Bidding process

The bidding process is when the house design is sent out to solicit contractors bids. Months earlier, we invited three contractors, Bobby Nakamura, Craig Rice and Keven Rinkenbach, S+R Construction. All three were interested initially, but two dropped out. Nakamura was too busy building his own home, and Rice was also busy, but is willing to do the work on a time and material basis. The client is not comfortable with a time and material bid because it leaves too many uncertainties, mainly ,whether she has enough funds to finish the project. We are left with S+R Construction and only one bid with none for comparison. Both Rinkenbach and Rice were intimidated by the design at their first glance. This project is more unusual, though both have built larger and more complicated projects.

For a residence, small contractors are used to plans that are less detailed, certainly not 45 sheets of architectural and structural drawings. Less detailed drawings tend to allow the contractor more flexibility. In our case, the drawings are more detailed because the client expects an exceptional level of quality and uniqueness. Conventional wisdom and methodology in the design with more details means less guess work for the contractor in the field, and quality control. I also went through great length to design a structure that simplify the construction process , eliminating nebulous trims and decorations, minimalism. Contractors see it differently, they see dollar signs.

S+R bid came in at $755,000 , the client’s budget is $500,000. Sobering. We had a lot to do to get the number down to something the client is willing to proceed with the construction. Let’s back up to my very first meeting with the client to set the budget. The design guideline for Puu Lani Subdivision requires homes with no less than 2500 SF , lanai included. I estimated $200/SF-$250/SF, so $500K-$635K, land cost not included. Cost per square foot on the Big Island varies, $150/SF for “spec” homes to $1200/SF luxury homes. $200-250/SF is for mid range homes. An 2000SF older home plus land in Kamuela can cost as much as $700K or more , $350/SF land included. Cost per square foot is the unit in which the building industry uses to gauge construction cost or in our case to compare estimates.

Lets do the numbers: Sato residence is 3800 SF including the Lanai, Contractor’s initial bid is $755K making it $199/SF, not too unreasonable unless the client’s budget is only $131/SF.

In came the negating process. There are many options to reduce the costs , but for practicality we, the owner , the contractor and I, narrow it down to only a few:

  1. Make minor changes to the design through reduction: more time to redesign, especially if it requires structural changes, and the outcome may vary visually; often, in a structural system, taking something away means replacing with something else, and the cost saving is ambiguous.
  2. Taking a hard look at the contractors estimate and “trim the fat”: There are often unknown areas in the plans that the contractor compensates for with a large amount of money, padding.

    There are structural changes requested by the contractor, but at this stage the owner and I decided that we will keep the design as is for the sake of comparing apple to apple. Structural changes and negotiating on something without plans, and hard costs is another level of complexity that is better not to enter into. We do not want to open up “a can of worm”.

    S+R is motivated to do the project and is willing to negotiate. Rinkenbach has spent a month’s time to come up with the estimate feels that he deserves to get the job. Trimming the fat seems to be the most effective means of reducing cost because we are working with known numbers. There are hard costs ,material cost, and the soft cost, contractor’s profit and labor costs. Both are negotiable, soft cost are more flexible. I crunched the numbers and was able to reduce S+R’s bid to $640K, without cutting into their profit too much. Even at that price the owner still has a lot to worry about. She still has to come up with another $100K for landscaping and kitchen cabinets on top of the $140K over her budget.

    We came to the negotiation table with my revised estimate of $640K($168/SF) and S+R’s revised estimate of $689K($181/SF). S+R’s new number already reflected that they are willing to come down. Though the project grew in size from 2500SF to 3800SF(2500SF enclosed and 1300SF lanai), overall, I advised the owner, both estimates are still within our initial estimated square foot cost($200-250/SF), so with a little more number crunching I think we will be able to reach an agreement with the contractor.

    click to see contractor’s detailed bid (estimate)