Design Session #3

THE BACK END – Administration

Bidding-  In this section, I help you set up a bidding program to obtain the best cost for your project.  This doesn’t necessarily mean the lowest cost, because the lowest bidder doesn’t always delivery good work.  I guide you through the bidding process to help you determine and procure the best price from the best qualified subcontractor or supplier.  There are a few tricks to doing this and you will find this information extremely valuable.

After the working drawings for your project have been completed, it is time to bid the job.  The purpose of producing a detailed set of plans is to obtain fair construction estimates from qualified contractors and suppliers in order to determine the actual cost of construction. Up to this point in the design process, only rough estimates based on square footage costs have been used to evaluate the scope and project costs, but in order to secure financing, most lenders require a detailed cost analysis based upon current pricing derived through a competitive bid procedure.  In order to derive meaningful cost figures of all the different components of the project, it is essential that all bidders are equally qualified and bid “apples-to-apples”, or in other words, that they all bid from the same set of plans, under the same set of conditions, time frames, and assumptions.

Now theoretically, if the plans and specifications for the project have been prepared well, and the parts and labor required to construct the job will be the same among builders, then the only difference between the final bid quotations between competing contractors should be in their profit margins and overhead costs.   As a general rule, all other things being equal, this is true, and it will enable you to select the most competitive members for your project team.

However, there are numerous other factors that influence the bottom line of the bid.  These include the time of year in which the construction takes place, the experience and knowledge of construction practices and material handling of the contractor, the location and access to the project site, the qualifications of the team of subcontractors and suppliers the contractor uses, the available equipment, tools, and vehicles the contractor has at his disposal, and his skills, talents, health, performance, and communication ability.  All these factors will influence the quality of your job and the eventual bottom line on your ledger sheet.

The purpose of producing a detailed set of plans is, first and foremost, to obtain fair and accurate construction cost estimates, from qualified contractors and suppliers, in order to determine the actual cost range for your project so you can organize your financing. Range is the operative word here because bidding a project is a little like trying to hit a moving target. The actual construction costs vary so much depending on the fluctuations of labor and materials prices and fuel costs in effect at the time of bidding, and the actual market conditions that exist during the window of time in which the construction occurs.  Most construction bids, in a volatile market, are only good for ten days. Since a project takes four to six months to build, it could easily go over-budget by thousands of dollars just due to the inflation that occurs between the time the bid price is established and the actual purchase of the service or material is made during the construction period.  Nothing is more illustrative of supply and demand economic factors than those that occur in the constructive industry.  It goes without saying that you will pay more for materials during the summer months than the winter months, and don’t forget to factor in the price of gasoline.  When gas prices go up, then anything that is based upon petroleum or moves on the roads will go up accordingly.

Up to this point in the design process, only rough estimates based on square footage costs of similar projects in your property vicinity have been used to evaluate the scope of work and potential construction cost of your project.  These square footage estimates are a very rough indicator, at best, and are only used in order to insure that your building design efforts will fall within your predetermined budget limitations.  After all, if the design is too large and out of budget, then it can’t be built, and all the time, effort, and cost to produce the plans will be wasted.  Square footage estimates are only good for determining if your project is in budget.

In order to secure financing, however, most lenders require a very detailed cost analysis based upon current market pricing derived through a competitive bid procedure.  In order to derive meaningful cost figures of all the different components of the project, it is essential that all bidders and suppliers are, first of all, equally qualified to do the work or service; and, secondly,  that they bid “apples-to-apples”. In other words, all qualified bidders should bid from the same set of plans, within the same time frame, under the same set of conditions and assumptions, so they produce a competitive response.  Make sure all contractors that bid your project are licensed with the State of Idaho and carry all required insurance.

Also make sure the plans you send out for bids include all the design changes you want and are in a finalized state.  Especially make sure your plans have been reviewed by the building department before bidding.  The Building Department can require all sorts of additional work and materials that will add to the cost of your project, so it is wise to only bid your job from the plans that have been planned checked first.  For example, the Building Department could require engineering on foundations, or special seismic bracing, or special inspections or testing, or larger beams, or similar things which will add to the expense of the work.  Your bidders will need to know this information in order to provide a cost for it.

Most homes are bid from a select list of qualified contractors, usually limited to three to five companies that have been recommended to the owners by friends or business associates.  This is by far the most common method to determine actual construction costs.  In this scenario, the general contractors gather a set of plans and circulate them among their team of subcontractors and suppliers and gather bids.  As the bids come in, the contractor totals all the incremental costs and then adds his profit and overhead to the bottom line and submits a lump sum bid.  The owner looks over the bids and selects the contractor for the job based upon price, qualifications, compatibility, etc.

