiated contract is the noncompetitive nature of the pricing. But with recognition that you are working toward obtaining the best qualified price, not the lowest price, the benefits to the client of increased quality, firmer scheduling, and minimal conflict during construction can far outweigh this disadvantage.
When you have clients who feel a competitive bid is absolutely necessary, but you feel strongly that you need to be able to thoroughly qualify the pricing provided by the bidding contractors, we suggest a hybrid bidding and negotiation process to make your final selection. This process allows you to obtain competitive bids from multiple contractors, but then review the bids with the respective contractors to evaluate their assumptions about the scope of work included in their pricing in advance of signing a contract. We have had success in bidding the project competitively to multiple contractors, then down-selecting to the lowest qualified bidder and asking that contractor to further discuss and clarify her or his bid with the opportunity to adjust the pricing based on the more detailed discussions.
In addition to meeting your clients’ concerns about obtaining the lowest price for the work, the primary advantage of this process for pricing is that once the contractors have submitted their bids, it locks in major elements of the pricing, subject only to clarification or additional assumptions on the part of you or your clients. This allows flexibility for the contractors to adjust pricing if they have reasonably missed or misunderstood an item in their bid, while keeping the bid largely intact. As with any competitive bid, the bidding materials you have to provide for the contractors to estimate the project and complete their bids remain unchanged. You are still required to provide complete pricing materials and cover the full scope of work associated with your expectations for the work in your documents. The primary difference in this approach is that after you receive the prices, you can meet and interview each contractor to verify and qualify the bid, allowing the contractor to explain his or her means of creating the pricing and ask any questions about scope that could affect the prices. This also provides an opportunity to collect information from each contractor that you can use to further suggest ways to revise pricing with any of the other contractors after you have selected the one you plan to work with.
Further and perhaps most important, it allows the owners to participate in the qualification process as together you review each of the submitted prices with their respective bidding contractors. Hopefully this exercise will help your clients understand whether they fully grasp the work involved in building their house and their comfort with the pricing. Owners are able to personally evaluate how the contractors understand their expectations for the project and their commitment to executing it well. It is also helpful to them to see how the pricing is derived, what aspects of the project are particularly expensive, and how the contractors plan to execute the work. Finally owners can hear directly from the contractors their approach to the schedule and how long they estimate it will take to build the project. In this sense this process is similar to selecting a contractor for negotiating a project; the primary difference is that there is an overall price from each contractor to start from, and unless changes are made, the only increases to that price would be those identified in your evaluation process as incomplete. If the owners participate in the individual review meetings and take an active role in asking questions, it can also allow them the opportunity to evaluate the contractors’ personalities. This will further help the owners to determine the contractors’ manner of interacting with you and the owner as to whether they would like to work with them.
In pricing the project this way, you fully communicate to the bidders your intent to review and share components of the pricing provided by each contractor before the bidding process. They need to clearly understand that the lowest bid will not necessarily be the sole criterion for selecting the contractor your clients will be moving forward with. Additionally they will each have an opportunity to present pricing to you and the clients and for you to pose questions about their assumptions. Further, these bidders will need to know you fully intend to share this with your selected contractor. In many commercial and institutional projects this process is typical, and most contractors see it as an opportunity to get in front of the client and explain their assumptions and qualifications to do the project. It is less common in residential work, and it does require a number of contractors to spend time and resources pricing the project; but if they are all informed of this in advance and fully understand that the criteria for selecting the contractor are subjective, it is reasonable to expect they will not have objections should they choose to participate.
When we have priced residential projects using this method, it has been our experience that the owners will rarely select the lowest bidder, unless they feel best about that bidder compared to the other contractors, after they have completed their interviews and presentations. In several cases the contractor with the highest price has been the owners’ selection after meeting with the contractor and hearing her or his approach to the project. Based on the contractor’s understanding of the project and communication of enthusiasm or eagerness to be involved, the owners can sense which contractors might be most engaged in the process and be the most fun to work with. As architects, we should be comfortable with the choice of any of the contractors, because we have preselected and prequalified them to do the work. It is to our advantage that the clients have identified with one of the contractors, have a voice in making the selection, and have “ownership” of this decision going forward.
While the project is being bid or priced, it is not uncommon for the architect to issue additional drawings, specifications, or instructions to the contractors, and this is done by a specific procedure called addendums. Reasons for issuing an addendum are many including to clarify information not clearly understood from a reading of the drawings or specifications, to correct conflicts in the drawings or specifications, to add information to the pricing materials that may have been omitted or completed after the pricing materials were initially issued to the contractors, or to describe a change to the project initiated by the owner. In every case the reason to issue an addendum is to get these items included in the pricing for the project while it is still a competitive process and before a contract is signed with a contractor.
As the architect, you will formally issue these to each contractor at the same time with clear instructions about how to incorporate the information into the pricing. The AIA has standard forms available that can be utilized in the issue of addendums, but for most residential work a simple cover letter describing the work to be priced, paired with a transmittal listing all the documents to be used to price the work, is all that is needed.
If the work described in the addendum will require additional time for the contractor to price it properly, a time extension to the bid process can be described in the addendum itself, citing the new date and time the bid is due. Common examples of items covered by addendums include the following:
Clarification of information provided in the bidding materials is a common reason for an addendum. Because you have fully conceived the project during the design and construction document phases, you are not looking at the bidding materials in the same way as a contractor. For a contractor, reviewing the set of materials may present questions that when conveyed to you may require you to clarify or provide additional information to help properly price the project. If you have multiple bidders, it is always useful to share the information with all of them, even if other contractors don’t have the same questions. You will have to judge if a contractor’s question will actually materially affect the pricing of the project and lead to a conflict later; but if it seems reasonable, in this day of faxes and e-mail, it is very easy to issue an addendum and address this at the time it arises.
