Is the Lowest Bid, The Best Bid
LOW BID HARD TO IGNORE
Building Insights by Allen Gorin
(Excerpt from the Sacramento Bee, November 12, 1994)
Let's try an experiment, you and I. I promise I won't share the results with anyone, and you may learn something important about yourself in the process. Pretend you're doing a family room and half-bath addition to your home, and you're down to choosing between two contractors.
The first contractor appears to be well organized in his initial presentations. He explains what you will be getting in the way of a final product by showing you pictures, diagrams from remodeling magazines, and testimonials from previously well-serviced clients. When you ask him questions, he appears to think through each answer before giving you his opinion. His business manner is, in a word, thorough.
Contractor Number Two, on the other hand, appears more tentative. Sure, he smiles a lot and has a firm handshake, but his proposal is generally vague. You have to draw many specifics out of him, which if you didn't press him for them, wouldn't become clear until much later on in the project. Furthermore, when you ask Contractor Number Two a question, he seems to be scanning you in order to give you what he thinks you'd like to hear as an answer. His business manner, in the lingo of the Old West, is probably "shoot first, ask questions later" (if he even thinks to question).
Based on the profile I've given you to this point, which contractor would you choose for your project? Contractor Number One, you say? I thought so. So would I.
Oh, I neglected to add one tiny bit of information. And in all fairness, I have to share it with you in order to make this experiment as realistic as possible. Contractor Number One's estimate is $41,550: a mainstream price, you quickly determine. For everything. No hidden costs. Cast in concrete. Contractor Number Two's estimate is $32,762.00, about 20% less than the first contractor's proposal. For everything (we assume). No hidden costs (we hope). Cast in concrete (before it's had a chance to harden).
Now which contractor would you choose? I can hear the gears turning between your ears. "Hmmm, that $8,800.00 differential is mighty tempting. Think what I could do with that extra dough. More amenities, ceramic tile instead of a vinyl laminate in the bathroom?" And so on and so on.
But what about our mental reservations about this contractor? "Maybe he had a lot on his mind the day he compiled and presented his proposal, and just made some honest oversights. It can happen to the best of us."
See what is happening here? That $8,800.00 is tempting you to rationalize the contractor's initial behavior, so that you can find some way in your mind's final analysis to get the product you want at the bargain-basement price you desire. Say it isn't so and I will exclude you from the manifold group of homeowners who always fall for the lure of the low bid. What we're faced with here is the widespread tendency to accept the lowest-priced proposal which, to be fair, is not simply endemic to homeowners and the world of home improvement.
In fact, a while back I was one of several guest speakers at a meeting of the Santa Barbara Contractors Association, at which a fellow speaker went so far as to address the matter as a national problem. According to this fellow, an American businessman by the last name of Deming was courted by the nation of Japan sometime shortly after World War II. His reputation was that of a man of vision, one who had consulted for American industrialists and the war ravaged Japanese wanted his guidance in rebuilding their industrial economy. He established a number of principles around which the Land of the Rising Sun should rebuild.
Near the top of the list was the following mandate: to end the practice of awarding business strictly on the basis of price. The Japanese business sector took Deming's advice to heart and quickly changed their collective mindset from one that was price-driven to one that was value-driven. They began shunning the low-bidding contractors and suppliers and opting for those mid-ranged estimates which, while competitive (yet not cheap), offered long-lasting parts and equipment, iron-clad warranties, and great service.
They changed from short-term to long-term thinkers. And the rest, as they say, is history.
Back to our experiment. Based on Deming's principle, let's realistically re-examine our two contractors, and let our analysis be objective and long-term in perspective. The first contractor's proposal, reflecting an accurate grasp of the construction marketplace, was competitively priced and thoroughly thought through. Reality suggests that his work performance would reflect his estimating acumen. Translation: minimal change orders, minimal time delays, no hidden charges, more dependable subcontractors, fewer disputes, probable elimination of lien problems, stronger warranties, and generally a more pleasurable renovation for the homeowner.
The low-bidding contractor, on the other hand, gives the homeowner the chance to win big. But so do the blackjack tables in Vegas. And in both cases, the reality of what usually happens is that you can come out a loser. You could follow the advice of another sage, John Ruskin: "If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better."
Allen Gorin is a consultant and seminar speaker on the subject of remodeling.