A large percentage of new home projects involve owner-builders who either choose to general contract the construction of their own home or to use a general contractor only on a limited basis.  For projects like these, the owners must perform most of the bidding tasks themselves that are otherwise handled by the general contractor in order to determine the cost for their project.

To start the bidding process, either you or your contractor must first prepare a material list.  You must go through your plans and itemize the quantity of materials starting with the site work, excavation, concrete, masonry, lumber, windows, doors, siding, etc.  Include all sixteen categories of construction and be very detailed ….right down to the nuts and bolts. Refer to the sample estimate worksheet available to customers of the Plan Shoppe. This will help you organize your list of materials and insure that your bidders provide you with quotations based upon the same information.  Sometimes you can take your plans to a lumber supply outlet and they will do a limited take-off, providing you will buy the whole package from them.  Some will provide this service free, while others will charge you a fee for doing this.  In any case, the best you can hope for from these sources is a quotation based upon the materials they choose to provide such as lumber, windows, doors, etc.  Generally, they will not itemize your materials in order to prevent you from shopping their list with their competition, and the estimates provided are usually in lump sums covering categories such as lumber, siding, roofing, windows, doors, etc. Most often the material bids are provided in one large lump sum and do not cover any other aspects of your project other than what the items they will supply.

For this reason, it is best to prepare your own material list and submit it to suppliers and contractors and subs yourself.  Refer to the Bidders Checklist provided by the Plan Shoppe.  You will obviously need to gather construction cost figures on all the materials to be used in your project and although lumber yards will quote on most of the major items, they do not cover them all.  If you already have a builder, then have him do it.  This is the only way to cover all the cost components for your project from the site work, to the concrete, to the plumbing, electrical, painting, floor coverings and everything else.

Next make a list of items and directions you want the bidders to know about specifically. This is called the Information To Bidders or the Information To Suppliers form.  You may need both.  These lists are something you can type up yourself.  Give them directions and deadlines on what to bid on and list any specific brands or model numbers, colors, sources, etc.  You want them to bid “apples to apples”, so be as detailed as possible.  Provide them a form or format to follow in submitting their quotations back to you, otherwise they will all use a different method and it will be difficult and time consuming to sort things out.  Make sure they know when you want your bids back, otherwise they will all take their own sweet time.  Give them a due date and call them up to insure they will respond when you need it.  Depending on the season, it should only take them a few days to provide you with a quote, but if it is at the height of the building season, then it will take up to several weeks before they can respond.  Please note that it is best to bid your project during the winter months when business is slow.  Suppliers and subs are trying to fill their spring work schedules and they will often respond with more aggressive bids in order to book your job.

If you want to price an alternate material or brand of a certain material or item, then list your base bid preference first and then Alternate #1 next.  For example, your plans may call for using I joists for your floor system, but you may want to consider using dimensional lumber due to the cost difference.  In this case, you would list your base bid material as I joists, and then ask for alternate bids on dimensional lumber from the supplier.  This will give you pricing on both and you can then make your selection based upon the price.  You can ask for as many alternate bids on items that you want.  All you have to provide them with is the quantities of materials.

One method that you can use to collect a lot of bids from different trades in a short period of time is to place your plans with the North Idaho Building Contractors Association (NIBCA) in Coeur d’ Alene. If your project is located within a sixty mile radius of this community, this method will save you a lot of bidding time.  You will need to place two copies of your plans on file and your instructions to bidders.  The NIBCA will then send out notification to their membership, which includes over 750 members from all the different construction trades, informing them that you have requested bids for your project.  The members that wish to bid on your project will visit the plan room and perform a take-off from your plans and then send you a bid.  If you provide them with a material list for their trade, it will make their job easier and insure that you get more responses.  Usually within a two week period, you will be able to collect at least three bids in every major cost category of your project.

If this method is not available to you, then you will have to make copies of your plans and circulate them to the bidders you have selected.  You may need to go through the Yellow Pages of the phone directory and make a list of all the different bidders you want to get quotes from and then drop off a set of plans at their office.  This will take some time and cost you some printing expenses.  It is a good practice to obtain at least three bids in each major cost category.  To minimize your printing costs, and if you have the time, you can often collect your plan copies from one bidder when they finish and then submit the same set to another bidder and juggle various sets during the bidding phase of your project.

Here are some examples of Information To Bidders and Information To Suppliers you can use to compose your own forms.  These will give you the general idea of the information you need to convey to your bidders.

