Why do some contractors bid work under their cost? What dishonest contractors aren’t telling you is sometimes more important than what they ARE telling you. It’s a negotiation, and their bid was just round one. If you don’t dig into what their bid represents and go a few more rounds, you will lose. Ask what their estimate includes exactly! How much time approximately will it take, what is the price of each component, what kind of quality of materials and labor does this involve?
When bidding out the work, the ultimate goal is to get the project done for the least amount of money in the right amount of time—for both parties. But what are we naturally inclined to do as consumers? We look at the price tag first. How many times have I heard someone tell me that some guy will do the work for $5,000 less than some other guy? To that I always say, “And?” Without a specific Scope of Work, (a.k.a. “Specs”), the comparison between two bids is almost meaningless.
Time and time again I’ve heard contractors say that they undercut other bids to get the work. This occurs often at or under the project’s cost. In other words, they know that they can’t do a good job AND make money on the project unless something changes! I used to ask myself why those contractors did that, and how they could possibly stay afloat. Being a straight-shooter, I had a hard time understanding their reasoning, but over time I’ve come to figure it out. There are a few factors that play in favor of a dishonest contractor that make this practice work for them:
• Unlike honest contractors, dishonest contractors aren’t interested in doing the best job they can in the first place, so the lost profit in pricing a job at-or-below the cost for an honest contractor doesn’t really affect them, because they will use cheaper materials, less skilled workers, and band-aid solutions instead of good craftsmanship. When it comes to bidding, the more important part of a bid is the less clear aspect: the Scope of Work.
• Dishonest contractors count on you to notice sometime after work begins that you want them to do something different, so they know you will have to sign a Change Order.
• If you are solely price-motivated, dishonest contractors know you won’t think to ask about time. They might use your project as a “get around to it” time-filler which allows them to keep their workers and subcontractors busy instead of sending them home for the week. That means unless the contract includes a Project Deadline, you really don’t know when it will get done, and your contractor will not be in any hurry to get it done quickly. What’s worse, they will feel justified because you wanted it done on-the-cheap. Should they be worried that their lack of speed might cause you to fire them or take them to court? No, because of the next secret they know that you might not:
• Once work begins, the tables have turned. If you decide to switch contractors, your project will become a Tainted Project. Dishonest contractors know that there is very little you can do to help yourself once they begin work, no matter how long it takes or how poor a job they do. You will undoubtedly cost yourself more money, time, and stress if you decide to fire or sue them, so dishonest contractors aren’t afraid of law suits or of being fired.