The stage at which you seek quotes from builders can be both exciting and daunting. For many homeowners, it’s a very stressful and confusing stage of the building process as they wade further out of their depth in an effort to select the ‘right’ builder. The ‘right’ builder will be different things to different people, however the high-priority considerations are generally the cost of the project, quality of work and the builder’s reputation.
Unfortunately there are a few sneaky strategies that some builders use to mislead clients to secure projects. With a better understanding of how the game is played, you will be better positioned to identify and avoid the ‘smoke and mirrors’, and ultimately enjoy a smoother and less stressful build, with far less risk of experiencing budget blow-outs. However, none of this knowledge will be useful unless you are willing to ask the right questions and accept that you may need to look beyond the cheapest cost to find the ‘right’ builder.
How have provisional sums been determined?
More than any other aspect of your quotes, you need to understand the impact of provisional sums. Provisional sums are allowances the builder makes for tasks (such as the installation of structural steel and the construction of retaining walls) where the final selection is not yet confirmed or where there is detail lacking at the time of quoting; they are an allowance that is made for both materials and labour that are required to complete the task. Because they are only allowances, they are also subject to change depending on the final cost of completing the task. The important thing to understand is that the client pays for any shortfall in the difference between the provisional sum allowance and the final cost of completing the task, not the builder. Under the provisions of the building contract, the builder is also entitled to charge an additional 20 per cent builder’s margin on top of the difference.
Adjustments to provisional sums are one of the most common areas where clients experience budget blow-outs, often because the provisional sum allowance is unrealistically low to begin with.
I have seen quotes with provisional sum allowances for site works (excavation) of $2000, where the actual cost is more likely to be around $10,000. Because the excavation was nominated as a provisional sum, the $8000 difference becomes a ‘variation’ that the client must pay, possibly with an additional builder’s margin of $1600 (20 per cent of $8000) on top. For this reason, it is important to understand how a provisional sum has been determined. Is it simply a guess, or has the builder put some work into arriving at a figure that will at least be close to the actual final cost?
A quote that contains a lot of provisional sums may indicate a lazy approach to quoting; in the worst case it can be an intentional strategy to deceptively make a quote appear more competitive, all the while shifting the risks associated with additional costs to the client. It can also be a sign that the plans the builders have been quoting from are unresolved or lacking in detail, giving them little choice but to make allowances. Ideally, you should be trying to eliminate as many provisional sums from the quote as possible and have those items included in the quote without being provisional sums.
How have you dealt with demolition costs?
If you are extending or renovating, there will be some level of demolition involved in your project. Demolition is another cost that might be included in a quote as a provisional sum and is subject to change. It is important that the costs associated with demolition are clearly set out in the builder’s quote, so you can understand the full costs of the demolition. Ideally, the demolition should be included in the quote and not as a provisional sum.
If the builder has nominated a provisional sum, you should ensure you understand how much has been allocated for demolition works. Then, by comparing the allowances of each builder, you will know which builder has been more generous with his allowance, which therefore reduces the risk and severity of cost increases.
Have you included everything in the inclusions schedule?
You should always provide builders with an inclusions schedule as well as detailed drawings for quoting. This is because there are dozens of items that the plans either don’t cover at all, or don’t deal with in sufficient detail to enable the builders to prepare a quote that is thorough, accurate, transparent and easy to compare. I’m talking about all of those items that are either represented on a plan or presumed to be included, but not actually detailed in any way. For example, what type and quality are the bathroom fittings and taps? Are towel rails and lights included? How will the built-in robes be fitted out? Are the floor tiles high quality or budget range, and are the bathroom walls tiled to full height or half height? Quite simply, detailed drawings alone are not enough. There are a few ways to prepare an Inclusions Schedule but I find the easiest way is to use online inclusion tools like ProSpex by buildingquote.
Preparing an inclusions schedule is one of the most powerful ways you can limit the likelihood of experiencing budget blow-outs. An Inclusions Schedule helps to ensure that quotes are thorough and more accurate from the beginning by clarifying and identifying items that are often left out of quotes, only to become additional costs, or ‘variations’. By ensuring the builder has included all of the items nominated in the inclusions schedule, you will also find it much easier to compare the quotes you receive as ‘apples with apples’.
What about the windows?
There are many variables when it comes to windows, both in terms of the type and quality of the windows and the way in which builders deal with windows in their quoting process.
Ideally, your drawings will have been sufficiently detailed to allow the builder to get the window package quoted by at least one window supplier. This is the preferred process as it is the most accurate way of including the windows in the quote. Builders will generally have a preferred supplier that they work with and it will be beneficial for you to understand who has quoted the windows. It is also worth visiting the showroom where the windows have been quoted, so you can see the type and quality of the windows that have been allowed for. Be sure that the type (for example, double glazed) and the opening styles are consistent with your expectations.
If the builder hasn’t got a supplier’s quote for windows, you need to be very careful with how the windows have been allowed for. If, for example, they have been included as a Provisional Sum, you need to understand that the builder has only made an allowance, or a ‘guesstimate’, of the window cost, which may or may not be accurate. Either way, like all Provisional Sum allowances, you will be paying any additional costs in the difference between the allowance made and the final cost of the windows. So even for small projects, it is preferable that builders source an accurate quote from at least one window supplier.
What is excluded from the quote?
Asking a builder what is excluded from their quote is one of the best ways to understand what is included in the quote. It’s a bit like reverse engineering; sometimes you need to start from the end and work your way back. By highlighting items that are excluded, you will be able to ensure that you are comparing ‘apples with apples’ when looking at other builders’ quotes. Some of the more common items that are excluded from quotes include: government fees and charges, consultants’ fees, asbestos removal, retaining walls, driveways, footpaths, fencing, floor coverings and curtains and blinds. If any of these items are required to be included in the builder’s scope of works then they should be included in the quote – and ideally not as provisional sums, for the reasons previously mentioned.
Do you pass on your trade discount for ‘prime cost’ items?
Builders buy a lot of materials. Therefore they get access to trade discounts. The discount will vary from supplier to supplier and even from one product, or brand, to the next. Higher volume builders may also receive a bigger discount than smaller builders. One way that builders can add value to their quote is by offering clients their buying power – quite simply, passing on any trade discount to the client. This means that when the client goes to select ‘prime cost’ items like kitchen appliances, bathroom fittings and floor tiles, they will be able to make some savings over and above what they could usually expect. In a new home build where there are a lot of items to purchase, the savings can be thousands of dollars, so it is well worth asking the question, ‘Do you pass on your trade discount for prime cost items?’
Who will I be dealing with during the build?
There are many different kinds of builders and it is important to understand the kind of builder you will be working with. Is the builder a project manager, or does he actually involve himself with the physical aspects of building the house? You may like the idea of the same guy who did the quote to be the one who is also swinging the hammer; or you may prefer a project manager-style builder whose only tools will be his mobile phone and computer.
It may be that the builder employs a site foreman to manage projects. It is important that you understand the structure of the business, so you know who you will be dealing with on a day-to-day basis throughout the build.
You should also ask how many projects the builder typically has under way at any given time. Obviously if the builder is on the tools, they are less likely to be able to manage several projects at a time, whereas a project manager is more likely to be able to run several projects. In either case, make sure that the builder is not stretching their capacity by taking on your project.