Breaking Out a Bid
If you break a bid down into different pieces of the job for a client, shouldn't each piece cost more? April 4, 2011
Question
I have a client that wants his master bathroom done. Tile, new vanity, replace faucets, strip wallpaper and paint, and add a GFI receptacle. I gave him a price and now he wants me to break down the bid - for instance, so much for the vanity, so much for the tile, so much for the wallpaper removal and paint. He is, naturally, going shopping and wants to give this guy this project and this guy that part of the project. So if I break the bid into separate categories, would the price be higher or stay the same?
Forum Responses
(Business and Management Forum)
From contributor C:
Higher. Treat it like separate jobs. That includes allowing for separate travel time for each job, separate design time, etc. It may also convince the buyer that it makes sense to use one supplier. If you get the entire project, you will not need to bill him for all of those separate trips, etc.
Or if you do not want the individual jobs, tell him you only want the entire job or none of it. It usually is much easier for one supplier/contractor to handle an entire project than it is trying to coordinate five contractors.
From contributor L:
I hate to break up my bids into section. They asked for the job, here is the price. They will cherry pick you. Most of my jobs have areas that have lower priced and higher priced sections. They balance each other out. But most of the time they will pick out the project that is the lower cost and then it isn't worth my time doing it because I was counting on the other work making up for the discount on the other areas of the project.
Whenever I give in and do separate my bids in a larger job, there is always an exclusion on the bottom of the page stating that the prices on this proposal are priced as a lump sum. Splitting them up will cause the individual prices to increase by 10-30%. A lot of BS parts of the job are only worth doing because you are there already doing something that will bring profit. I find they pick these and give the other jobs away to others.
From contributor J:
If you did break it down it would definitely be higher. At the most I might give two prices - one for the vanity just delivered and the other for everything. Just explain to the guy there's nothing to be gained by spending your time figuring out a full breakdown because it's not practical or profitable for you to do the job that way.
From contributor M:
Definitely higher. I believe that as a business person, I have an obligation to give my customer an accurate quote for the work I will be performing, doing the work the most efficient way I can. If my customer throws me some options that will make the project work in a way that is better for him, whether it is budget or doing the work in parts, or helping him get other more competitive prices for certain parts of that work, then I am not obligated to make his life any easier or affordable at my expense.
From contributor B:
The job will be less efficient with more people doing different parts of the job. If you break it out, you need to allow for these inefficiencies, and bid accordingly. Then show him what the discount is (which equals your current quote) if you complete the entire project.
That's one reason I've always given my customers one flat rate (keep in mind I only do cabinetry) - it eliminates the hassle of an attempt on their part at negotiation. In my opinion, never break out anything unless it's optional. If it's optional, keep in mind the efficiency of doing it yourself and price accordingly.
From contributor T:
This reminds me of the movie "Five Easy Pieces" where Jack Nicholson is trying to order just plain toast but the restaurant only sold breakfast. As I recall, the waitress would have been substantially better off to just provide it the way the customer wanted it.
From the original questioner:
Well, I broke the bid into each category and raised the price on each by 25%. I don't think he was too happy - I still have not heard from him. Oh well - I am tired of people thinking I will just give my time away because I am a one man show. Hope I am making the right decision and I don't wind up in the poor house.
From contributor C:
I would guess that he would not be happy. The game that he was trying to play was not working. He wasn't getting what he thought he might. He was trying to beat the system and take advantage of you and others. Oh, well. I never want to have a reputation that says "take advantage of me." He has already wasted too much of your time by asking for separate prices. I'm waiting for him to come back and ask you to lower the first price.
From contributor Y:
I hope you didn't burn up too much of your time with that fellow. I am aware that with the economic climate, people often have to lowball themselves just to make light bill money. I will offer this to your plight. If you meet with the guy again, ask him if everyone that bids the job is bidding the entire job as you have, and are they itemizing the bid? Can you discern if he has the trade literacy to know what is appropriate pricing for the individual tasks? Finally I will add that I am in my 40th year and learned long ago that a request like that for a simple bath remodel is a ploy of his. Good luck and move on to the next.
From contributor P:
What leads you to believe this customer was trying to "play a game" or take advantage of anyone? It could just be he wanted to know what the various elements of the project cost so that he could compare his alternatives. This is something we all do everyday.
How many companies do you know that are competent to both install tile, install wallpaper and build cabinets? How many could do all three competitively? I am sure that the questioner has good reasons for increasing individual line items 25%, but he also needs to look at the customer side of this coin.