Conflicts in the drawings seem to always be discovered by the contractor and it is best to find them during pricing when you can still address them without possible cost ramifications to your clients. Many times they will be incidental and their resolution will have no cost implications for the project, but others can be important and providing clear direction during pricing can potentially save time and money later. When determining if a conflict in the drawings should be addressed in an addendum the primary criteria should be potential cost. If you can clarify it by issuing written instructions or a simple drawing, then take the opportunity to do so.
Omitted information is a frequent reason for issuing an addendum. In the course of developing pricing using the bidding materials, the contractors or their subcontractors and suppliers will identify places where they do not have all the information they need to price the scope of work properly. Sometimes this will be an item that you and the owners have not yet finalized, for instance, all the appliances for the kitchen or the exact specification for a finish material. If you and the owners agree to make these selections later, then ask the bidding contractors to note this omission in their bids and acknowledge you will add the item by change order during construction. This is a simple instruction, easily issued as an addendum during bidding when it arises.
A more complex example would be the omission of a section of the specifications describing a major scope of work that could lead to a significant change order when it is discovered during construction. Another example would be a sheet of drawings that was inadvertently left out of a bid set. In these cases it is best to thoroughly document the omitted information, issue it as an addendum, and include an extension to the bid time if necessary.
Late issues of drawings or specifications occasionally occur for various reasons, and these need to be issued as addendums so they are fully incorporated into the pricing. In our firm this is most often associated with consultant drawings that may be completed later than expected and are issued after the first set of bidding materials has been issued. We also find that if the owners make a late decision or change to some part of the design, we may want to revise our drawings or specifications and issue them later than the rest of the set.
Owner changes or requests after you have issued the pricing materials are another frequent reason for the issue of an addendum. If the owners make a change to the design that has a potentially significant impact on pricing, it is always better to price the item prior to award of the contract. Our experience has shown that even though you feel you have completed design, your clients are still thinking about their future home and may want to suggest changes or additions to the design. Often these are small items, but at other times they represent significant changes that affect many subcontractors and need to be carefully documented before they are issued as an addendum for pricing. Again if it is a complex change or addition, an extension to the bid time is warranted.
As noted above, an addendum can be a short paragraph describing the condition to be priced or a more complete issue of drawings and specifications necessary to fully describe the work. In every case we suggest that you number the addendum in a serial manner, starting with addendum 1 and following with as many as are required by the circumstances of the pricing process. Although the addendums may be seen as a distraction, issuing addendums during pricing is a helpful way to begin to create a list of items you will need to revise in the pricing documents before you issue them for construction. In our office we see them as an important part of the value we bring to our clients to ensure that the pricing they obtain from the contractors is complete.
The transmittal accompanying the addendum from your office to the bidding contractors should list the addendum, how it is being sent (e-mail, fax, mail, courier, etc.), and all the materials that make up the addendum itself. At a minimum this would include the following:
1. The transmittal, which functions as a cover letter. It is written on a transmittal form with our letterhead and is addressed individually to each of the bidding or pricing contractors. We provide a copy to the owners too.
2. The addendum itself with its number and date and a written description of what it contains. In our office we do these using a letter format on our letterhead, clearly addressed to “All Bidders.”
3. Drawings, specifications, and vendor or product information that reflects the items you want to be accounted for in the pricing.
The addendum can cover more than one item, even if the items seem widely disparate. During the pricing of some projects, multiple items will be brought to your attention within a given time. We try to wait a few days between the issues of addendums, but we do cover multiple unrelated items if necessary.
It is in evaluating the need for and the creation of these addendums that the importance of having one person in your office answering all the contractors’ questions can be seen. Having one place to receive all calls, e-mails, faxes, and written communication ensures that the questions are answered in a uniform manner and that if they are deemed worthy of an addendum, it is done in a consistent manner and issued to all the concerned contractors.
When the contractor sends in the bid, require that the contractor acknowledge on the bid forms the receipt of each of the addendums.
Allowances are areas in the contract defined as dollar amounts that stand in for actual hard pricing of an item that is part of the project. A common example of an allowance item is carpet. It is not unusual for the actual carpet not to be selected at the time the drawings are completed and for this item to be identified in the contract as a budgeted amount of a certain cost per square yard. When the final carpet is selected, the allowance should be reasonable to cover a carpet of a certain quality and for this amount to be applied to the cost of the purchase of the material. If the carpet costs less, then the amount of the allowance, the savings, will be credited; if the carpet costs more, then the owner will be responsible for the additional cost which will be added by change order.
With an example such as carpet the idea of an allowance makes sense. It is an easy concept for the owners to understand, and having a budget requires them to be disciplined when making their final selection if they want to stay within the budget. The problem with allowances, especially those created by contractors when bidding or pricing the project, is that they can be used incorrectly by contractors to address things that are not just a material selection, but an entire assembly, and here is where there are potential problems.
