"What is a fair price to build?"
When a home-owner bargains, it is a top-down activity. He sees only the total final figure and believes it is reasonable to lop off something…let’s say 10%.
The home-owner has overlooked one crucial fact. The total cost is actually the sum of all the costs tabulated from the various trades. It includes the cost of small items from stainless steel screws and nails to labour and materials, and everything else required to build a house.
So a demand like “I want a 10% discount without changing anything in the specifications of the house” is an unreasonable one. Where would the reduction come from?
The main contractor has to maintain his margin, as does every party working on the project. The discount can only be realised if something is trimmed along the way. As a former Consulting Architect, I would say that in construction, there are many different ways to cut corners in order to reduce quotes.
And even with the best specifications in materials and methodology, and full-time day-to-day supervision, there is still the matter of dealing with individuals – who can be less than efficient, less competent or simply less trustworthy. And unfortunately in construction, this risk is always present, though finding the right partner to build your house can minimise – but not eradicate – the risk.
Like it or not, you have a vested interest to ensure that your contractor does not lose money but that he makes money out of you. Think about it: This fundamental shift in mindset could save you a lot of pain and anguish.
Sometimes, in a bid to get a bargain, people forget that building a house is very different from going to Bangkok and bargaining your way down to the last baht!
Building a home is not as simple as select-collect-pay-and-go when you purchase an item from a shop-vendor. You must have a vested interest and total confidence in how well your contractor handles the whole building process. After all, you are putting him in charge of the cashflow and workflow. More importantly, you trust that he will deliver a quality home according to your specifications.
It’s important to check him out. Is he knowledgeable about the necessary legal procedures? Is he familiar with construction and maintenance? How quickly does he revert on your queries and complaints? How competent is he?
Wrong.
Some home-owners believe that appointing an independent architect is the best way to protect their interests against unscrupulous contractors and non performance right down to the last details. They cannot be more wrong – and need to re-read the architect’s terms of appointment very thoroughly & carefully.
The terms of appointment will indicate that the architect’s major inspection is to satisfy statutory compliance, which is the visible and relatively easy part. He will largely rely on the building specification and documents to ensure that your house is constructed accordingly. Typically, he will inspect the site once every fortnight, or if you are lucky, maybe even once a week.
If you think that appointing an architect will sufficiently protect your interests, then why are there so many abandoned projects – which have architects to oversee them? At the end of the day, he is not responsible for the conduct of the contractor nor his attitude or financial stability. Even the best of bonds and written guarantees will not ensure trouble-free building.
There is very little an architect can do if the contractor runs away, files for bankruptcy mid-way through the project, or does a bad job. You may call for the bond, if he has one, or you may sue the contractor. In reality most contractors have been paid more than the cost of the project, so he is in a winning financial position.
The stick or the carrot? History has favoured the stick, but I think the carrot works better.
Instead of bargaining down, why not dangle a carrot? We do this in the workplace all the time. Think about performance bonuses and incentive rewards - and how companies use various methods to motivate their staff. When the employees work harder, they boost the bottomline.
Why not try the same motivational techniques with your contractor?
In an industry where there are many punitive clauses aimed at the builder - such as ‘If you don’t finish by this date, a penalty of $x per day will be imposed’ or ‘If you fail, we will seize your bond’ - is it any wonder that a contractor may choose to run once he realises that he cannot finish the project?
I am not making excuses for the contractor, but his fault may lie in his lack of business acumen than the desire to cheat. He could have sent in such a low tender for the project that he has no margin for error. So when the cost of materials go up, or one of his sub-contractors fails him, he is left with nothing to overcome the hurdle. Rather than lose more money on the project, he cuts his losses and flees. You may wish to think twice, or three times, before you try to squeeze your contractor on the final quote.
In building construction, using motivational techniques can work wonders as we are dealing with people at every level. Whilst I cannot vouch for everyone, my experience with my sub-contractors tells me that when motivated, they will work much harder and pay closer attention to the details - over and above what is required of them. And in construction, we all know it’s the little things which counts, and which makes a house well-built!
You have already made the decision to invest in a new, perhaps once-in-a-lifetime house. Don’t you want to motivate someone to build that house? Favour the carrot ... you’ll see what wonders it’ll do for your dream-house.