Information To Bidders

Green Bay Resort Storage Building

Coeur d’ Alene, ID

1.   You are one of only three contractors invited to bid the project, based upon recommendations from The Plan Shoppe.  Proof of license and insurance will be required if you are the successful bidder.  It is recommended that you visit the job site prior to bidding to acquaint yourself with the limitations for access and other site conditions.  You may contact Terry at the resort if needed at: 275-4930.

2.    It is necessary to complete this project by June 1, 2008 before the summer season starts at the resort.  Time is of the essence and the sooner you can respond with your bid, the better.  Bids are due by April 15, 2008.  Please FAX your bid to the owner at (208) 792-0607, or to save time, email a copy to:    johndoe@greenbayresort.com

3.    List any exclusions that your bid does not cover, otherwise it will be assumed that your bid includes labor and materials to cover the entire job as shown in the plans, including all rental equipment.  The owner may elect to provide some, or all of the materials, and this will be determined and negotiated prior to the bid being awarded.

4.    Please itemize your bid submittals into the standard loan application format as much as possible.  See attached form.  Provide a list of all your subcontractors you intend to use on this project, and their proof of insurance and licenses.

5.     If you have any questions, please contact either the owner or the designer at the following addresses:

            Owner:                                                            Designer:

            John Doe                                                         Dave Salois

            Green Bay Resort                                           The Plan Shoppe

            27401 Eastvale Road                                      P.O. Box 3066

            Coeur d’Alene, ID  83815                                Coeur d’Alene, ID  83816

            (208) 792-0607 FAX                                        (208) 763-3375 FAX

            (208) 789-6611 Voice                                     (208) 666-0489 Voice

            (208) 787-7053 Cell                                        (208) 771-3526 Cell

            Email:  johndoe@greenbayresort.com            Email:  theplanshoppe@gmail.com

6.   The successful bidder will be required to mobilize within two days of bid award and to stay on the job site, without interruption, working a standard forty hour week until the project is complete.  If overtime is necessary to complete the job, please indicate this as a separate itemized cost.  The contractor and all his subcontractors and suppliers, when on the job site, will be required to follow all  OHSHA safety regulations at all times.

Information To Suppliers

Green Bay Resort Storage Building

Coeur d’Alene, ID

This material list has been composed using MS Excel. The project is located approximately 8 miles east of Hwy. 95 from Coeur d’Alene, ID, at Green Bay Resort on the lake and is scheduled to be completed by June 1st.  This is an owner-built project and I request contractor pricing, if available. The categories of materials are listed at the bottom of the page with a separate tab for each category.  Ignore any worksheets that do not apply to your supply business.  Please provide a total at the bottom of each category page and show the sales tax as a separate item not to be included in your individual pricing.  You are invited to quote as many materials on this project that you can supply.  Please list any delivery fees or freight charges and indicate any special order items that require lead time for delivery or any special handling or other costs associated with any component.   Please complete the pricing for these itemized materials as much as possible and return it to me as soon as possible.  Complete the identification information at the bottom of this page and indicate the time limits for your price quotes.  Thank you for your cooperation and I look forward to doing business with you.

1.         Time is of the essence.  Please FAX your bid to the owner at (208) 792-0607 FAX, or to save time, email a copy to:  johndoe@greenbayresort.com

2.         Please  FAX a file copy of your quote to the designer also at (208) 773-0489, or    email a copy to:  theplanshoppe@gmail.com

3.         List any exclusions that your bid does not cover, otherwise it will be assumed that             your bid includes all materials listed in the material list.

4.         Please itemize your bid submittals into the material list format as much as possible.      See attached material list form.

5.         If you have any questions, please contact either the owner or the designer at the following addresses:

            Owner:                                                            Designer:

John Doe                                                         Dave Salois

Green Bay Resort                                           The Plan Shoppe

27401 Eastvale Road                                          P.O. Box 3066

Coeur d’Alene, ID  83815                                Coeur d’Alene, ID  83816

(208) 792-0607 FAX                                         (208) 763-3375 FAX

(208) 789-6611 Voice                                      (208) 666-0489 Voice

(208) 787-7053 Cell                                         (208) 771-3526 Cell

Email:  johndoe@greenbayresort.com            Email:  theplanshoppe@gmail.com
Supplier: ______________________________________________________________________

Quoted by:  ___________________________________________   Date:  __________________

Prices quoted herein are valid until: _________________________________________________

Construction Administration Options-  One of the key components to any successful project is determining who is going to build your new house.  Are you going to hire a general contractor or a project manager or are you going to build it yourself.  There are advantages and disadvantages to all of these options and I discuss them thoroughly in this section.  The single choice you make here can save or cost you thousands of dollars.  I can help you make the right decision.  I show you how to hire a general contractor or how to build your project yourself.  I discuss how to develop your own contracts and what key language is necessary to protect you.  I discuss risks and liabilities, insurance requirements, payment procedures, and vital information you will need to administer your project.

