Reversing the Bid Process
From contributor H:
Yeah, then you would know how much more he is willing to pay you over and above what you would have been happy with! Unless you're one in a million (which means there are 10,000+- more just like you), it ain't gonna happen.
From contributor A:
If I understand you correctly, the answer is yes. I refer to it as "shopping". It goes something like this. The contractor is bidding a cost plus contract. Sometimes they do not have time to get specific pricing for every project within the bid. Instead they guess at allowances for each aspect of construction. These guesses may be based upon multipliers like linear footage or square footage or simply a guess.
So they throw a number like 5k for a mantle. The original estimate was only for allowances (not firm numbers by any means). So he's got this 5k number in his head and more importantly, he has told the customer the 5k number as well. He then shops it to subs like myself. He simply says "can you build this for 5k within the next 3 weeks?". I do the math and I am pretty sure I will make $1500 profit. I take the project and everyone is happy. If I simply say no because of timing, not enough money, etc., the contractor will try to shop this price to his other subs.
If no one can do it for that price in that time frame, he loses a little face and explains to the customer that "if they want it now, it's going to cost them a little more," or honestly, "my initial number was on the low side of the true cost." Then I can take the project based on my new price knowing what he is willing to pay. Obviously this gives you quite a bit of leverage if you don't really need the work in the first place.
The only downside is that over time based on your relationship with the contractor, he may not trust your general pricing and start trying new subs. In my case this has happened. My contractor tried a couple of other subs and found that their cost/quality/timing/prices were not on par with my own. That actually reinforces our relationship in the future. It also gives me more leverage to get better pricing.
In my experience this only happens on multimillion dollar residential cost plus contracting. The contractor basically doesn't care about the actual cost. The quality and timing of these projects far exceeds the cost.
This relationship has made my business more profitable than any other aspect. I consider myself fortunate to have maintained such a relationship. I am currently trying to nurture a similar relationship with a second local contractor. The key to this is that both of these contractor's work is 90% cost plus.
From contributor D:
Thanks for your responses. My question stems from the project described in the Architectural Woodworking section entitled "raised panel wainscoting in spiral stairwell?", a thread which generated a lot of really interesting discussion. I'm going to start a new thread in this section to pose my question in a different way, which is more to the point...
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