If I were recieving bids and someone significantly lowered their price simply because I asked I would wonder why they didn't simply give me their best price in the first place.

Posted By engineer on 15 May 2012 11:50 PM
  - give a little, get a little; make a living, not a killing.

I like it

Posted By joe.ami on 16 May 2012 08:46 AM
If I were recieving bids and someone significantly lowered their price simply because I asked I would wonder why they didn't simply give me their best price in the first place.

The reasons will vary, but in hungry markets even the bid prices are down from where they were before the construction bust.  If they'll lower the price further it may be simply the "slim margins are better than an idle rig"  or keeping a client and keeping the crew busy even if the short-term margin is zero.  (In my own business I've had to work at-cost when times were slow just keep from going in the red on health insurance, but I don't bid a project that way right out of the gate.)

I'm not in favor of beating down on price as a general rule, but on simple foam jobs the bid prices seem both lower and much more widely variable than they were 3-5 years ago, despite an uptick on chemical feedstock costs.  If somebody is willing to undercut another by 30% it's an indication that there's wiggle-room in price, and that is sure to change when the market turns around.

Posted By Dana1 on 16 May 2012 11:13 AM 

If somebody is willing to undercut another by 30% it's an indication that there's wiggle-room in price, and that is sure to change when the market turns around.

Or there's an indication that somebody here today will be gone tomorrow. Maybe it's okay with insulation, but as a rule I don't recommend outfits that are simply working for cashflow or at cost.
A customer yesterday commented it's a suprise lately to call a company you haven't employed in a few years and find them still in business.

It is way too much aggravation...my time and therefore money, to get a foam guy to provide the quality I need only to have him go belly up months later.

If we grow enough we may pull the foam process in house, but for now I'll stick with the good guys, not the cheapest guys.

Posted By Dana1 on 16 May 2012 11:13 AM

I'm not in favor of beating down on price as a general rule, but on simple foam jobs the bid prices seem both lower and much more widely variable than they were 3-5 years ago, despite an uptick on chemical feedstock costs.  If somebody is willing to undercut another by 30% it's an indication that there's wiggle-room in price, and that is sure to change when the market turns around.

Years ago when I bid out a home, the pricing was all over the place depending on WHO you got the bid from. Mind you, this is the for the SAME EXACT house & finishes. It went from $90 - $180 a square foot. The guy charging $90 a sqft still makes a profit, so the guy who charges $180 sqft, he is making a killing.

I have family members back out east that are GC's and suffice it to say that they are multimillionaires and they are strictly residential builders, no commercial. They made their millions building homes.

There is a A LOT of fat in construction and the profits can be hidden in many places. I've seen GC's go to Lowe's and buy a $150 fixture and charge the homeowner $300 for the fixture and then charge them $150 to install it.

Posted By engineer on 15 May 2012 11:50 PM

I haven't been at this particularly long, but long enough to have figured out that the backbone of the business is referrals, and the only way to garner those is to treat everyone fairly - give a little, get a little; make a living, not a killing.

That is key. Everyone needs to make money but some of these guys are making 3 years salary on one build because they gouge the customer. Don't get me started on corrupt GC's....

The truth is probably nearer the middle. The guy charging 90 doesn't know his true costs and goes belly up, or, more likely, has a carefully orchestrated strategy of killing the client with the inevitable additions and change orders. The guy asking $180 may have a really inefficient operation, or is already at capacity so adding business means working lat, paying OT, etc.

The true cost of furnishing and installing a single $150 fixture may in fact be close to the $450 you suggest...There is time spent discussing / accepting the change order, processing it internally, physically procuring the item (sending someone in a company vehicle to Lowe's, maybe more than one Lowe's since big box stores often are out of the darned thing one need) Making sure the electrician hears about it (effectively communicating changes to subs is a bear). If the fixture changes a lamp to a ceiling fan, the box changes...and the list goes on.

There are a few millionaires in the GC biz, but a heckuva lot more who went belly up or have been eating Ramen noodles since the housing bust

In the "$150" fixture scenario, don't forget the warranty mark-up as builder is on the hook for part and labor for a year or more. I am very candid with customers about mark up and all are invited to purchase their own water heater to save $300; most however prefer to have me own the part and labor warranty.
j

Quite correct - I omitted that cost