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The Dangers of Employing the Lowest-Priced Contractor

Two of the most overused adages in construction, and many other industries for that matter, are ‘you get what you pay for’, and ‘there is no substitute for experience’; there is a reason these tiresome sayings have stood the test of time though – they are true.

In these austere economic times we are unfortunately seeing more and more individuals and businesses fall into the often costly trap of appointing a contractor on price alone. In many ways it is understandable; times are hard, budgets are tight, and we can resent paying more when someone is offering to do the same for less. In reality though, delivery by the lowest priced contractor often falls well short of expectations, and throws up costly complications that an experienced but competitively priced contractor could have managed as part of their original tender.

Ways in which employing contractors on price alone can prove costly are as follows:

Lowest price can often mean the lowest quality; it is as simple as that. Cut price contractors must maintain a fast turnover of jobs and for that reason corners will be cut. Experienced contractors with a longer term view will be concerned about the potential references, referrals or repeat business that you could provide to generate future opportunities. A key indicator of a contractor looking to price work fairly can be in the questions they ask. Someone seeking to clarify the project brief and get a better understanding about client requirements will more often than not produce a well-considered genuine quote.

Cut price contractors often employ low-wage operatives, inexperienced employees that may not have been adequately trained. The foresight that an experienced foreman or leader brings will save money and improve the quality of the work. They will also provide peace of mind by honestly communicating progress to you and managing expectations during the project.

Little contingency planning is included in costings by a cut price contractor, meaning the cost of time over-runs or extra materials due to poor original estimates for example, will repeatedly be passed on to you. This can often turn a cheap project into a very expensive one.

Unscrupulous contractors will review the specification in greater detail than normal looking for angles to claw back additional money rather than absorbing this in their original tender. This may be something as simple as an obvious omission or a detail that works in principle but that they know from experience will not work from a practical point. This results in the contract price being increased, sometimes driving it over budget and creating poor working relationships with the Contract Administrator and the Contractor. Consequently this creates unnecessary aggravation for the client as the job will not be undertaken with the same level of care thereafter.

Cut price contractors generally do not consider long term benefits or cost savings. Experienced contractors can save you money, they will understand savings that can be made considering the whole life costs of the building, for example in terms of insulation vs the cost of heating the house, and they will advise accordingly. This may result in less profit for them and better savings for the client but this helps to build a relationship between the contractor and the Contract Administrator and it is more likely that a client will use this contractor or recommend them in future.
The above obviously contains some fairly strong generalisations. In the current financial market many contractors are competitively priced and the cheapest contractor could actually be the most appropriate for the job. However, if their original cost estimate has not been backed up with details of similar projects that they have worked on, as well as a list of references for you to follow up, then you have taken a massive gamble.

At Finnegan Property Services we have extensive experience of working with clients to appoint the right contractor and the processes we put in place can easily be implemented on a project of any size. We utilise our contacts within the industry to select contractors known to us who have a strong track record and the right level of experience to complete the project and provide them with the project specification. As Chartered Building Surveyors we then analyse their tender returns to consider whether prices for certain elements are comparatively high (or low) and query that with the contractor. Only once we are satisfied that the contractors have understood the full brief and priced accordingly will we advise our clients on the contractor that we consider would be most capable of delivering the project successfully and cost-effectively.

If you do not have the luxury of an extensive contractor database the principles still remain the same, any reputable contractor confident that they can complete the project successfully will be comfortable providing costs, experience and references. By reviewing it diligently, following up referees, and comparing providers during the contractor appointment stage, the chances of completing the project on time and on budget are significantly increased. Just as importantly, it may help you avoid the most frustrating old adage of them all…’I told you so’.

For more information about Finnegan Property Services’ contractor appointment advice, contact enquiries@finneganassociates.com or 020 3137 8078.

Posted on 30 September, 2015

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