Help! contractor underbid job and I need advice
Joan Gillett
We have a long-standing relationship with a good contractor. He gave us
a verbal bid of $3,000 on a large scale landscaping/foundation job. His
guys began the work a few weeks ago without a written contract in place.
He told me he was hesitant to write a contract because it was an unusual
job and he wasn't sure how long it would take. He asked if we could do
it on a Time & Materials basis instead of his normal written contract,
where we agree on an amount before he starts the work, and that's the
amount we use regardless of how quick or slow he finishes the job.
He called me this weekend with bad news. He said his guys had already
racked up $8,800. He faxed me the list of charges, and among them were
equipment rental charges that amounted to close to $3,000. This was his
own equipment (a bobcat, a truck, and so on) and I don't recall ever
having seen equipment rental charges on his contracts before. I own my
own business (computer documentation) and would never charge a client
for rental time on my computer, scanner, etc. So do I question the
equipment rental charges? Only $1600 was materials... the rest was
labor, and I know he makes a good profit on his labor charges,
especially for his part-time help. Do I question the labor charges?
As I've said, this guy has been good to us over the years--he's on time,
his work is highly praised by everyone who sees it, and his workers are
polite and friendly people that are a pleasure to have around. So I
don't want to create "an incident." But the job is unfinished... and he
estimates that there's still a few thousand left. So this could get up
over $10,000. What do we do?
Thanks
Joan
salka
Joan Gillett wrote:
>
> We have a long-standing relationship with a good contractor. He gave us
> equipment rental charges? Do I question the labor charges?
>
> As I've said, this guy has been good to us over the years--he's on time,
> his work is highly praised by everyone who sees it, and his workers are
> polite and friendly people that are a pleasure to have around. So I
> over $10,000. What do we do?
Joan- You sound like a good person to work for. Rather than
questioning specific charges which are probably completely accurate
and normal for his business, I would concentrate on the facts that you
are sure of. 1)He gave you an estimate (albeit tentative) of $3000.
2)You agreed to pay time and materials. 3)The final cost will be
approximately $10000.
I suggest that you talk to him about these facts and see what kind of
a compromise you can reach. Be aware of the possibility that he may
have already marked down his costs to ease your shock. You should
trust your judgement of the man's character. Paying more than you
expected but getting what you wanted is not the worst outcome. The
countryside is filled with contractors who will charge more than the
estimate (They can always find extras) and still cut corners.
I once built an addition for a couple who had received an estimate
from my business partner. With the framing completed I realized that
our price was underbid by at least 50%. I immediately went to the
gentleman and told him of our predicament. He said nothing. I then
proposed that we bill him for our actual costs and deduct $3000 from
that total at the end of the job. This $3000 roughly equaled our
overhead and profit for the job. He agreed and we both were happy. We
did more work for him later on and there was never a question of
price.
Be direct, make a fair offer, give him a chance to do the same.
salka
Mike
In article <336E5CCD...@careys.com>, jo...@careys.com says...
>
>We have a long-standing relationship with a good contractor. He gave us
>guys began the work a few weeks ago without a written contract in place.
>He told me he was hesitant to write a contract because it was an unusual
>job and he wasn't sure how long it would take. He asked if we could do
>it on a Time & Materials basis instead of his normal written contract,
>where we agree on an amount before he starts the work, and that's the
>amount we use regardless of how quick or slow he finishes the job.
My first thought is without a written contract you are probably powerless to
do anything. On the second hand, if the guy is as good as you indicate, work
with him. See what they are willing to do. Prehaps you will need to leave
some things off, make the design simpler, or leave parts unfinished to do
yourself later.
>He called me this weekend with bad news. He said his guys had already
>racked up $8,800. He faxed me the list of charges, and among them were
>equipment rental charges that amounted to close to $3,000. This was his
>own equipment (a bobcat, a truck, and so on) and I don't recall ever
>having seen equipment rental charges on his contracts before. I own my
>own business (computer documentation) and would never charge a client
>for rental time on my computer, scanner, etc. So do I question the
>equipment rental charges? Only $1600 was materials... the rest was
You could question it, but I doubt it will get you anywhere. When you charge
a client for your service, you may not spell out a rental charge on the
reciept for computer time, but your not going to lead me to believe your
computer is free either. I still pay for the computer, whether it is rented,
leased, or purchased, in the form of the mark up I pay for your service.
>labor, and I know he makes a good profit on his labor charges,
>especially for his part-time help. Do I question the labor charges?
