Alfa Builders
The Owner’s Crossroads – Do I Negotiate or Take Competitive Bids?
When getting a construction project off the ground, some things are a given. The owner has to acquire some property, get a design drawn up for the building, and hire a contractor to build it.
But there are a few options related to hiring a general contractor once the design is completed.
Two of these options are to negotiate with a reputable builder or to take competitive bids from several builders (typically, the builder with the lowest price would be hired). Here are some advantages and disadvantages of each.
Option #1 – Negotiate
One distinct advantage to negotiating is that you can hand pick the contractor of your choice. Since construction projects can often be daunting tasks for an owner, it is reassuring to start the process with a team that you, as the owner, have selected yourself.
Another advantage of negotiating with the contractor of your choice is that you can get this process started early. During the design phase, the contractor can be brought in to help the project stay within budget.
Also, if there are some materials or products that have a longer lead time, these could be ordered so as not to delay the construction phase. Involving the contractor in the design phase could help save a month or two on the back end of the project.
The main argument against negotiating is there is always the question in the back of the mind of the owner – “did I get the best price on my facility?” But if the owner has done a good job selected his contractor, it helps allay any fears that might pop up.
Option #2 – Take Competitive Bids
The best reason to take competitive bids is to ensure that you are getting the best price that the market has to offer.
A commercial construction bid can have as many as 15 to 25 bidders in today’s tight economic climate. So it really forces the contractors to trim any “fluff” from their proposal if they want to have a serious chance at the project.
The two main disadvantages to competitive bidding are that the low bidder might be someone the owner and architect do not know as well as the fact that the project cannot get underway until after the bid process is completed.
Which Option is Better
The answer is it depends on the situation. If the owner has a good working relationship with builders and has liked the work they have done in the past, negotiating a project is a good route to take.
However, if the owner is a novice on the construction scene, and his main goal is to get the project built as economically as possible, then follow the competitive bid route and rely heavily on your architect to weed out any unqualified bidders.
Please comment below if you prefer one method of awarding a project over another or feel free to Contact Me.