In principle, we dislike allowances of any kind in contracts for construction. In reality, we frequently have them and for a variety of perfectly acceptable reasons. In a competitive bid situation we ask that there be no allowances in the bid prices and that the contractors omit pricing for any item not fully designed or specified. It has been our experience that when we create allowances during pricing and provide them to the contractor, they often prove inadequate. We seem never to be able to incorporate all the components of a scope of work that go into the allowance, and the result is additional cost to the owners for an item we felt was fully covered. When the bidding or pricing contractors, at their own discretion, create an allowance in a competitively bid project, they are not matching this allowance to those created by any of the other bidders, which suggests there is an inconsistency in the prices.
Ideally during the design and construction document process you can try to obtain client approvals for as much of the project and its finishes as possible. Sometimes this will necessarily elongate the process and force the clients to make all the selections possible at the time you are doing the initial work. This actually leads to better pricing and a better-quality project because you can plan for these items in your detailing of the project and not risk making adjustments later.
What makes sense to be an allowance in a project and what does not? How do you define them if you have to use them? In our experience we think the only place that allowances should be used—and even then only if they are fully understood by you, the clients, and the contractors at the time of the pricing—are for a very limited number of finishes and specialty construction items, finish items that make sense to be an allowance.
Carpet, which I used as an example above, is a typical allowance item. But it is also an item that by its very simplicity can open itself to problems after the final selection. If you establish the allowance for the carpet, it will be a good idea to visit an appropriate carpet or floor covering supplier with your clients to assess their expectations for quality and the type of installation. Carpet pricing varies widely among various products, and unless you can get your clients to identify an actual selection they feel meets their needs, your assumptions will probably be wrong. The same is true for installation. Some carpets have repeats in their patterns that by nature suggest large amounts of potential waste when used in rooms of certain sizes. You won’t actually know whether this is a cost factor until the installation is priced. Clients also have differing opinions about carpet pads and the cost for the various varieties. The only thing I can say for certain is that until you have selected the exact carpet, installation, and pad, you will not have a final quote for the scope of work and your allowance is only an educated guess until then.
Like carpet, tile is another item that is often not selected during the design and construction documents process and that is often the subject of an allowance in a bid or contract. The possible variations of tile materials and costs make this a poor item for this manner of pricing. Besides the obvious number of materials that are potentially lumped under the heading tile (stone, ceramic, and porcelain), the wide variety of sizes (and the associated variation in their cost of installation), and whether it will be a monolithic or patterned installation, the allowances may not be adequate to cover the preparation work in the places scheduled to receive it. Over the last several years, tile has assumed a greater role in the interior finishes of the houses we are designing, and it is not unusual for our clients to select very expensive, highly specialized products for use. Unless they are willing to make these selections before we complete our construction documents, it is virtually impossible to price them using an allowance.
Most of our clients pay special attention to the design of the kitchens in their new homes. The appliances are an important part of the design of these spaces and typically one of the most expensive single line items in the construction of the house itself. Whether they cook or not, our clients opt for exotic appliances for use in their “trophy kitchens,” and the selection of these appliances is critical to clients for the brand identity as well as the culinary merits. When you are designing around these appliances in the layout of a kitchen, you almost have to have them specified in order to carefully organize and detail the kitchen layout and millwork. We encourage the clients to select the actual units they plan to use, even go with them to the showrooms and meet with the suppliers so we fully understand the plumbing and electrical requirements for installation. Despite this we still don’t always have the actual final selections, and the appliances end up being identified as allowances in contracts. It almost always winds up being additional work, often for additional fees when we have to adjust cabinets and layouts after the final selections are made. Owners will also incur additional costs when they make their final choices and they exceed the amount provided by the allowance, or when there are pricing increases before the appliances are purchased.
Low-voltage prewiring is frequently carried in a contractor’s price as an allowance. This category has become increasingly important as technology has taken on a greater role in the houses we are designing. We use the phrase low voltage to cover wiring that is not armored or protected for fire safety or used for conducting currents that are part of the power and distribution system for the house itself. Included in this category are communications (telephone services), audiovisual wiring and services (music, television, cable television, and satellite wiring), computer cabling, and home security. Rarely do we or our consultants ever design this work; it is almost always designed and installed by the service provider or a specialty contractor. As this type of work is present in virtually every new house, the contractors know they have to coordinate this work from both a scheduling and sometimes cost perspective, so they create allowances for the work in their budgets for the owners to work from. My experience has been that only the owners working with the provider can fully explain what this work scope will be and what their expectations will be for the cost. Although this work does affect the overall cost of the house, my sense is that this area is outside the expertise of most architects.
While I contend that almost nothing should be carried as an allowance in a contract for construction, the examples illustrated above at least make sense in some cases to be carried in the budget in this manner. At times we have had contractors identify in their pricing a wide variety of work items as allowances that were certainly not traditional or were inappropriate, creating great confusion and conflict during the course of the project. We now try very hard never to allow this to happen when we know the ambiguity associated with the allowance could lead to conflicts during construction over significant costs to the owner as the work is defined. Items that do not make sense to be carried as allowances in the contract for construction are discussed in below.
Assemblies are parts of the construction of the house that are made up of multiple parts, often constructed by multiple trades. Assemblies should never be allowed to be carried as an allowance in a construction contract. A good example of an assembly is the interior walls of a house, which are the product of many trades. They are framed by carpenters, usually called framers, who lay them out and construct them from wood or metal studs. They are clad in gypsum board panels, often by a drywall contractor, and taped, bedded, and floated by a painter. Inside the wall is plumbing and electrical work, frequently mechanical ductwork and low-voltage wiring all done by other trades. The wall is literally an assembly of pieces to create a whole part of the construction.
