What do William Shakespeare and the state of Denmark have to do with your Home Makeover Project ?

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Home Makeovers are often unpredictable ... predictably unpredictable in fact. They often come unstuck, get derailed, turn into a train smash.

 

That’s what happened to one of my Clients. Their project got messy before they even started the work on site and they needed my help to help them get back on track.

 

The trouble started in the early stages of their home makeover. The planned works involved some alterations and an addition to their family home. Like many homeowners, they needed more living space as their children were growing up but they really didn't want to move home. Their home was ideally situated for access to their local school, for catching the train to work in the nearby city and lots of other compelling reasons for staying put. So their only option was a home makeover project.

 

Their plan was to build an extension and then relocate their kitchen along with rearranging how the spaces were used to create a more functional, more efficient and larger living space.

 

They approached an architect who produced a simple set of design plans. The design wasn't contentious and so getting Planning Consent was straightforward. So far so good.

 

Then they invited bids or tenders - quotes - from a selection of general or main contractors. They were going to select and appoint the most suitable contractor who would carry out the construction works for them.

 

And then something happened that blew them way off course. It was unexpected, it was confusing and it stopped them in their tracks. "Now what do we do ?", they asked. Which is when I got involved.

 

As soon as they explained what had happened, I knew exactly what had gone wrong. To quote William Shakespeare, I knew "something was rotten in the state of Denmark". That's from Act 1 Scene 4 of Hamlet, Shakespeare's famous tragedy. One of the characters, Marcellus, makes this statement when he realises that something is not right. Something smells of corruption. And I was definitely smelling something that was off. And I was worried it could lead to some kind of tragedy.

 

Actually, it happens all the time on Home Makeover projects. My Clients had made the same mistakes most Homeowners make. And there are three mistakes, in particular, I want to warn you about in today's episode. As is usually the case, it's easy when you know how. And I love making things easier for Homeowners on their Home Makeover projects. Easier, faster and cheaper.

 

So, stay tuned because, once you've listened to this episode, you'll know the secret of how to avoid these three common mistakes and that will save you time and money on any and every home makeover project, anywhere in the world.

 

Hello and Welcome to Home Makeover Project Secrets, the show that equips Homeowners with the skills and understanding to execute successful home projects, that goes behind the scenes of Home Build Projects to unlock the secrets and share insider tips and strategies to save money and time on any and every home project. What you learn will give you the confidence to embark boldly on your next project and you’ll know what to do so your story has the happy, dream home ending you deserve.

 

I’m your host, Andrew Philips …

 

When I talk about "Home Makeovers", I include renovation, remodelling, alterations, additions, going up into attics and down into basements, redevelopments and even ground-up new builds. Any and every project where you're going to be appointing professionals, designing something, buying materials, carrying out construction work, employing contractors and sub-contractors, suppliers and manufacturers and even if you're doing some or all of the work yourself. All things home build.

 

I'm delighted you've joined me today.

 

Because we're dealing with what might be quite complicated information, especially if you are unfamiliar with some of the terminology and processes, the show notes and transcript will be uploaded to our website www.thediypm.com so you can easily revisit any episode and refer to the key information shared each week. And of course, if you prefer to watch or read an episode, rather than listening, you'll find links on the website as well. We also include any links to resources, free gifts and other useful information mentioned during episodes.

 

By way of some background and explanation ... across Episodes 5 through 9 I've been presenting a mini-series on Home Makeover Project Costs.

 

In Episode 9, I explained that bidding or tendering is one of the best ways to get competitive costs from Contractors on Home Makeover projects. I also shared some insider secrets about how bidding and tendering is only one part of the best strategy to achieve the best possible cost for any project. Do head over to www.thediypm.com/podcast and click on the link to Episode 9 if you haven't yet heard that Episode. As you'd expect, there are some rules to follow to make sure any bid or tender process ends successfully and today I'll share three.