How To Save Money Building Your House-  This section discusses many ways to save money during the construction of your house.  Regardless if you hire a general contractor or decide to build it yourself, there are many tips I have gathered from my experience in the industry that will literally save you hundreds, if not thousands, of dollars when you “buy-out” the job.  I share many tips and tricks that help you employ the right techniques to find the best values and to get the best services from subcontractors and suppliers.

The Construction Process-  The following list covers the typical sequence of required building inspections from a typical building department during the construction of a house.  In this section I discuss what the building inspector is looking for and the potential pitfalls that can occur in each phase of construction.

SEQUENCE OF REQUIRED BUILDING INSPECTIONS

1.  Plan Review & Building Permit

    • Engineering Requirements
    • Health District Requirements
    • Fire Department Requirements
    • Street or Highway Department
    • Seismic & Flood Plain
    • Zoning Requirements

2.  Site and Foundation Inspection

    • Approach & Access
    • Flood Plain & Hazards
    • Conduit & Culverts
    • Gas and Water Piping
    • Sewer System
    • Slope/Grade & Drainage
    • Setbacks to Property Lines
    • Forms and Footing Beds
    • Reinforcement

3.  Rough Plumbing Inspection

    • Piping, Drains, Waste, & Vents
    • Water Line

4.  Rough Framing Inspection

    • Foundation Wall
    • Anchors & Nailing
    • Hold-downs & Bracing
    • Slab-on-grade Insulation
    • Joists, Beams, & Stairs
    • Wall Frame & Siding
    • Windows & Doors
    • Fire Wall
    • Stairs
    • Chimneys & Fireplaces
    • Roof  Frame & Sheathing
    • Decks & Slabs
    • Shear Walls & Braced Panels

5.  Rough Mechanical  Inspection

    • Ducts & Flues
    • Ventilation
    • Furnaces & Equipment
    • Combustion Air
    • Water Heaters

6.  Rough Electrical Inspection

    • Temporary Power  & GEC
    • Conduit & Wiring
    • Receptacles
    • Smoke Detectors
    • Grounding & Bonding
    • Meter/ Main Panel

7.  Insulation Inspection

    • Floor, Wall, & Ceilings
    • Pipes, Windows, & Doors

8.  Drywall Nailing

    • Fire Wall
    • Walls & Ceilings
    • Moisture Resistive Areas

9.  Special Inspections

    • Concrete > 2,500 psi
    • Pilings, Drilled Piers
    • Special Grading
    • Bolts in Concrete
    • Structural Welding
    • Glu-Lam Certificate
    • Shear Nailing < 4” o.c.
    • Spray-on fireproofing
    • High-strength Bolting
    • Pre-stressed Concrete
    • Special Moment/Concrete
    • Insulting Concrete Fill
    • EIFS (Dryvit)
    • Special Cases

10.  Final Plumbing Inspection

    • Piping & Connections
    • Fixtures & Connections
    • Kitchen & Laundry
    • Exterior Vents
    • Water & Sewer Lines
    • Irrigation System
    • Water Softener & Heater

11.  Final Mechanical Inspection

    • Gas Piping & Connections
    • Appliances
    • Ducts & Flues
    • Grilles & Finishes
    • Furnace & Fan Equipment
    • Air Conditioning

12.  Final Electrical Inspection

    • Main Hardware
    • Finishes
    • Fans & Light Fixtures
    • Special Outlets
    • Smoke Detectors
    • Receptacles
    • Grounding & Bonding

13.  Final Building Inspection

    • Site Improvements & Address
    • Curbs, Driveways, & Sidewalks
    • Tempered Glass
    • Fireplaces & Masonry
    • Attics & Garages
    • Decks & Slabs
    • Stairs & Handrails
    • Egress & Landings
    • Doors & Windows
    • Appliances & Equipment
    • Finishes

14.  Issuance of (CO) Certificate of Occupancy

Project Closeout-  In this section I provide a checklist and discussion of all the things you will need to review in order to officially close out your project and close on your construction loan.  This section not only covers the actual construction elements of your project, but all the procedural elements as well such as final payments, warranties, construction manuals, contract payments, correcting bad work, change orders, lien releases, final inspections, and taking care of loose ends so you can occupy your new home.


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