We have had contractors who occasionally list construction of this nature as an allowance, which signals to us a significant potential problem. If they don’t have enough information to do a hard bid price for the work scope, they need to be given the information and time to do so before you bring them to contract. This scope of work is by nature expensive, and the variables all need to be defined in the pricing process. Another example of an assembly that you might see carried in a bid as an allowance is the foundation. If your client signs a contract with these types of items as an allowance and the final pricing exceeds the allowance, then under the typical understanding of an allowance the contractor could expect a change order for additional compensation for an item that should be fully defined in the construction documents. It is only by actually experiencing this situation with a contractor that we learned firsthand how difficult it could be. The message is this: do not allow it under any circumstances, and advise your clients in this manner, no matter what the contractors represent as their understanding of what the term allowance means in the contract.
We also feel this way about some types of specialty construction. We have had contractors price work such as fireplaces or exterior porches as an allowance. Most fireplaces in the houses we design are metal or precast concrete inserts installed within traditional framing, then finished both on the interior of the house and above the roof as a chimney. Again the number of trades involved seems to suggest a great many variables, and an item like this is inconsistent with the kinds of work that should be budgeted as an allowance. When confronted with this we assumed that the allowance was for the firebox and chimney, not the interior and exterior finishes, the fireplace surrounds and, mantel and hearth. In one case, a contractor included all these items in an inadequate allowance, and the approval of the additional cost in a change order with the owner was the source of a major conflict and disappointment of the project.
With a specialized construction such as a porch, here again there are too many components to allow it to be priced as an allowance. If the construction documents are detailed enough for the contractors to create a detailed price, they need to do so. It is impractical for them to price construction like this after the project is contracted and underway, and expect the porch to fall within the allowance.
Millwork and cabinets are another item that we try to require the contractors to provide a firm price for and not an allowance. We use the American Woodworking Institute (AWI) standards for the quality and construction we expect for the millwork and cabinets in our specifications, and this should provide very clear expectations for the subcontractors to do the work and the type of certifications they need to have. If the contractors budget the millwork as an allowance, it suggests they have not analyzed the AWI standards or carefully reviewed the layout and design of the millwork to provide a complete and accurate price.
Hardware is an item that many contractors are used to providing as an allowance in their pricing. We have found that hardware as with ceramic tile has become a specialty item of widely varying cost in our projects. The widespread presence of advertisements for hardware companies in the shelter press, read widely by people who are considering having a house designed, has made them familiar with the wide variety of specialty products on the market; and the typical builder-grade hardware most homeowners take for granted is no longer always acceptable. Consumers are aware of the quality and variety available and choose to use them in their homes. Allowances do not provide adequately for the possible choices, and the contractor needs to price to provide and install it accurately.
Recently countertops, another item traditionally listed as an allowance by contractors in pricing for a house, have become a problem. Details and materials vary widely in cost and execution. With virtually all our houses some type of stone or synthetic solid surface is used for all the countertops in kitchens and baths. This condition is mimicked in the mass housing market where houses of all price points now have some stone countertops. To meet this need, large volumes of stone countertop materials are brought in from abroad in varying thicknesses, often prefinished, that are relatively modest in cost to purchase and install. Human nature being what it is, your clients will rarely find the product they want in the lower-cost materials available, rendering the allowance useless. The challenge in pricing stone countertops as an allowance comes from the possible range in cost and quality of the product available which makes it necessary for you to try to obtain a specific selection from your clients before the material is priced.
One strong incentive for our clients to make the specific finish choices for their houses is that they can be priced accurately during bidding or pricing, locking in the cost in the contract they will ultimately sign with the contractors. If an allowance is used in the contract, there is a possibility the clients will not ultimately make a selection based on the budget or will be disappointed by the possible choices available to them. This is best avoided by making the selections during the design process.
If, after construction has started, your clients begin to identify the final selections to go with the allowances, you will have the opportunity to help them select these items, and it can involve a great deal of your time. In some cases they make choices that may require you to create additional drawings or details for the contractor to price and install the work. If your contract for construction administration services is hourly, you have a vehicle for compensation for the time spent helping them to select the final choices and for any additional drawings or details. However, if you are working under a fixed fee, these are really items that best fit into the design phase of the project, and you will now be supporting the effort without compensation unless you have clearly made arrangement for this with your clients. Helping them understand that in essence you are still designing when selecting finishes may provide the opportunity for you to be fully compensated for this activity. This offers another incentive for them to make these selections before pricing begins.
Clearly allowances are possible sources of tension on a project, and the conflicts and costs begin to be identified at a time when often the owners and contractor are in conflict due to schedule, quality issues, perhaps even change orders. I had one project in my career where the allowances became a critical part of souring a relationship between an owner and me. Allowances were used not only for items such as carpet, but for whole assemblies in the house, items such as the fireplace, roofing, gutters and downspouts, millwork, and countertops. What looked like a comprehensive bid actually had a large number of open items in the form of allowances that were not fully qualified or priced prior to the owner’s signing the contract. As the project moved forward and these items were priced by the contractor who consistently underestimated the cost of the work in his allowances, the owner was continuously presented with change orders for the overage amounts.