 

Just to make sure you are clear on what I'm talking about - bidding or tendering is a process where you invite a number of contractors to provide quotations to carry out a piece of work - in this case, your home makeover.

 

When this process is executed effectively, you should be able to select the lowest cost and appoint that contractor with confidence that you are paying no more than the best, market-tested price for your project scope of work. But ... I have to warn you that this very, very often doesn't work out the way homeowners hope.

 

So now, let's go and find that rotten smell ...

 

I’m going to share what went wrong for my Client and more importantly, explain how they could have avoided the problem.

 

They had sent the drawings to four contractors. They'd invited them all to visit their property and during those visits they had explained what was involved - we call that giving a briefing. They had set a return date when the contractors would send in their bids. And then they waited with high expectations for the big day to arrive.

 

It's quite an exciting part of any Home Makeover Project. The bid process marks the transition from the design phase to the execution phase when the works will start on site. All your hard work is about to pay off. And, of course, there are some nerves. You've been working to a budget but now you're doing an actual, live test of whether or not your budget is correct - can you get what you've been hoping and planning for at a cost you can afford ? You're about to find out.

 

On the deadline day, three bids arrived. The fourth was missing. And it never arrived - still hasn't actually. But this isn't the big deal. As an aside though, I should mention this happens quite a lot. Even good contractors do this - and I highly recommend you only consider working with "good", competent, reputable, responsive, interested contractors. They are constantly submitting bids and tenders for projects. Sometimes they just get too busy and either run out of time to prepare a bid for you or they realise they haven't the resources either to prepare and submit their bid or to even carry out the project.

 

Good contractors typically do the decent thing and at least let you know they’re withdrawing and they'll probably be apologetic. Unfortunately, too often, contractors just don't bother. And then you lose one of your possible contenders. That's why we always recommend inviting at least three contractors to bid. Four is better because even if you lose one, you still have three options in the game. And that's usually enough to keep things competitive.

 

So, anyway, they opened the three bids that had arrived and that's when the alarm bells started ringing. Putting the bid returns in context, the Clients had estimated that the likely cost for the project should be around $ 75,000 to $ 80,000. And they knew they could afford $ 75,000 to $ 80,000. Bid 1 was about 15 pages and very detailed but Bid 2 was just 1 page on email - literally a one-liner- and Bid 3 was about 7 or 8 pages.

 

Bid 1 came in at ... wait for it ... $ 145,000 - wait, what ? That's crazy. Actually, that's ridiculous. That's nearly double the budget. Early panic started to set in. Had they completely underestimated the cost of the project ? Did this mean their hopes and dreams would be shattered ? Would they have to start again ?

 

But then, Bid 2 was for just $ 40,000 - oh wow, that's fantastic news. "That's so far under our budget". Almost half in fact. And then Bid 3 was around $ 82,000, quite close to the budget.

 

Well, you might be wondering what's wrong with those numbers. How was that a problem ? Maybe you're thinking : "Bid 1 was clearly just plain wrong, way too high. Probably just an expensive contractor or they didn't want the work anyway. We can just ignore that one. But Bid 2 was the perfect outcome because it was the cheapest, obviously, and way under budget. Brilliant news. And bid 3 was somewhere in between, but no matter, we can ignore that one too because it's way higher than clear winner, Bid 2."

 

Well, not so fast. You need to look a little more closely.  If a bid seems too good to be true, then it probably isn't accurate.

 

A reliable outcome is when the bids or tenders are all quite close together - the sweet spot would be plus or minus 5 to 10% from your budget. That would tell you that (1) - your budget was about right, (2) - you have three competitive bids and (3), you can probably safely focus on the lowest to verify it is a complete and accurate bid.

 

But, when you get a wide spread of totals from any tender or bid exercise, then something is wrong. "Something is rotten in the state of Denmark". Something smells off. It's just not possible that three contractors, all accurately pricing the same basic information for the same project scope could be so far apart.

