Remodeling Myth: The Three-Bid Rule
Home
remodeling is a maturing industry. That means that truly professional
firms that specialize in remodeling are becoming the norm. Now
homeowners can draw from a greater pool of reliable remodeling
contractors in whom they can have confidence.
The shift to
more professional remodeling firms, however, necessitates a change in
how homeowners should best select a contractor. Specifically, the old
practice of collecting three bids for the work and using the low bid
to select a contractor no longer makes much sense.
The three-bid
rule appears to work because it assumes everything to be equal except
the cost estimates (or bids) from the three competing contractors. In
other words, the underlying premise is that the three bidders have
assessed and calculated the scope of work, blueprints, and
specifications in exactly the same way so that the owner can compare
'apples-to-apples.'
In reality,
however, such assumptions are risky and rarely accurate. Every
contractor, professional or not, analyzes a project and estimates
costs differently. As a result, the three bids are not
apples-to-apples comparisons. Some differences are subtle, but their
existence means that bid comparison can be deceptive.
Even if all
three contractors based their bids on precisely the same
interpretation of the project, the three-bid rule still reduces each
remodeler to a number, when the most relevant factors for the
owner's satisfaction are the builder's skill, experience,
personality, record of success, and ability to do the work. For this
reason, an increasing number of the best remodeling companies simply
refuse to bid competitively, opting out of such opportunities because
they know they will be evaluated only in terms of cost, rather than
whether they are the best firm for the job.
Such
remodeling contractors prefer a different approach: the negotiated
contract. In that scenario, a remodeling firm is selected based on its
abilities and its personality fit with the homeowner. Considering how
closely contractors interact with homeowners during a typical
remodeling project, these criteria are the best predictors of client
satisfaction.
The negotiated
contract also takes the guesswork out of the project's cost. In this
process, a contractor receives a budget from the homeowner based on
what the homeowner wants to spend, not on what the remodeler thinks
the project will cost. Sharing the homeowner's budget not only removes
assumptions and misleading comparisons of cost, but also builds trust
and facilitates honest communication about actual costs. If necessary,
the builder and homeowner can then negotiate choices and prices in
order to match the project's scope with the client's
budget.
Not only does
the negotiated contract process result in a more accurate estimate of
cost, it is also far superior to the three-bid rule in matching the
personalities of the client and the remodeler during the negotiation
process. The process also reveals the best match between a particular
project and a contractor's skills and experience. When there is a fit
for both personality and experience, home owner and contractor are on
track for a finished project that can meet or exceed
expectations.
As the
remodeling industry continues to evolve into a recognized profession,
it is adopting new and more effective methods of conducting that
business. The negotiated contract reflects the new age of home
remodeling to the benefit of every homeowner.
Warm
regards,
Austin Schmitt, John Schmitt, Mark Jackson, and
Elizabeth Mitchel
Kingston Design Remodeling
11515 Suburban Place
Fairfax Station VA 22039
(703) 323-6527 - phone
kingstonbuilders@cox.net
www.kingstonbuilders.com
c.
2006 All
rights reserved.
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