We had never worked with the contractor before, and it was the first time we had ever encountered allowances in a contract that did not actually equate in value to what we had designed and documented. In the owner’s eyes we were the experts who should have recognized the allowances were inadequate. The problems came in two areas; one we were prepared for, the other was new to us. During design the owners had indicated that they were more interested in spatial quality and square footage in the design of their house and were willing to accept modest finishes. We designed accordingly and put together a selection with modest prices that the owner agreed to, and we used the prices, but not the specifications in our Instructions to Bidders. When the project actually started construction, the owners wanted to make upgrades to some of the finishes and realized that the allowances we had were adequate for the modest choices we made in design, but well below the upgrades the owner wanted, creating significant cost increases. We have this experience regularly and feel confident suggesting to our clients to stay with the initial choices or face having to pay the added costs. What we were not prepared for was the allowances that covered specific areas of the project we had documented in our drawings and specifications which the contractor had put in the contract. One after another as this contractor completed pricing the project, he was submitting change orders for items that we felt were clearly defined and not subject to pricing as a traditional allowance. We were able to counter a lot of this, but with tremendous time expenditure on our part, as well as ongoing conflict with the owner who viewed us as incompetent. We soon asserted a position that allowances that did not cover the work scope indicated in the drawings were misleading and fraudulent and represented an incomplete bid for the project. We convinced the contractors they were taking advantage of the use of the word allowance and were able to create a compromise that got the project finished at a very high level of quality.
We were ultimately able to successfully complete the project, and we did have to take some financial responsibility for the way the contract was constructed. But it taught us an important lesson, and allowances have never figured in the contracts our clients have signed with contractors since.
When you receive competitive pricing from bidding contractors at the date and time specified in the Instructions to Bidders, it is useful to have a predetermined format that the contractors use to present their numbers. When you are competitively bidding a house, it is useful to have all the contractors submit their bids using the same format, typically called a bid form or bid tabulation form. For competitively bid projects we recommend providing the form to the contractors so that all the bids are formatted the same way, which simplifies your analysis of the pricing and instructs the contractors to group their prices in the same manner. This form should be provided as a part of the Instructions to Bidders and can be filled out by hand or the line items typed in, depending on how you ask for them. The increased use of electronic media also makes it possible to transmit these forms electronically, via e-mail, which is useful to the contractors as a way to fill in the forms clearly and consistently. Avoid providing an electronic format with formulas and summation calculations built into it, similar to capabilities in an Excel spreadsheet where possible corruption or misuse of the formulas could result in an erroneous bid. It is better for the contractor to simply fill in the numbers calculated than for your bid form to generate numbers for them.
For projects where only one contractor is negotiating a price, the bid form itself is less important and the pricing can be presented in any manner you select for review with your clients. For ease of your own understanding and for possible future use of the pricing for comparisons with other projects, it may be useful to suggest the contractors use your more typical format.
The form should list each category of work, using a format similar to that in which your specifications are organized, with CSI being the most common and largely accepted as an industry standard. Given the categories, you can break out the work further, based on the level of detailed information you want to have when evaluating the pricing (Fig. 4.2).
At the bottom of the form we ask them to acknowledge each individual addendum, but rather than have separate prices for each of these addendums, we prefer the work be included in the appropriate category.
If the contractors have questions about which category part of their bid should go into, you can provide this information and if necessary add the instruction to an addendum. Remember you will receive these forms, and in review, if you identify discrepancies, you can always ask the contractors about the contents of a category and determine if they should revise them.
When pricing becomes available, whether by competitive bid or negotiation, and it is over budget (and they always are), this is the moment that can and does kill many residential projects. No clients are ever fully prepared for a project budget that exceeds their expectations, even if they can afford to spend more money and even if they were participants in the entire design process. If the clients are not able to deal with the overage and feel constrained financially, they may opt out of the project. This is a time when you must exert leadership and express to them your sincere disappointment with the results, but also share your intention to do all that you can to help get the project into an acceptable budget while keeping as much of the design intact as possible.
FIGURE 4.2 Typical form provided to contractors in a competitive bid so that all their prices fit into categories for easy comparison and evaluation alongside the other bidders.
If you have outstanding fees at the time these prices become available, you may find yourself in a difficult position to get them paid by the clients. Disappointed by the prices, often with no additional resources to add to the process other than preapproved construction financing and a previously determined amount of available cash, your clients may be evaluating whether they can move forward at all. No matter how well you have prepared them for possible higher costs than they originally anticipated, they will naturally find you at fault, and one choice they may make is to discontinue their relationship with you. At the very least they may reasonably expect you to make required modifications and revisions to bring the project into budget with no additional fees. Typically this will take the form of an appeal to your professionalism: “It was your job to bring it in on budget, we were relying on you as our architect to design to what we said we could afford.”
When you are faced with a project significantly over budget, this is a hard argument for you to counter unless you have conscientiously kept them abreast of potential cost issues during the entire design process and have this documented, so you can remind them of the times the scope changes clearly suggested a higher project cost. Even so, they may be angry, or at the least disappointed. Remember the “let’s see what it costs and we’ll take it out later” scenario is not always remembered by the whole project team in quite the same way you will remember it. Adding things to the drawings not originally part of the scope of work (be it area or volumetric changes, finishes, equipment) to the project during the design process gives them the power of having always been there. Taking them back out is never easy.
You will have to use considerable professional skill and tact to revise the project to bring it into budget and still have a product that reflects as much of the original design intent as possible. You will have to make a decision as to whether you will do this without expectations of additional fees for the work. If the scope involves your consultants, you will have expectations that they too will do what is necessary to bring the project into budget without additional compensation, something they may not feel obligated to provide. All these considerations need to be balanced with a very honest assessment of your professional role and whether you provided services in a manner that ensured you were being a good steward of the clients’ resources, a question only you can answer.