 

Yes, it is true some contractors are more expensive than others - so there will always be a higher price. And often, the way contractors tell you they're too busy or don't want your job is to submit a price that's way too high. That way, if they win anyway, it will be really profitable for them.

 

You also hope there will be a contractor who, on the day is a bit hungrier, is looking for more work, is keen to work with you and your design team - or for whatever reason, wants to win the bid - and therefore submits a highly competitive cost. And any others will probably be somewhere in between the low and the high bids.

 

So - three bids and two don't make much sense. Now what should we do ? How do we solve the problem ? Well, we did what you always need to do whenever you receive bids back from contractors, we analysed them - we carried out a comparative analysis, which means we compared them to check several key factors which included : (1) checking the math - to verify everyone had added all the cost components up accurately. You might be surprised how often errors of basic adding up can happen. A math check is always the first step. (2)

 

Next, we checked that all three had included exactly the same scope - had anyone missed anything. Again, you might be surprised to know that contractors often miss scope items - they forget to add in whole chunks of the project works. Or leave out the total for a page or two by mistake. And so on. In a future episode I'll be explaining some more about bid analysis because it’s an important skill to master.

 

But the key takeaway here is that the last thing you want to do is to rush to appoint the lowest contractor and then, once they've already started work on site, discover that their bid has errors and missing items. After a careful bid analysis, we often discover that the lowest contractor isn't actually the lowest and it's the contractor who was initially second in the running who ends up winning the job.

 

Ok, so now you know what went wrong - three confusing and obviously unreliable bids - and now, as I promised, I'm going to explain why ... and the real gold, I'm also going to explain what to do so it doesn't happen to you. I've already given you a hint - my Clients made three mistakes.

 

The first mistake was in the bid details. They say "the Devil is in the detail". I don't know about that, but in construction projects, you do need to sweat the details - at least the important details. I explained this in Episode 8. It is fundamental to a successful bid process that all bidders are bidding against exactly the same scope of work and specification - the same, identical, parts.

 

Let me share an example. Imagine you want the contractor to install a new door. If you say on the drawing "install new door" then the contractors will submit a cost to install a new door.

 

Ok, so without trying, how many different types of doors can you think of ? It's just about unlimited, right ? Wood, glass, painted, veneered, double, single, solid core, fire-rated or not.

 

If the only detail you provide is just "new door" then all the contractors are likely to price something different. You're leaving it to their imagination or their intelligence or worse, their lack of insight and intelligence and even worse than that, their dishonesty. The sharpest contractor, wanting to win the bid, is likely to submit a cost for the cheapest door they can buy. They already know that probably won't be what you want but it could win them the job. After all, their bid is compliant because they have included the cost of a new door.

 

By contrast, the most diligent contractor might imagine that you would want the new door to match the existing doors nearby to where the new door is to be installed - that's quite sensible so, if you have existing oak doors, that contractor might cost for an expensive solid oak door. And there could be a $500 cost difference between cheap and nasty contractor 1 and solid and dependable contractor 2. Worst of all is that, in your mind, you wanted a glass sliding door to let light into the room but take up less space.

 

So, either way you wouldn't get what you wanted. And that would probably only emerge once the work starts. The contractor might ask just to check - hey, I'm going to bring the new door to site tomorrow - it will look like this. Is that Ok ? In the "cheap" scenario you'd be horrified and then tell them what you were expecting. Then there would be a huge disagreement which would most likely end with the cost going up and it might take a few days, potentially even a few weeks to find and buy the door you really want ... which could mean a delay. And that's just one item. What about the door handle, the hinges, the paint colours, and on and on.

 

So, mistake number one was that there was too little information in the bid documentation to be sure they would get bids based on exactly the same specification.