From contributor L:
It's a two way street. The customer can't always get what he wants and neither can the contractor. When you go for the lowest price, you get what you pay for. The customer ends up not happy and then the blame begins. It can never be the customer's fault. So it must be the contractors. And that is the way the customer will present it to all his friends. If the contractor has his crew and subs all together, it will be an efficient operation. Splitting it up may be cheaper, but it will usually be a train wreck waiting to happen.
From contributor B:
Do you have liability insurance to cover the additional work beyond the vanity? You probably do, but it's definitely something to think about, especially if it involves plumbing.
From the original questioner:
I understand that everyone wants to get the lowest price they can. What gets me is that the guy gave me a budget and I stayed $2,000 below the budget. I provided him with a rendering of the vanity and mirror, and I gave him my full discount on the tile. Time to move on.
From contributor L:
Some people are never happy unless they can bring you down more. If you give a firm price and stick to it, even if it is under budget, you may lose the job because they feel you weren't working with them or seemed too rigid in your pricing.
I've had it happen. I give them my best price first bid. I won't go any lower. If you give them a price and then you go lower, what makes you think they wouldn't think you were trying to rip them off in the first bid?
You can't win with some people. Pick up and move on. There are more fish in the sea. Even though pickings are slimmer, getting a client who is a bad time sometimes isn't worth the effort.
From contributor C:
I agree with Leo about giving the best price first, then not lowering it just because they want it lower. If the price is too high, and they ask to lower it, my response is "What would you like to remove or change in the project?" Simply explain that you always treat your clients and their time with respect. You always give your best price first so as not to waste their time. If they do not want to believe that, it is time to move on.
As I stated before, I never want to have a reputation that says "take advantage of me." Word that you will cave in to haggling has a way of spreading real fast. Then you are faced with the prospect of wasting a lot of time playing games for a very long time. (Yes, I am using that word again. It does not necessarily mean entertainment type games. Here is one definition: "a physical or mental competition conducted according to rules with the participants in direct opposition to each other". Negotiating a contract, by definition, places the participants in adversarial positions. And it is a mental competition. I prefer the outcome when it is a win-win scenario. Anything less is unacceptable.)
From contributor S:
If you bought a car, piece by piece, what would it cost you - the same? Not a chance. When you give a customer a quote, you allow for travel time, picking up materials, shop supplies, etc. When they ask you to divide the original quote into four parts, you have to add the travel time, etc. to each part. You have been asked to treat each part as a separate quote. If he takes the full quote, he only pays once for all the incidentals.
From contributor P:
It's a two way street. Let's imagine that the customer just asks for a bathroom vanity and you quote for the bathroom vanity. If the customer asks for a linen cabinet or medicine chest also, will you subsequently lower the price for the bathroom vanity?
In this case the customer is increasing scope of work instead of decreasing it. Since everybody seems to be on board with the concept of raising prices, how do you all feel about lowering them?
If less work always equals higher prices, does it follow that more work always equals lower prices? Would you voluntarily suggest a rebate after the customer already agreed to the higher price?
From the original questioner:
If the client wants a vanity and a linen closet, yes, the price would be cheaper for the two together just for the simple fact of the yield you would get out of the sheets of plywood. It might take you two sheets to make the vanity and it might take you two sheets to make the linen closet, but together you might get them both out of three sheets.
From contributor P:
I agree that the cost would be different, but would the price be different?
From contributor L:
I worry less about the material costs and more about the labor. If I had to make one and install and the other and install, it would take two trips with all the packing of items and tools and such. When you do both, you pack the same but get more work to do at the same place. It does help that you get more efficient cuttings, but usually not much compared to the labor costs. Plus setting up to run one piece instead of a bunch makes it more efficient time wise also.
From contributor O:
I can't imagine not breaking up the bid by trade type at least. When I price a job, every category of work has a separate price. You have to do that math to estimate it anyway. If they cherry pick, so what? It's their money, isn't it? Sell them on the simplicity and efficiency of having you GC the whole thing and make 10% on the other trades for talking on your cell phone.
From contributor L:
Some jobs aren't worth doing by themselves. If someone wants to have a crown put up in a 5 x 9 bathroom, you are going to have to charge them quite a bit extra because the drive/setup time is as long as or longer than the actual work.
But if you are there to install a few vanities and have to do the crown too, then it would be worth it because the profit in your vanities will offset the cost of the setup times on the crown. You are there already.
So you bid out the job for two vanities and crown. The guy likes your price for the crown install, but chooses someone else to do the vanities. For me, that would be a deal breaker. I'm not going to go out there to do a piddly amount of crown for the same price as I put in a contract that included the vanities.
Cherry pickers need to pay a premium price when they choose from your list. A full size job is not an ala cart proposition. If it was, no one would want to afford them.
