This week’s report uncovers key issues if you’re selecting your contractor through competitive bids.

"It's unwise to pay too much, but it's worse to pay too little. When you pay too much, you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the job it was bought to do. The common law of business balance prohibits paying a little and getting a lot. It can't be done." John Ruskin, Author/Economist 1819-1900

When you have drawings or plans ­ or are about the have them prepared ­ it is common practice to call several contractors for bids. This method of selection is called "Design ­ Bid ­ Build" and it involves many issues which I would like to draw to your attention.

To truly compare bids, you would need a complete set of drawings and a full list of specifications. Even for a medium-size renovation, this could involve thousands of items. In theory, this is possible but in reality, it just doesn’t happen.

Contractors typically include different materials and different components according to their own preferred standards. These are the price differences that show up in your bids. The end result is you have no real means of comparison... because you can’t compare apples to apples.

When you shop for price, which you do when you ask for competitive bids, you may find enormous and puzzling variations in cost.

Beyond what is stated on your drawings or specs, you have no real control over quality with competitive bids. Once the contractor has quoted a price, a portion of that price will go to cover his costs and the remainder will go to his earnings. If his costs are lower, his earnings are higher.

As a result, if something unexpected arises during your project, the contractor might need to cut quality in order to complete the job profitably or to complete it at all. Given the choice between going out of business and downgrading quality, most contractors would select to stay in business.

For specifications not clearly set out in the bid, your contractor is not committed to use any other materials or methods. This means as the job progresses, many options will be up to your contractor... who will then choose between more expensive methods and materials on one hand and additional earnings on the other.

Even if you tell your contractor what you’d prefer, he is not obliged to provide it unless it’s spelled out in the bid... or you’re willing to pay extra for it.

While some architects and designers perform inspection services to make sure their design is being faithfully rendered, even this would not totally prevent alterations... or affect later choices of materials and techniques. Are you prepared to oversee every aspect of construction yourself... or hire additional personnel to do it for you?

And if the specifications spelled out in your bid are violated, what recourse would you have? Is a lawsuit a viable option?

• Except for basic building codes, few rules govern construction quality and workmanship.     
• It is not uncommon for some contractors to bid low intentionally... while expecting to increase earnings through extra billing as the project progresses.     
• About the only consistency with the competitive bid process is that if something's not clearly spelled out, you likely won’t get it without paying extra.     
• Since a contractor is not generally paid to provide competitive bids, he is not likely to be able to afford the time for accurate estimating.     
• Casually prepared bids tend to look "more reasonable" than estimates that are thoroughly researched. This is simply because they do not include everything. Overlooked details, omitted materials and hasty calculations all tend to lower the price... until later.     
• If all contractors pay the same material costs, how come they can quote different prices? Good question! In reality, most creditworthy renovators do pay about the same price for the goods and services they purchase.     
• If there is a cost advantage, it is typically because one contractor is purchasing and providing lower quality products or services.     
• Many of the trade’s more qualified contractors reject competitive bidding. This is partly because an accurate estimate takes a significant amount of time and effort. To make such an investment only to lose the job to a lower and possibly less thorough bid makes little sense to them.

In the end, of course, the decision is yours... but I hope you now have a better understanding of why the competitive bid process may not be the best option for your renovation... and I would recommend that you select your contractor in an entirely different manner.