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Direct costs will be items such as lumber, concrete, and
labor. These items are things that will be permanent fixtures
in the home, or such things that will have been done to
complete the construction.
Indirect costs will be items that the builder charges to keep the business
running. Indirect costs can be broken down into overhead and profit. Profit
is what the contractor charges for their knowledge, experience, and management
ability. Overhead will pay for the contractors' phones, power for the
office, office staff, payroll service, etc.
Advertise
Typically, a homeowner will have gone to an architect to
design the plans or gotten them from a plan service. I suggest
using an architect as they will help you make changes to
the plan and can assist in advertising for bids. Often,
when advertising for bids, a listing in the local newspaper
will be sufficient, but if several contractors in the area
are well known you may call them and ask if they would like
to bid on the project. In my honest opinion, this is the
best method. This will give you the option to choose whoever
you want. Also ask them if they can fit you in their schedule,
this is important due to the fact that if they have lots
of work, they will bid higher to cover the extra costs they
will incur to complete your home. The architect should also
provide you with a base cost for the project that you can
compare with the bids for accuracy. Do not, I repeat, DO
NOT take the lowest bid just because it's the lowest.
Interviewing
After receiving the bids, pick several of them based on
track record, cost, and professionalism and then interview
with them, interview all of them if you have time. One point
to remember in the bid sheet, do not stipulate when or how
the bid will be awarded, instead state something to the
effect of, "Bids will be opened on Month, Day, Year
and bids will be awarded after an interview process has
been completed." You can get some good ideas in differences
of building techniques and design during the interviews.
Many times a homeowner will just pick the lowest bidder
and end up with someone that they are incompatible with.
This is very important, if you can't deal with the contractor
you will not have a pleasant experience during construction.
Do not cull a bid because it is more expensive than the
others, they may have seen a problem area that the others
did not see and are covering for it. This will usually become
apparent during the interview process.
Accuracy
Another item when comparing the bids, make sure the contractor
has bid for what you wanted them to bid for? Did they include
your Viking model cooktop or did they substitute it for
a lesser model or brand? The problem that arises when substitutions
are made that you were unaware of is a change order. Change
orders make for bad business relationships. Don't get me
wrong, there will always be change orders but they should
be kept to a minimum. When substitutions are made the homeowner
does not get an accurate estimate of final project cost,
it will be a final project cost without all the change orders,
which add up quickly. This is how many contractors get jobs,
they bid the lowest quality items and then change order
everything back up to the original product. They show you
a very low cost but when it's all said and done you end
up paying just as much as if you had taken the highest bidder.
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