If labor is the largest portion of the bill, that is probably a negotiating
spot. Ask him what he charges by the hour, and first make sure the total
labor charge is representative of how much work is being done (ie: watch for
"clock padders"). Next try and determine how much he pays his help. He
probably won't tell you, but the workers themselves might be willing to give
you a ballpark figure. The difference between what he pays his workers and
what you pay the contractor is the contractors mark up. Some of this markup
will pay the contractor and his requirements to run a business (light bill,
secretary, phone, car, etc). Some of his mark up is undoutedly to buy new
equipment to replace the old, and to cover wear/tear/maintainance on what he
has now.
You however already know he rented a large amount of equipment and charged
you separately, so therefor his cost for equipment related items should be
minimal (assuming some of the equipment, saws, hammers, etc. he used are his
own). If you think your contractor's labor mark up is high, see if he has
adjusted his markup to consider the use of rental equipment. Other wise,
your only choice would be to ask for a reduction in his markup, which
probably will come out of his pocket to do so.
>As I've said, this guy has been good to us over the years--he's on time,
>his work is highly praised by everyone who sees it, and his workers are
>polite and friendly people that are a pleasure to have around. So I
>don't want to create "an incident." But the job is unfinished... and he
>estimates that there's still a few thousand left. So this could get up
>over $10,000. What do we do?
Again, if he is as reputable as you say, he should work with you on the final
cost. Even though you have no written contract (and presumably no formal
estimate) there should be a moral obligation to work towards his original
guess. On the other hand, don't expect to pay $3000 for a $10,000 job (ie:
you will have to give as well).
--
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Steve Dropkin
> We have a long-standing relationship with a good contractor. He gave us
> a verbal bid of $3,000 on a large scale landscaping/foundation job. His
> guys began the work a few weeks ago without a written contract in place.
> He told me he was hesitant to write a contract because it was an unusual
> job and he wasn't sure how long it would take. He asked if we could do
> it on a Time & Materials basis instead of his normal written contract,
> where we agree on an amount before he starts the work, and that's the
> amount we use regardless of how quick or slow he finishes the job.
>
> He called me this weekend with bad news. He said his guys had already
> racked up $8,800. He faxed me the list of charges, and among them were
> equipment rental charges that amounted to close to $3,000. This was his
> own equipment (a bobcat, a truck, and so on) and I don't recall ever
> having seen equipment rental charges on his contracts before. I own my
> own business (computer documentation) and would never charge a client
> for rental time on my computer, scanner, etc. So do I question the
> equipment rental charges? Only $1600 was materials... the rest was
> labor, and I know he makes a good profit on his labor charges,
> especially for his part-time help. Do I question the labor charges?
Time to talk to him ... Also time to dig up old invoices (you _do_ have
them, don't you? they're part of the cost basis your home and good for
reducing capital gains on the sale of the house whenever you sell it) and
see if you have been quoted for rental time before. If this is his own
equipment and not stuff he had to rent special for this project, I
certainly would challenge him on it or at least find out why this invoicing
is different. And it may be time to get another contractor in for a bid,
even at this point.
I'm sure others here will have additional advice, but I would:
1) sit down with this contractor, stress your value as a customer, and come
to some agreement on how you can finish the job relatively economically or
come down on the price charged so far for labor (and the price to be
charged for labor on the rest of the project). You can bet there's some
room to negotiate on the labor charges; you need to try for it.
2) resolve not to let this happen again. If he told you up front he wasn't
willing to sign a contract because of the unknown scope of the project, you
should have asked another contractor to bid on it (this one simply may be
over his head on this job) and/or established a point X amount of time into
the project at which point you both reviewed the findings to date and came
up with a firm estimate you both could live with. If things were
inconclusive at that point, you would have needed to set another
"inspection milestone."
3) monitor this project more closely. You might have mentally calculated
costs according to a breakdown he provided of labor charges, raw material
costs, etc., or asked him to partially-invoice you sooner (see above re
"inspection milestones").
My somewhat-solicited $.02 is that this is going to be an expensive lesson
in how not to do it. Your best effort at this point is in challenging any
expense that does not seem right and finding a way that neither one of you
is stuck with the bill. Talk and insist that he talk openly and honestly.
And don't pay him anything until you have an agreement _on paper_. Good
luck!
--------------------------------------------------------------------
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-- Fritz Anderson
Staff
Joan Gillett wrote:
>
> We have a long-standing relationship with a good contractor. He gave us
> a verbal bid of $3,000 on a large scale landscaping/foundation job. His
> guys began the work a few weeks ago without a written contract in place.
