Our next topic is a two parter — here’s half of it for May. Stay tuned for the second half in June.
In our experience, it seems most owners and managers have their own process for requesting proposals and managing projects. There are a number of tools that managers and owners can make use of to consistently ensure the best outcome. While in practical terms it would be quite arduous to employ them all on every project, picking a few is bound to make you look better and end up happier in the end. Here are our best recommendations, in no particular order.
1. Establish some guidelines
Different properties and communities have wide ranging sets of priorities and financial resources. For some, the condition of the parking lots and roadways is a high priority and one they’re willing to pay a premium to keep at both a high functional and aesthetic level. For others, money is tight, there are numerous higher priorities, and they’d be content to park and drive on dirt if that’s what it came to. Let your contractor know where the owners stand and allow them to provide a proposal accordingly (are we just filling potholes or creating a bituminous masterpiece worthy of the Louvre?).
2. Ensure that minimum expectations are met from the proposal
We’ve seen some proposals…one page…work description “fix parking lot”… and price at the bottom. What are you really getting? Is there a catch somewhere? Are the terms and conditions fair and reasonable (if there are any at all) or are they completely one sided? At a minimum, here’s what we recommend – all quantities listed (in other words – no “as needed” – that’s a contractual excuse for shortcuts), all materials specified, a map and/or photos showing work areas, and a detailed list of clarifications, terms, and conditions. Most of the time in construction, the big money is in the details. If you’re skipping over important ones, you’re missing out on some things that could be important to the cost of the project and to you as a customer in the long run.
3. Cover the necessary documentation
Is the estimate/proposal/contract extremely specific, clear, and fair? Is the contractor providing you with what you need as far as listing the owners/managers as additional insured? If you’re managing HOA’s, did you contact their insurance company to ensure they don’t have a residential exclusion? (Many policies do as the cost for this coverage is substantial. Most insurance certificates don’t state the exclusion on the certificate. If there’s a problem, it could become a huge financial and liability issue if you haven’t done your due diligence.) Documentation is quick and easy and can save massive amounts of money and heartache if a disaster should arise.
4. Iron out large differences in prices
Contrary to what many clients believe, most contractors in a given industry have very similar cost structures. We buy our materials from the same suppliers for the same amounts of money (even “bulk purchases” in this industry have very little impact on price), the employees are paid roughly the same, the equipment types and costs are similar, and the profit margins are generally competitive. If there’s more than a 10-15% difference in the price for a similar scope, dig down and find out why. Chances are that someone made a mistake or is leaving out important details in their proposal that could clue you in. On the other hand, some contractors excel on and prefer smaller projects while others are better at and prefer the big jobs. But if something doesn’t seem right, it probably isn’t. Don’t be afraid to make a few phone calls and ask some good questions.
5. Consider the value of intangibles
Does the contractor do most of its work on projects like yours? Do they have processes to ensure the projects run smoother and the stakeholders are satisfied (especially retail tenants or HOA residents)? Have they performed work at your site or nearby ones with similar conditions? Are they simply more knowledgeable, detail-oriented, and professional? All of these things could be completely worthless or priceless depending on what type of project you’re undertaking. Make sure you take a moment to evaluate any factors that may be important to the success of the project outside of the basics of the scope and price of the work.
6. Be open to saving money through creative solutions instead of just low prices
In some instances, a good contractor can save hundreds of thousands of dollars, perhaps 20-40%, over the life of a solution through proper due diligence prior to scope creation and value-engineering. The tendency is to look straight at the bottom line on the proposals you’ve received to evaluate the cost of a project. There can be huge hidden costs in poorly thought out scopes that may be cheaper initially and massive savings in well thought out scopes that might cost slightly more upfront. Don’t forget to look at the big picture.