In our residential practice our work comes to us almost exclusively through referrals, and the value of our professional reputation, the weight that carries for our clients, is critical to our ongoing practice. We made a decision long ago that the two key things we had to do as a firm engaging in residential design were, first, to get projects built and, second, to have very satisfied clients. The two are not incompatible, indeed are tightly linked; and to keep the practice working with those two goals in place has required us to do our utmost, often at no compensation, to get a project that is over budget into an acceptable cost structure for our clients and still meet their expectations for a thoughtful design.
When I use the term acceptable cost structure, I am referring to the new reality for the cost of the project that asserts itself, no matter what the cause, when the pricing exceeds the original budget. In some cases simple changes can be made to finishes or equipment (appliances, plumbing fixtures, lighting), bringing the project into a budget that will be acceptable to your clients. At other times much larger changes may have to be considered; they may have to give up square footage or amenities, but if they intend to build the project and are willing to accept some additional cost, then they are accepting a new budget.
Value engineering is a construction industry term that refers to establishing priorities based on the overall design objectives for a project and realizing these priorities through careful selection of individual cost components that offer the best value. Simply put, it is deciding on what the project needs to have at minimum to meet the requirement of its program and making material and system choices to achieve these needs. It has become a euphemism for cost cutting, when what it really describes is an effort to get the most value out of every design decision when viewed in the context of the whole project. In commercial or institutional projects it specifically addresses major parts of the building before design begins, for instance, the evaluation of the most effective structural system, steel or concrete, for the building. In the design and pricing of a single-family home, it usually breaks into three categories: square footage, the enclosing volume, and the finishes.
Most of our projects begin with some kind of agreed upon program that is tied to a proposed budget, which we use to guide the decisions we make regarding all the materials, systems, and finishes of the house. Your professional experience will guide your decisions of how to organize the plan, the best way to enclose the volume, and what finishes you will use. As discussed in earlier chapters, most of us will engage in the design of the house utilizing reasonable choices we expect will be within the project budget.
Assuming we begin with a reasonable budget for the program our clients plan to build and are careful to revise the number upward during the design process to reflect client-initiated program changes, then if we get a higher number after the project is priced, we should be able to adjust one of the three areas with modest changes and get the project to an acceptable budget. If not, we need to begin a process of value engineering to prioritize what parts of the design are essential to the clients and what elements they are willing to change. If they want to build the project and are not comfortable with spending an additional amount of money, then they will have to be active participants in the value engineering process. Each of the three categories by itself can often provide potential savings, but usually a mix of choices from each is desirable. Your leadership of this process not only will help you to prove your value to the clients, but also will allow you to realize as much of your design intent as possible.
First, we ask them if they want to keep the project at the size as designed. If the answer is yes, then we move on to the next two categories. If the answer is no, they are willing to make the house smaller to maintain other elements of the design, we work with them to look at the program and determine what spaces can be omitted or made smaller. As a general rule, changes to the plan of the building involve the most revisions to the drawings so we try to minimize this area when performing value engineering.
Second, we look at the enclosing volume of the house and determine if any of our design assumptions are creating premium costs. This refers to the cross section of the house, ceiling heights, wall area, and framing. An example would be a higher than normal plate height that increases not only the framing costs, but also the amount of exterior wall to be clad and the amount of interior finish to be applied. Lower ceilings are not always an appropriate choice based on a given design, and so interacting with the volume offers unique challenges, too, potentially a great deal of documentation revision.
Third, the finishes and equipment, the area in our experience where most of the value engineering in residential projects takes place. If, as with most architects, your design priorities are based less on materials and more on the planning and volumes of the house, the material choices can be modified without taking away from the strength of the design. A common example would be cladding the exterior in stucco in lieu of stone to save on labor and material. Another would be carpet flooring in lieu of hardwoods in some parts of the house. Still another example of value engineering in the area of equipment would be going to a more generic appliance package in lieu of high-end brand names. Incrementally each of these decisions will help to lower the price, but may not adversely affect the quality of life of the owners or their experience of living in the house.
One thing we try not to do in value engineering is to lower the overall quality of the project in appreciable ways that will affect the energy performance or long-term maintenance of the house. It is important that when identifying areas where cost savings may be available that we not put undue burdens on the owners for unreasonable upkeep in the future. It is relatively easy to add stone countertops in the future when finances allow, but it is prohibitive to upgrade the SEER levels of the air-conditioning system or insulation in the wall cavities.
An expanding art collection led Bill Fifield and Dave Roseberry to look at possible new properties to replace a home that had become too small for their needs. Their particular problem was exacerbated by their fondness for their present house, a beautiful late-1960s contemporary with a compact U-shaped courtyard plan, organized around a central swimming pool. The major rooms were arranged around the perimeter of the U and looked onto a large center terrace with the swimming pool as its heart and focus. At first they considered adding onto the existing house, but the rigidly symmetrical plan offered no way to do so without severely compromising the balance that was so much a part of the design.
Their real estate agent suggested that to get a contemporary house with the features and size they would want, incorporating their desired amenities, they might consider building. A few years earlier she had sold a building site to another one of my clients who then went on to build a contemporary house which we were fortunate enough to design. She was now helping these clients select a lot that met their criteria, and she referred them to me as a possible architect for their new house. We met and interviewed, arranged for them to see several of our completed houses, most very different from what they had in mind but good indicators of the quality and consistency of our design work. We were hired soon afterward and began work on the design.
