Dealing with contractors 5

[s0eebuch]

Hey all,

I'm back! Ok, so here's the deal: My first buried waterline design project for a local county Utility Dept. went out for bid and the response was tremendous (the result of a slow economy, I guess).

So, after doing our due diligence, we accept the lowest bid and award the project. Later, the contractor learned he was the lowest bidder by a significant amount (i.e. He left almost $100K on the table - his bid was that much lower than the next bid).

Now, he's looking to recoup some costs. He is going through my contract documents with a fine-tooth comb, looking to justify a change-order and he hasn't even broke ground yet!

The estimator, "Frank", is a real piece of work too. He's abrupt to the point of rude, confrontational, and gets very defensive at any question/request. In our preconstruction meeting, he demanded the start date of the project get pushed out 14 days. It was (and continues to be) very unpleasant.

Any others notice a trend in how contractors are responding to the engineers? Any tips on how to handle them? Every time Frank calls me, I get tense and find myself at a loss for words. Logic has always served me well and I have a hard time dealing with angry people that will not listen to logic.

Thanks in advance.

 

[GMcD]

Welcome to my world. I've been doing Building Engineering for the last 30 years and only 1 or 2 in 10 of the contractors are OK to get along with, and want to play as a Team. Three or four in ten are "competent" and will fit into the bell curve of mediocrity. The rest are all varying degrees of amateur contract lawyers, incompetent goofs, dunderheads, ignoramuses and idiots.

Now before I get reamed a new one by any Construction people and Trade Contractors out there, I must clarify that I find for the most part, at least 75% of the guys on the ground with tools want to do a good, or great job, and really carry the can, and are great to get along with, and are willing to work together to realize the vision. It's the business manager/project manager levels that are rife with the "difficult" people. Power plus ignorance = frustration.

 

[ajack1]

Monkeys like peanuts, some descent humans also like peanuts, but usually if you put peanuts on the table you will attract monkeys.

 

[kelowna]

I have found difficult people everywhere, both on the construction side and on the design side, although always a very anoying but also very small minority.

For me, respect goes a long way, explaining things too, sometimes contractors do not understand the reasons for something and they get very fustrated with what to them are stupid requirements. If I can not explain the requirement, then it is stupid!

Also, when they come with a proposal/alternative that is not acceptable, rather than refuse point blank, I ask for the reason behind (material availability, schedule,...). Many times working together we have come out with a third way which both satisfies my requirements and helps them.

Finally, I always acknoledge the fact that they have to make money on the job, they do not make money, everybody loses and the job suffers, so if there are ways to help them make more money without compromising quality, schedule or technical requirements, I do so.

Now, if the person is just difficult and wants to make my life a misery, I can shout as much as the next guy, use as many swear words or be as bad as them. Usually that does not last very long though. Once the p***ing match is over, they tend to calm down and then we can start working together

 

[s0eebuch]

ajack1 - I completely agree with your analogy - but it was THEIR peanuts that they put on the table. We simply agreed said, "Yes". Some contractors forget that, I think.

GmcD - Yeah, I see the difference, no doubt. And most of the guys in the trench getting their hands dirty don't much care for the ones in the office. Too many contractor-workers are shocked when they see me at the jobsite in my workboots and hard-hat and I tell them I'm (gasp) and Engineer!!!

Kelowna - See my response to Ajack1 - we agreed to their price. Now they want more money and their argument is that the specification didn't specifically list it. Well, this is stuff like Heavy Equipment necessary to do the job, trench boxes to fulfil OSHA requirements, staking of the water line location to meet design measurements, ect. - to me, this is stuff an experienced contractor should know is required and not need the engineer to explain to them. Am I being unreasonable? I hope not.

 

[ajack1]

This strategy seems to be becoming more common, go in with a stupidly low price and then really load any changes and dispute every last issue and ask for more money.

The problem is by accepting a quote that was $100K lower than the second lowest bid your company are almost encouraging it. A mid priced bid would probably have a bit of give and take in it, one that low is never going too.

What are the low to mid priced companies going to do in order to win work?