> He told me he was hesitant to write a contract because it was an unusual
> job and he wasn't sure how long it would take. He asked if we could do
> it on a Time & Materials basis instead of his normal written contract,
> where we agree on an amount before he starts the work, and that's the
> amount we use regardless of how quick or slow he finishes the job.
>
> He called me this weekend with bad news. He said his guys had already
> racked up $8,800. He faxed me the list of charges, and among them were
> equipment rental charges that amounted to close to $3,000. This was his
> own equipment (a bobcat, a truck, and so on) and I don't recall ever
> having seen equipment rental charges on his contracts before. I own my
> own business (computer documentation) and would never charge a client
> for rental time on my computer, scanner, etc. So do I question the
> equipment rental charges? Only $1600 was materials... the rest was
> labor, and I know he makes a good profit on his labor charges,
> especially for his part-time help. Do I question the labor charges?
>
> his work is highly praised by everyone who sees it, and his workers are
> polite and friendly people that are a pleasure to have around. So I
> don't want to create "an incident." But the job is unfinished... and he
> estimates that there's still a few thousand left. So this could get up
> over $10,000. What do we do?
>
>
> Joan
Tell him that his price is unacceptable. Earlier you wrote, "where we
agree on an amount before he starts the work". Tell him that is what
you agreed on and that is what it will be. Tell him that you didn't give
him a blank check and you never agreed on the $8,800. bill ahead of
time. If he finds this unacceptable then he should pack up his gear and
get off your property. If he doesn't leave, call the police and have him
arrested for trespassing. He has no contract and legal right to be on
your property.
You need to be more cautious next time. A proffessional will know
exactly what the job should cost. There are always surprises, but
equipment rentals (if their are any) are a fixed cost that the
contractor knows in advance. This guy is trying to take advantage of
you, don't let him. Be more careful in the furure...THE LOWEST ESTIMATE
IS NOT ALWAYS THE BEST ONE!!! Many contractors low ball the estimate
just to get the job, and then run up the bill later.
Steve
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salka
Staff wrote:
> Tell him that his price is unacceptable. Earlier you wrote, "where we
> agree on an amount before he starts the work". Tell him that is what
> you agreed on and that is what it will be. Tell him that you didn't give
> him a blank check and you never agreed on the $8,800. bill ahead of
> time. If he finds this unacceptable then he should pack up his gear and
> get off your property. If he doesn't leave, call the police and have him
> arrested for trespassing. He has no contract and legal right to be on
> your property.
>
> You need to be more cautious next time. A proffessional will know
> exactly what the job should cost. There are always surprises, but
> equipment rentals (if their are any) are a fixed cost that the
> contractor knows in advance. This guy is trying to take advantage of
> you, don't let him. Be more careful in the furure...THE LOWEST ESTIMATE
> IS NOT ALWAYS THE BEST ONE!!! Many contractors low ball the estimate
> just to get the job, and then run up the bill later.
I do not agree with this approach for the following reasons: 1)The
owner has a relationship with the contractor. This relationship is
presumably built up over time and a number of other projects which
have been mutually satisfactory. What would cause the contractor to
jeapordize this relationship? 2) The contractor and the owner both
agreed to proceed on a time and materials basis instead of their usual
arrangement. They did this because the contractor was not sure about
the extent of the work. If someone does this all the time they are not
*professional*. If they do it when the project is uncertain, this is
just prudence. It is often foolish to insist on a firm price on every
project. If forced into giving a firm price on an uncertain job
(whether from incomplete plans, specifications or unknown conditions)
most contractors that you would trust to work on your property are
going to cover their ass with a high price and you can be certain that
they will make you pay all of it because you made them take a
risk.3)Every publicly bid job which we have ever bid has a clause in
it which allows for additional costs brought about by unusual
conditions which are revealed by excavation. I don't know that these
occurred in this case but I wouldn't presume that the contractor is
cheating the customer based on ignorance of this. 4)If you want the
job completed and are happy with the quality of the work, this
contactor will do it faster and better than anyone you can bring in.
5)You are right about one thing. Be careful in the future. If you know
and the contractor knows that you are going to be using him for the
job, tell him to figure a range of prices. This will give you
information you need to make a decision and will make him consider a
range of possibilities.
I recommend that you negotiate with your contractor for a compromise
you can both live with. Don't pay him or have him continue the work
until you've reached an agreement. He will have incentive to agree
under these circumstances. ------Schell McKinley