HIRING A CONTRACTOR
Low Bids vs High Bids Low Bids vs High Bids
The community has been calling lately with issues and concerns over low-bid and high-bid contracts. Construction is picking up in our area, there is lots of remodeling taking place and YCCA wants to make sure that you are protected and aware. There can often be a big difference between the lowest bidder and the other bids received. Especially with the current financial times being experienced by many companies, low bids are submitted in some cases just to get the job in order to keep the lights on and put gas in a company truck. High bids can be submitted in some cases because the contractor wants to make a little extra.
It is critical when obtaining bids you successfully evaluate the essential requirements of the work you want performed and for you to communicate these items to the contractors. Bids with extreme variations or where there is obvious unbalancing should be thoroughly evaluated prior to signing a contract. When items are bid unusually high or low the accuracy should be checked. If, after examination, the estimated quantities are determined to be a reasonably accurate representation of actual anticipated needs, then the low bid should be further evaluated for unbalancing. Unbalanced bids can be defined by two terms – mathematically unbalanced and materially unbalanced. A mathematically unbalanced bid is one containing a lump sum or unit bid items which do not reflect reasonable actual costs plus a reasonable proportionate share of the bidder’s anticipated profit, overhead costs and other indirect costs which the contractor anticipates for the performance of the work.
There are numerous reasons why a bidder may want to unbalance their bid on a contract. One reason is to get more money at the beginning of the job. The bidder does this by overpricing the work done early in the project. This is call “front loading” the contract. Another reason is to maximize profits. This bidder does this by overpricing bid items they believe will be used in greater quantities than estimated in the proposal and under pricing items they think will be used in significantly lesser quantities. Another reason for unbalanced bids is that possibly the bidder is unlicensed, thus they do not have overhead for licensing fees, workers compensation insurance and liability insurance.
In analyzing bids, the following should be considered: Is the bid mathematically unbalanced? Are the unit prices in reasonable conformance with other bids? If quantities are incorrect, will the contract cost be increased when the quantities are corrected? On items where the quantities may vary, will the lower bidder remain as low bidder? If the bid is unbalanced, will the unbalanced have a potential detrimental effect upon the competitive process or cause you problems after you have signed a contract? The lowest bid is not always the best choice!!!!
In addition to reviewing your bids, there are also other items of importance and prevention for you to consider when contracting for work and they are: Be cautious of individuals soliciting work door-to-door, be cautious of individuals offering “special deals” for jobs using “leftover” materials, and be cautious of companies doing telephone solicitations. Make sure your contractor is licensed, ask for references, obtain a minimum of 3 detailed bids, get a written contract, make sure you understand the terms of the contract before signing, be cautious of advancing monies for work not yet completed, put all changes in writing. Arizona statutory law requires that all construction contracts over $1,000 contain at a minimum the following: the name and business address of the contractor, the contractor’s license number, the name and mailing address of the owner, the jobsite address or legal description, the date the owner and contractor signed the construction contract, the estimated date of completion of the work, a description of the work to be performed, the total dollar amount to be paid to the contractor for all the work, including taxes, the dollar amount of any advance deposit paid or scheduled to be paid to the contractor by the owner, the dollar amount and stage of construction for any progress payments to be made to the contractor, specific information, prominently displayed explaining how to file a written complaint with the Arizona Registrar of Contractors.
YCCA is designed to assist homeowners and contractors and when using a YCCA member you will know from the beginning that all contractors bidding on your work have industry-standard capabilities and a proven commitment to quality, reliability and integrity. So Don’t Start Your Job Without YCCA.