 

[davidbeach]

That's why I think low bid has to be abandoned and replaced with going with the 2nd low, or even median bid. Any bid substantially outside the cluster in the middle of the pack probably has problems and should generally be avoided.

 

[Drumchaser]

Ahhh, the lowbid swamp. I have been mired in it for quite sometime, and can relate to some comments.

100K is not much if the contract was 5 mil., but I'm sure it was not.

I have seen it both ways: Contr. folks in the field good (and bad), and contr. mgmt./owner types good (and bad).

Dealing with contractors is not something someone green should ever do. (without major oversight)Engineer or not.
Some will smoke your arse before you know it, then you pay them for it.

 

[msquared48]

A couple of ideas:

1. Geee...it seems to me with the downturn in the economy and lost revenue that a lot of Capital Improvement projects are either being cancelled or put on hold. Maybe he would like to join the unemployment line in back of the rest of us.

2. The acceptance of the contract does not give him the right to abuse you. YOU do have the power here to give him heartburn - with your inspections. The next time he gives you heartburn - one on one - remind him of that. If what he wants is an adversarial relationship, you can oblidge. Say it with gusto, and in his face.

3. Think of any and all ways to delay sequential project payments. If there are any complications - blame them on him.

4. Look over the contract closely too, looking for whatever additional leverage you can muster. If you find any, hold the aces for an appropriate time.

5. Refuse any change orders. Make him stick to the contract. Maybe they will default.

Mike McCann
MMC Engineering

 

[apsix]

6. Tell him the start date is not important, it's the completion date he has to comply with.

 

[jmw]

Seems to me that when you go out to tender you should have some expectations of what would constitute a reasonable price... like you should know roughly what the answer will be when you do a calculation.
Ergo, when bid review time comes around you have the means to spot the "wrong 'uns"; too high and too low.
Too high could be because they've got so much work on they'll do this job only if it is financially too good to pass up.

Too cheap ought to ring a few bells;
they either made a big error in their bid,
they are planning to cut a lot of corners if they can get away with it or
they expect to revise the price up once they get the job

To be fair, the last option seems to be accepted practise for government contracts - I think the term is "cost over-runs"? But usually isn't that approach only adopted once you are so far into the project that it is too expensive to back out?

So if you must take the lowest bid, what do you expect is going to happen? Are you obliged to take lowest bid or did everyone think it was Xmass?

JMW

http://www.ViscoAnalyser.com

 

[s0eebuch]

Great suggestions, all. My engineer's estimate was about $750K - winning bid was $475K. Median was $650K.

We have suggested to our clients (repeatedly) that they through out lowest and highest bid, then select the lowest responsive and responsible bidder from the remaining group.

When times are 'fat', we may only get two bids on a project - yikes!

When times are 'lean', my clients continue to think from a 'fat' economic period - plus they have a board of supervisors to answer to (my clients are municipalities) AND contractors will (and have) taken my company to court when we do not recommend the lowest bidder, regardless of our reasoning. (Would we honestly award a $1M project to a three-man crew that usually does residential waterline tie-ins?)

 

[HgTX]

I'm a fan of 2nd-lowest bid, but that's not an option around here.

I take it as a matter of course that the contractor will go through the contract with a fine-toothed comb and look for areas where they can justify a change order or a claim. I've heard that some contractors employ staff just for this purpose.

For the current job, all you can do is make sure that you can justify everything through your contract, specifications, drawings, etc. See if there are published codes of common practice for your industry and buiding materials. Document everything. Document "verbal" agreements. Document conversations. Document timelines. Respond to RFIs in a timely manner; you don't want them coming after you for lost time on top of everything else.

For future jobs, go through your own contract looking for the kind of hole a contractor could take advantage of, and plug those holes. Develop some boilerplate language about various activities (labor, equipment, etc.) being subsidiary to the main bid items. Remove ambiguity (maybe there was a day when ambiguity would work on the side of the client, but from what I see ambiguity mostly works for the contractor). Read everything with an eye for willful misinterpretation, just in case.

A moderate dose of paranoia during contract development can save a lot of headache in the field.