Bill and Dave possessed a wonderful art collection, an eclectic but refined assortment of decorative objects, as well as exceptional groupings of furniture, so from the beginning we knew that we would be designing the house around these things. Most of the art consisted of large abstract expressionist canvases which would require plenty of neutral wall space for hanging and dedicated lighting appropriate for each piece. Each of the furniture groupings (living, dining, and great rooms) nested on striking area rugs, themselves pieces of art, so flooring had to be restrained as well to be complementary with the rugs.
Affection for the previous house suggested elements that Bill and Dave wanted to incorporate into the new house. Chief among these were views from the major spaces onto water features or a swimming pool. The previous house also made generous use of clerestory windows set near the roof line which helped to keep the ceilings brightly illuminated. Where possible, they wanted to incorporate clerestory windows into the new house, as natural illumination was a priority. Finally they liked the way monumental fireplaces acted as room dividers in the house, creating a focus for the furniture groupings and allowing a continuous flow of space and visual connections between rooms.
The new corner lot was just over an acre with streets on two sides. The rear property line fronted a scenic, wooded creek, whose proximity resulted in roughly one-third of the potential building area being located in a floodplain. For a neighborhood known for its trees, this lot was strangely bare, so there were no natural features other than the floodplain and normal building setbacks that had to be considered in the design. The rectangular lot also had its longer axis running east-west, which meant the house could be planned with significant northern exposure, ideal for natural lighting for the art and minimizing heat gain (Fig. 4.3).
The program was simple: living room, dining room, kitchen, and great room along with three bedrooms and a study/library. Each bedroom was to have its own bath and dressing area. Supporting these spaces would be a large pantry, storage, and two laundry rooms, one for the master suite and one for the rest of the house. A three-car garage was to be provided, one space dedicated to a prized antique vehicle that was seldom used.
The resulting design solution is a single linear bar of house set close to the south property line with principal rooms lined up one after another in a continuous line facing north. To the south side of the “bar” were lined up the supporting spaces such as bathrooms, closets, and the garage. In effect all the major rooms could face north and have exterior walls almost entirely of glass, while the rooms on the south side could have only the windows needed to allow for clerestory lighting. Progression through the house for guests began at a foyer, then through the living room, which was divided from the kitchen by a monumental fireplace mass, the back of which was lined with kitchen cabinets and appliances. The kitchen itself was set between two such fireplace masses and had work counters with sit-down bars for the other two sides. Continuing beyond the great room was the master suite with its own study/library. The only element of the design to project from the north façade is the dining room, a peninsula with three walls of glass, immediately accessible off the kitchen, but also surrounded by the swimming pool (Fig. 4.4).
FIGURE 4.3 Plan for the Fifield-Roseberry house. (Drawing by Zachary Martin-Schoch.)
Early in our planning Dave had suggested we consider a negative-edge pool, and we always intended to have a pool placed on the north elevation, visible through the glass walls of the main living spaces as a primary water feature in the composition. Eventually we had an idea to set the dining room in the center of the pool, making it a unique dining experience for guests or the everyday use of the owners. The pool itself is actually U-shaped and has steps leading into it from the terrace adjacent to the glass wall that separates the interior from the exterior.
Essentially all the main public spaces are one large, interlocking room, divided by two monumental fireplaces with double-height ceilings to accommodate the large pieces of art (Fig. 4.5).
FIGURE 4.4 View of the Fifield-Roseberry house showing the interior spaces that open onto the pool and terraces. (Steven Vaughan Photography.)
FIGURE 4.5 The limestone fireplace acts as a divider between the living room and the kitchen in the Fifield-Roseberry house. The firebox is inset into the overall mass of the fireplace itself. (Steven Vaughan Photography.)
Although both Bill and Dave are active professionals, they have a desire to be serious cooks when time allows. From the beginning the kitchen was always to be the heart of the house, and its placement in the center of all the main living spaces attests to this priority. This is a kitchen designed as much for hospitality as for cooking. Built-in counter seating for guests is set along two of the perimeter sides of the kitchen, allowing guests to watch and talk to their hosts, but not be under foot during food preparation. Centered in the kitchen are three granite-topped islands for work, all with integral storage. Two of the islands incorporate matched sets of sinks, dishwashers, and trash compactors, one for scullery and one for food preparation. The remaining two sides of the kitchen, those not taken up with bar seating, are at the back of the two large fireplaces and provide the bulk of the space for storage and appliances. Into these full-height walls are incorporated the refrigeration and cooking units for the kitchen, including built-in refrigerator, freezer, wine storage units, and double-oven column. On the opposite side is the large restaurant-style range with stainless steel high-volume vent hood. All these appliances are integrated into flush maple cabinets with flat-panel fronts and simple stainless steel pulls (Fig. 4.6).
The north elevation with its projecting glass box dining room floating in the negative-edge pool is the conceptual “front” of the house. The simple, white stucco forms of the exterior act as structural frames to orient the interior spaces to views into the landscape through the significant north wall, which is virtually all glass. The resulting impression is one of a glass box with hovering white roof and ceilings that flow seamlessly from interior to exterior. The owners were fond of a high parapet that surrounded the roof edge of their previous house. In another nod to that structure we incorporated this element into our design, allowing the roof structure to be concealed and the flat ceiling to float over the glass walls of the house.
FIGURE 4.6 Located between the two freestanding fireplace walls, the kitchen of the FifieldRoseberry house has three islands to act as work surfaces. All the appliances are located in the two sidewalls. (Steven Vaughan Photography.)
