Pricing the job
If you haven’t already done so, now’s the time to think about getting an estimate from a quantity surveyor (QS), someone who’s trained in construction methods and costs. They will go through your designer’s drawings to itemise and cost the quantity and quality of the materials and labour needed. You probably wouldn’t go down this route with a small job like a new bathroom, but it starts making sense for larger jobs that cost an absolute bomb.
A QS is very useful because:
- You can scale back your project now if it’s over budget.
- When the contractors’ tender bids come in, you have a better idea of what’s too high or too low (be suspicious of either).
- If you end up with only one tender, you can compare it against QS’s estimate to determine if it’s reasonable or not.
- If you’re managing the project yourself and aren’t sure what’s a fair price.
- Contractors can use the QS’s assessment of building material quantities when compiling their tenders – remember to give them only the quantities, not the price.
To find a QS, if your designer doesn’t suggest one, go to the New Zealand Institute of Quantity Surveyors website (nziqs.co.nz).
The cost of your build depends somewhat on your taste and style – if you’re a person who likes top quality, your renovation will cost more. Fittings and fixtures are often chosen later so the true cost may not be reflected in your estimates and quotes. Your estimate will include a “prime cost sum” for such things – light fittings and door handles, sinks and taps, for example – but you may need to pay extra if what catches your eye is more than the sum allowed.
Ideally invite at least three builders to tender for the job, letting them know you have asked others. That’s for fairness and transparency, but also means you may get a more competitive quote.
Let them know you won’t necessarily opt for the cheapest. You’ll also consider their reputation, qualifications and work quality (and mean it – it’s rare that the cheapest is the best).
Information to pack into your tender pack includes:
- detailed drawings and specifications outlining the extent of the work
- materials required
- construction details
- location of the building site (and any anticipated difficulties, such as access issues)
- position of the house on the site
- QS' estimates for the quantity of materials, if you have them
- type of building contract the work is to be under:
- full, where they buy the materials and supply the labour
- labour-only, where you buy the materials and they supply the labour
- managed labour-only, where you buy the materials and supply the labour, under the contractor’s direction.
Give as much information in the tender documents as possible. That means the received quotes will be more reliable, with less chance of dispute if the actual costs are higher than the contractor thought due to an information deficit.
The tender bids you receive should include:
- exact costings (including GST) for all the materials and fittings (allowing for prime sum costs)
- exact costings for the labour of the builders and subcontractors (if you asked for that)
- any other details you asked for, including the builder’s hourly rate for any extra work.
It’s likely your bidding builders will be tendering for other jobs, too. If they win another tender, they should tell you and pull out, or ask if you’ll wait until they are free.
Want to use your favourite builder?
Many of us have a builder we’ve worked with happily before, or have heard is truly excellent, so you might want to bypass the tender process. If so, still give them this information and ask for a detailed written quote.
Estimates vs quotes
Estimates and quotes are very different things:
- An estimate is only a best guess at what the job will cost and the builder isn’t bound by it – it is, however, reasonable to expect it to be within 10 to 15 percent of the final cost.
- A quote is an explicit promise based on detailed specifications and is the price you will pay – unless there are matters outside the builder’s reasonable control, or the cost of materials or labour increases (even then, only if that’s allowed in your contract) or other variations.
Other considerations around estimates and quotes:
- They should both be in writing, signed and dated.
- Be careful of provisional sums included in a quote, where the price of something is uncertain – these are often underestimated, so ask if the amount quoted will cover what you’re expecting.
- Be wary of low tender prices compared to others. If you think they’ve misunderstood the project, go back and clarify.
- Never use one quote as leverage to beat down another’s price. That’s unfair and could compromise on work quality.
- Put a premium on experience and reliability over price on its own – a more experienced builder is likely to cost more, but can pay off in the long run.
Guaranteed maximum price
A guaranteed maximum price (GMP) is where the builder guarantees a top price in the contract.
A GMP has its pros and cons:
- They work well as an incentive to the builder to finish on time and within the budget.
- You avoid the risk of uncontrolled extra costs and time.
- However, you pay a premium because the contractor will factor the risk of delays and extra costs into their price.
- Any variations you ask for will be outside the GMP, so you will pay more.
What if the build comes in under the GMP?
Any savings during construction are generally shared between you and the builder, with the ratio specified in the contract. This gives both you and the builder an incentive to co-operate as you will both wanting to avoid overrunning the GMP.
A reality check on cost
As good as a QS’s estimate might be, in addition to your designer’s experience, it’s only when the tenders come in that you can see how much your much-desired project will cost.
Chances are you’ll have to revise your plans (yes, yet again) or increase your mortgage to match.
If that happens, go back to your designer and the QS and ask if they can point to areas that could have blown out the cost. Because the cost of building fluctuates, and getting a building project nailed down takes time, a lot of time can pass between the estimates being calculated and tenders being received.
So, see what can be scaled back or altered to suit your budget. If you’ve already lodged your application for a building consent, any major changes to the plans mean you’ll have to either put in a new application – with a new set of documents – or ask for an amendment.
Once you’ve decided which bid to accept, it’s the done thing to write to the other tenderers to tell them they were unsuccessful. Tendering is a part of their business, but it takes time and effort. Also, they may be waiting for your response before making other decisions, so let them know as soon as possible.