Hg

Eng-Tips policies: faq731-376

 

[cvg]

even though this contractor seems to be trying to pull a fast one, he did after all leave at least $100k on the table which should give both you and the owner a little breathing room. Make the contractor follow the rules, but you don't have to be the bad guy here. You may get a lot more cooperation and an overall better job done if you let him know you will be fair and will at least consider his legitimate requests for extras. Also consider a partnering or team building session to help get things off on the right foot (although it sounds like it may be too late for that...)

 

[TPL]

I work in a different engineering environment but have to deal with several large value (>US$2million) projects that go out to tender each year.I have to justify final choice of vendor selection to management and have found that putting together a questionnaire at the bid stage and asking all bidders to complete it helps to make things easier.

Some of the questions are along the lines of:

a) How many full time, company staff are employed by your business

b) How many projects of this size has your company successfully completed in the last (i) 2 years (ii) 5 years. Would you provide references that we could contact regarding the projects?

c) What is the hourly rate of your site supervisor?

d) How many direct hire staff will be on-site for the duration of this project?

e) How many contractors will be on-site for the duration of this project?

You have to tailor the questions to suit the project, but the aim is to get an understanding of competence and costs for other projects so that all vendors can be compared. Putting the answers into an Excel spreadsheet helps to find the extremes - the reputable vendors have no problems with supplying the requested information and I always tell all bidders that I assume that anyone who doesn't answer has something to hide and will be disqualified.

I make sure that all vendors are fully aware that the information provided is treated confidentially and will not be shared with any 3rd parties. You might need to run the questionnaire past your legal/commercial people first

If they want to delay the start date, then you should ask for, and agree to a new completion date: how about adding a penalty clause so that every day late in delivering the ompleted project costs them say US$5k?

 

[plasgears]

I hope price is not the only criterion for placing the contract. An organization should have a qualification program that allows rejection of unqualified contractor bids. This is built into modern qaulity programs. Visit the contractor, review org charts, rate the qualifications, etc.

 

[GregLocock]

That's a big issue. When we assess vendor bids we are supposed to look at past history, technical expertise, and a whole bunch of other stuff, as well as the price. But of course if engineering select anyone other than the cheapest bidder then at best there is a certain amount of whingeing, at worst we get overridden. (This is pretty obvious if you look at a car, it is covered in brand name parts rather than knock-offs for good reasons).

I'd guess something like 60% (probably more) of jobs go to our preferrred source rather than the cheapest ones, but of course they get a lot of pressure to meet the cheapest bid while preserving the quality of their initial bid.

Hwever I am lead to believe that in some environments (especially government) it is compulsory to accept the cheapest bid. I'd be spending a lot of money on contract lawyers and spec writers and systems engineers in that environment.



Cheers

Greg Locock

SIGlease see FAQ731-376 for tips on how to make the best use of Eng-Tips.

 

[cvg]

for public works projects (as this waterline most certainly is), the low, responsible bidder almost always gets awarded the contract. This is one of the problems with the traditional design, bid, build method for public works. With alternative delivery methods such as construction manager at risk or design build, the public agency may choose a contractor partially or completely on qualifications without undue influence on the price. (however, in my opinion - some contractors use this to inflate prices or pass back as much risk as possible to the agency). As many have noted, in the private sector and industrial markets, you can choose any contractor you want for any reason. In that case, by all means throw out the low bid, check all references, require complete statement of qualifications and ask the shortlisted firms to come in for an interview and you should get the best contractor that money can buy.

 

[ornerynorsk]

Buyers market, nobody holding a gun to his head when he submitted the bid. I'd call him in and throw the hardball back at him. Do you want the job or not. If yes, let's work amicably together. It's your let, you're the boss, don't relinquish your position as such.

 

[Krautso]

Variation in bids is usually due to uncertainty in the tender. The more you leave to chance (or the contractor's determination) the more variation in approaches you get. Some contractors assume the worst and bid for it and some assume the best case scenario and end up begging for extras when things don't go their way. To avoid the variation in bids, be exact in the wording on the tender, and try to think like a contractor when you're putting it together.

Ultimately, remember that your job is to get a good product, on time at a fair price. Not to put contractors out of business or to teach lessons in contract law or "fine print". Work with the contractor on his concerns and you will be more likely to get a good product with fair pricing.