Most of the house is constructed of three primary materials, four if you include the glass that make up the majority of the exterior wall on the north side. Inside and out, all the flooring is ordinary sealed concrete with a grid pattern saw cut into it that is a decorative expression of the structural grid. The exposed exterior walls are all smooth stucco, painted white as a counterpart to the white painted gypsum board of the interior. Architectural woodwork and cabinets are plain sliced maple with a clear finish. One additional material acts as an accent, the limestone panels used on the fireplaces that act as room dividers.
Installation of the art collection and the furniture were primary reasons for the initial decision to build the house, and from the beginning carefully planned lighting was integral to the design. In addition to exploiting the available north light, specific lighting was designed to illuminate the walls where art would hang. The remaining lighting was limited to provide lighting for tasks where it was required, such as in the kitchen and bathrooms. During the day almost no artificial illumination is required, so successful is the natural lighting strategy.
FIGURE 4.7 The cabana at the Fifield-Roseberry house has a full outdoor cooking area as well as changing rooms. The poolside structure is large enough for casual dining. (Steven Vaughan Photography.)
All the main rooms open onto the 2700 ft2 pool, which is an actual swimming pool, not just a reflecting pool or water feature. An adjacent covered cabana structure contains an outdoor bath and changing room, as well as a full outdoor kitchen with built-in gas grille. Off the master suite, another outdoor room is provided in the form of a screened porch, built to look exactly like the interior rooms of the house, but with walls of screen, not glass. Both the cabana and screened porch face west and are ideal for watching the sunset (Fig. 4.7).
The rest of the site was fully utilized by extending elements of the house’s design into the landscape, encouraging exploration beyond the house itself. All the walks and paths are continuations of the interior circulation patterns of the house itself. An allee constructed from architectural concrete extends the front terrace that runs parallel to the pool out toward the creek. This allee is planted with matched pairs of white crepe myrtle aligned with the house’s structural grid, as are all the planting materials (Fig. 4.8).
The reason this house is the case study for this chapter is the tremendous effort at value engineering made by our firm, working with the contractor and our consultants with the support of the owners, to bring this house in at a cost they felt they could afford. Early in the project we selected the general contractor who was also part of the design process, reviewing and contributing to the final selection of finishes and details.
FIGURE 4.8 Creekside view of the rear elevation of the Fifield-Roseberry house showing the raised concrete allee and screened porch. The wall with framed openings at the right of the house encloses a private garden off the master bathroom. (Steven Vaughan Photography.)
When we completed the drawings, he began to price the work and obtain bids for several of the major line items. Our expectations were that the house, originally set at about 8000 ft2 air-conditioned would cost about $150.00 per square foot (without the landscaping scope of work) or approximately $1,200,000. When the contractor completed his pricing, initially the house priced out at just below $2,000,000 and was considerably higher than the owner was willing to spend.
The owners were committed to the project and charged us with making recommendations to them regarding the best way to bring the house closer to the budget without sacrificing the design. With their permission and support we set about trying to reduce cost by more than 30 percent along three parallel paths with the idea that each could contribute to a lower price, but none alone would be adequate.
One set of possible considerations involved the size of the original house and the number of rooms and spaces. When we completed the design, the house had five bedrooms, two on the second level. Taking advantage of the area above the garage, we had designed two additional bedroom suites into the house for guests. These were accessed by a sculptural steel stair that was visible from the major rooms and required a high level of detail and finish. The garage itself was designed to park four vehicles. After discussions with the owners we suggested taking out the two upper-level bedrooms with their associated baths and closets, which also allowed taking out the expensive architectural stair. The garage was reduced to three spaces. In all this change deleted about 600 ft2 from the house, without affecting any of the major rooms or spaces.
Second, we as a team value-engineered the work done by the consultants, focusing on structural design as well as mechanical, electrical, and plumbing design. It was our original intention to distribute the air-conditioning through the floor, so we had designed a crawl space for the ductwork and plumbing. Due to this condition we had an elevated concrete slab that required significant formwork and reinforcing steel, as well as multiple concrete pours. By making the decision to distribute air through the walls and ceilings, instead of the floor, we were able to go to a slab, poured directly on piers with significant savings, again with no change to the overall design. With regard to the electrical scope of work, we worked out the logical placement of the existing art in the new house, along with potential locations for new pieces and limited lighting to just those areas. In effect we made a decision to eliminate any general lighting for the house, making the illuminated art the dramatic backdrop for every one of the rooms.
Finally we looked at the finishes and determined what items we could give up or substitute. The original plans specified limestone for the exterior cladding of the house arranged in a pattern of dimensional panels 18 in × 36 in. This was one of the most expensive line items in the project construction budget; procuring and fabricating the limestone, then transporting it to the site, and finally installing it comprised over 20 percent of the total project cost. By making the choice to go to stucco for the exterior finish, the shape and layout of the house could remain the same, and significant cost savings were immediately realized.
Each of these items, along with several other minor choices, when combined, contributed to the lower cost; but overall the quality-of-life and design priorities for the house were kept in place for the owners, much to their delight and satisfaction. For us, the opportunity to realize our design, with what could be perceived as compromises only to those who understood the full original scope of work, was a tremendous reward. We reduced the scope of work and brought it down to just over $1,250,000 without sacrificing the design. The house is 8 years old, and the owners still love it and are some of our firm’s most ardent supporters.