Sunday, January 24, 2010
Wednesday, January 20, 2010
Replacement Siding Has the Greatest Return on Investment - Even More Than Replacement Windows
Replacement Siding Has the Greatest Return on Investment - Even More Than Replacement Windows
By Lenny Scarola
DreamHome Remodeling Inc recently concluded a survey of all its past customers on which home improvement project they believe results in the highest return on investment (ROI).
Here are the results, followed by the true findings:
A. Replacement Windows 63.64%
B. Replacement Siding 9.09%
C. Bathroom Remodel 18.18%
D. Adding a Deck or Patio 9.09%
The True Findings
The actual research finds that replacement siding has the greatest return on investment, as high as 102%, as backed by the Qualified Remodelers magazine. This study has been done by many times over by both home remodelers and real estate research groups.
Second, is remodeling your bathroom, then replacing your windows, and lastly, adding a deck or patio. It's important to note, however, that all four home improvement projects do have a great return on investment, some just increase the value more than others.
Why Replacement Siding?
When you think about it, replacement siding covers the most square footage than any of the other projects. When you are changing this much of your house, it only makes sense that it also affects the value of the home the most.
In addition, vinyl replacement siding can radically change the look of a house. It can literally make a 40 year old house look nearly brand new. With today's home buyers making snap judgments based on initial curb appeal, this can really go a long way.
Why so many thought Replacement Windows
Windows received the greatest number of responses most likely because of how much they are in the news. The Federal Energy Tax Credit includes new windows and doors, but leaves out replacement siding (even though replacement siding can also have a dramatic effect on energy savings).
It is often the case, that whatever is in the news the most, is what sticks in people's minds, and will greatly affect their perceptions.
Lenny Scarola is the owner of DreamHome Remodeling of Northern Virginia and Maryland. DreamHome has installed vinyl replacement windows for over 10 years, in over 5,000 customer's homes. Go to Northern Virginia Windows more information on vinyl replacement windows, Gorell Windows, or to receive a free replacement window price quote.
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Tuesday, January 19, 2010
The Green Building Code and me!
By Joseph Hamby
Whatever your opinion is about global warming, you cannot ignore the fact that the cost of energy of every kind has gone up and will continue to do so for the foreseeable future. It's also not difficult to understand how these increases filter into every aspect of the home building business and into the costs of living for the homeowner, especially the cost of heating and cooling.
In reality when the entire building process is examined there is no point at which we can afford to not pay attention to methods and practices that save energy. The almost universal terminology for these practices is "going green". As Kermit, the frog, sang: "it's not easy being green."
Last spring, it got a bit easier. The International Code Council has adopted the National Green Building Standard ICC-700. The standard's rating system allows builders, designers and communities to choose the levels of high-performance green buildings that best suit their needs. Key provisions include:
* Land conservation
* Rainwater collection
* Construction of smaller homes to conserve resources
* Energy performance starting at 15 percent above the baseline requirements of the 2006 International Energy Conservation Code
* The use of low VOC (Volatile Organic Compound) materials and detached garages or carports to improve indoor environmental quality
Homeowner education on proper maintenance and operation to maintain its green status throughout its life cycle
Training on ICC-700 already is available. Check with the ICC to your local Home Builders Association for more information on scheduled training opportunities.
And just so the rest of the industry won't feel left out. The Code Council is finalizing its Green Building Technologies Certification program for building officials, inspectors, planners, zoning personnel, mayors, city council members, developers and other interested parties. Again check with the ICC for more info.
Also many utilities working with the Department of Energy and the Environmental Protection Agency have developed guidelines and green codes. Georgia Power and the Southern Companies have been leaders in this program called Energy Star.
The National Home Builders Association working through state and local chapters have created workshops and encouraged builders to work together to strengthen green practices and codes.
Now it's up to you and me. First as good business people: going green and the green codes will save money and make you money as more and more consumers understand the impact of energy conservation on almost everything. Second as responsible citizens of our planet and guardians of the future for all generations to come. The time to start is today. Doesn't it just make good sense?
To find out more about green building please visit the following links: Building Codes or Atlanta Remodeling Contractor.This article was authored by V.C Fuqua and Submitted by Joseph Vann Hamby. All editing and summaries are Authored by Joseph Vann Hamby in a collective effort to encourage publishing of V.C. Fuqua's brilliant View of Building Codes.
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