 

But I can hear you asking, "Andrew, what happens if I don't know what door I want." Well, here's an insider strategy to solve that problem. Staying with the example of the door but noting that this applies to any item where you may not have made a final decision, insert in your bid document a door (or whatever product) similar to what you think you might want with as much detail as you can provide. This way, at least you know all the bidders will quote against the same information. After you have appointed your preferred contractor, you can always omit the original door or whatever item and replace it with another specification you really want. At least you know you are working with the most competitive contractor.

 

A word of warning though ... when you make changes after a contractor has been appointed, there is a risk that their charge for the alternative door or whatever product won't be as competitive as the original. And that's how costs can start to creep upwards. So it is always better to work hard before you go out to bid to make all or as many product choices as you can and then avoid making changes, as much as you can, once the contractor has been appointed. Of course, it's impossible to get everything finalised before work starts but aim high. Every item or decision not locked in is an opportunity for costs to creep.

 

The second mistake was in the format of the bid documents. All my Clients had done was to send copies of their plans to the bidding contractors and provided a verbal briefing. That left the contractors to decide how they wanted to format their bids. As I've mentioned, Bid 1 was about 15 pages – quite a lot of detail, but Bid 2 was just 1 page - a one-liner on email and Bid 3 was about 7 pages. Because they had all included different levels of detail, comparing the costs submitted was almost impossible. No surprise here ... to be able to carry out a detailed comparative analysis you need, well, details.

 

At the very least, the works should broken down into work elements - like plumbing, electrical, lighting, kitchen millwork or joinery and so on. This way, you can at least compare the prices submitted at an elemental level. But, when you detect a big difference between elemental costs, you still won't be able to work out why and where the differences are coming from. The best strategy is to go further and include as much detail as possible within work elements - your professional team, the architect or interior designer, should be able to do this for you. We call this a Tender Sum Analysis or a Bid Analysis. I'll be going deep on how to produce a reliable Tender Sum Analysis or Bid Analysis in a future Podcast Episode. Again, because it can make a huge difference both when selecting and appointing your contractor and during the on-site phase.

 

But, some really great news, you can even do it yourself. If you sign up to become a Podcast Subscriber then you’ll get immediate access to my Project Design Planner which will help you to list the various items of work on an elemental basis - even if you've never done this before. You don't need to be an expert. You'll find the subscriber link on our website at www.thediypm.com. Click through to access the Strategy One-Pager and then make sure to download the Design Planner - it has a link to an explainer video to show you exactly what to do. I'll put a link in the show notes.

 

And the third mistake my Clients had made was in the choice and briefing of the contractors. They might have got away with the lack of detailed information and the format of the bid documentation but because they didn't realise this can happen, they didn't make it explicit to the contractors what was expected from them. And that goes back to their initial briefing of those bidding contractors.

 

It could have been as simple as saying something like "Hey, when you submit your bid, please make sure you break it down into work elements with as much detail as possible." And it can help to explain it will be much easier for you to make your decision and choose them if they do so. In fact, you should also say that any bids not submitted fully itemised will not be considered.

 

At that point, a lazy contractor or an unskilled contractor, who doesn't like providing any details, might just walk away. And that's Okay too. If they can't be bothered to provide adequate documentation at bid time, imagine how lazy they are likely to be when the works get going.

 

There's a real science to contractor selection, briefing them and then inviting bids or tenders. And in future episodes, I'll be explaining those processes in much more detail.

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To make sure you never miss an episode, why not subscribe to Home Makeover Project Secrets on our website at www.thediypm.com where you'll also find our blog posts and details about our upcoming Project Masterclasses and Training Courses.

 

If you have a question about a project you're planning or already running, please reach out and email me on faq@thediypm.com.

 

If you have a challenge to overcome then I can just about guarantee others are also facing the same or similar challenges. It’s always reassuring to know you’re not the only one battling away …

 

It's been great to have you with me today and I look forward to having you back for the next Episode of Home Makeover Project Secrets.

 

All the best on your Home Makeover project adventures.

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Andrew Philips, Project Management Coach