Ideally you should aim to get at least three different quotes for your project. To achieve this you will probably have had to identify at least a dozen potential builders and have invited at least seven or eight to tender for the work — several will probably not respond depending on how busy they are.
Each quote then needs to be assessed in its own right, and you need to assess how complete the price really is, and how many areas there are where the price is not firmly tied down.
It is probably best to ignore items that have been priced with a Provisional Sum and instead compare the measured rates which they have used to arrive at the figure, and which they will apply to calculate the final cost. The final quantities are likely to be the same whoever undertakes the work.
Once you have analysed each quote and chosen one or two that look both competitive and realistic, you can start to go back and try to negotiate on different areas where you think one may have charged considerably more than the others: you may be able to get them to revise the costings downwards. Some people choose to commission a quantity surveyor to produce an independent cost assessment and this can be a useful tool to use in negotiating prices with a contractor where large sums are involved.
You should always be very cautious of quotes that appear too good to be true — because they usually are. If a single quote comes in well below the others, it is likely either to have omissions, or the contractor may be planning to make up the difference once they have secured the contract by exploiting loopholes in the specification and tender documents, or by overcharging for any variations you later make to the contract — it is unlikely that you will make no changes, and some variations are usually necessary on site anyway due to errors, omissions or lack of clarity on the drawings.
What if they’re all too high?
It’s perfectly possible that all of the quotes you get back will be in excess of your expectations. This may well be because your expectations are too low (they should be based on the Build Cost Guide in the back of this magazine) but it might also be due to other reasons.
The most likely reason is that you’re living in an area where there still isn’t a lot of competition between builders — or too much demand for their services, meaning upward pressure on prices.
The solution is not to go back to them and ask them for a more competitive quote — but rather to go over the quote and try and work out if there are any savings you can make (perhaps reducing their involvement on site) through materials or labour. You might also consider asking more builders to tender.
Selecting a Building Contractor
It’s not easy to see past the cheapest price — but your selection should be based on much more.
Price is obviously a major factor in deciding which contractor to appoint — however, there are other considerations to make in selecting the most suitable builder for your project. Choose the one that scores highest across each of the following measures:
- A competitive price (having analysed the quotes)
- A fair and reasonable approach to variations and extras
- An understanding of your objectives
- The availability you need
- Relevant experience
- Good references from clients and suppliers
- The workforce and contacts needed
- Willingness to agree payment terms that suit you
- Willingness to work on the basis/contract you require
- The guarantees you need e.g, a structural warranty such as NHBC
- VAT registration: you cannot benefit from zero rating for VAT on materials for new build, or most of the VAT concessions on renovation work if the builder you hire is not VAT registered
Bear in mind that whichever quote you accept, a builder is unlikely to be prepared to make a loss on a project if it ultimately turns out that they have under-priced the contract. They will look to recover at least their costs, if not their profits, and this can lead to disputes further down the line — when it is much more difficult to do anything about it. It is far better to have an accurate and realistic quote in the first place and it is your responsibility to make sure of this. The best way to do this is to look at other people’s build costs in the ‘Your Projects’ section of this website.
A quote may include allowance sums — here’s what to look out for
A contractor’s quote will include allowances for items that are estimated, known as Provisional Cost Sums (PC Sums). PC Sums are given for items for which it is impossible to accurately quote a fixed price. There can be many in renovation work and in a conservation project almost all of a quote will be PC Sums.
The quote will also include allowances for Prime Cost Sums. These are items that have not yet been finalised but which will be chosen by you the client, such as kitchen furniture and bathroom suites. Normally, a quote will make an allowance for Prime Cost Sums including a handling fee, an estimate for the labour involved and a charge of around 5-10% for project management.
Beware the measure
Gross internal floor area is the measure most designers use (the most common in the industry). It’s the area of a building measured to the internal face of each perimeter wall for each floor level. It includes areas occupied by internal walls and partitions. There are, however, alternative measures, particularly ‘gross external area’, which is simply the measure from outside wall to outside wall.
The difference between the two can be in the region of 15%, and as a result it’s worth clarifying on your plans (and with the quoting builders) which measure you’re using.
H&R Editor Jason Orme recalls his experience of the tendering process
“The designer and I made up a list of preferred builders and invited them all to an ‘open day’ at the site. About half of the builders who said they would turn up actually showed (five). We spoke to the select few about the project, showed them the site, and presented them with a full set of plans and specification documents.
“A month later we chased up the builders we met to see where their quotes were. Three had got back to us — two with realistic prices a little over our budget and one wildly over. Luckily, the cheapest was the one I preferred anyway, so I went to see his previous projects and proceeded with him, splitting the contract in two – to the watertight stage, and to completion – in order to incentivise a strong start to the project.”