"It's unwise to pay too much, but it's worse to pay too little. When
you pay too much, you lose a little money - that's all. When you pay
too little, you sometimes lose everything, because the thing you
bought was incapable of doing the thing it was bought to do. The
common law of business balance prohibits paying a little and getting a
lot - it can't be done. If you deal with the lowest bidder, it is well
to add something for the risk you run, and if you do that you will
have enough to pay for something better." — John Ruskin

1.  Comparing Mark Up rates

It is very difficult for the customer to compare quotes according to the Mark Up percentage.  It is common for construction companies to receive “preferred client” discounts from their suppliers, and reputable companies will pass on this discount to their customer in the form of lower costs.

The discount percentage often varies according to the volume of business a company does with a particular supplier; thus, a smaller company or a ‘back of the truck’ contractor may not get the same discount as a larger company.  The larger company, however, has higher overhead costs to consider.  What does this mean to the “Cost” portion of a Cost-Plus project?  If Litwiller passes on to you a ‘deep-discount’ cost, then marks it up 24% to cover our overhead costs, the overall cost to the client may still be LESS than another contractor who gives you a slightly-discounted cost and only marks it up 15%.  The only way to compare estimates by price is to ensure each estimate is based on the same scope of work done to the same quality level, then compare each bottom line (overall project cost including mark up).  Which leads to point #2…

2.  What is included & what is not included in your estimate?

In comparing estimates it is also quite difficult for the customer to know what quality level is being quoted and what the actual scope of each estimate includes. If you have two estimates that vary in overall cost by more than 10%, it is quite likely that the estimates are including different scope of work detail & quality levels, but you may not have any way to evaluate this from the initial estimate;  most contractors will give only a very basic scope of work with their free ballpark estimate.  It takes several hours to research and price out a detailed estimate for a mid- to large-size project, and most companies will be reluctant to put that much ‘overhead cost’ into a detailed budget without getting some money up front from the client.  Bottom line… a ‘back of the truck’ contactor quoting for builder grade materials & fixtures and an established larger company

The market today is shifting from a project based “fixed price” to a “relationship & service: based pricing model; the worth of a reputable construction company is becoming the “Value in the Service” and the importance they place creating a quality product in a reasonable time frame. Whether you are billed a cost+mark up price or a fixed dollars-per-square-foot price, the bottom line for you is the service you receive and the experience (positive or negative) you live through during your project.  A reputable, efficient, experienced construction company will develop and complete your project with a minimum of disruption to your life, and with no end of project “surprises” when it comes to overall costs.  These are the intangibles that must be considered when comparing contractors.

3.  I can buy it cheaper than that somewhere else!

Consumers today are educating themselves through the internet.  Although knowledge is never a bad thing, incomplete information can have the effect of creating pre-conceived ideas of what the cost of services & products should be, with no consideration of associated costs which may be incurred.  As mentioned above, even though the overall cost to the customer is often less than retail, a general contractor realizes a profit from selling you a ‘marked-up’ product purchased from a supplier, then pays a tradesperson to install this product.  The “price-savvy” shopper may find a supplier (local or online) who can offer the same product for 10% or 20% less than the contractor’s stated cost, but will likely pay a much higher “shop rate” for labour when hiring a tradesperson to do the installation: the installer is not receiving profit from the purchase of the product, and thus must cover their overhead from the installation price alone.  Bottom Line… an overall price that is often no less - and sometimes significantly more – than the contactor’s quoted supply-&-install cost.  Then add in the warranty consideration: the price-savvy shopper will usually not receive any warranty service on the cheaper product they found, other than perhaps a straight replacement of the product itself; so, if the product fails, the customer will pay to have the defective product removed and to have the replacement installed.  A reputable contractor will usually remove, replace, & reinstall a defective product at little or no cost to the customer.

Professional Renovation Contractors:

• Maintain a well organized and professional office where all important paperwork and invoicing is kept current and accurate

• Tend to work with like minded, reputable & reliable trade partners

• Carry liability insurance, Worker’s Compensation coverage, municipal & provincial business licenses, and are usually bonded

• Regularly attend educational workshops to keep up to date with current construction practices & bylaw issues

• Do not receive “commissions” from trade partners

• Provide a detailed written estimate and submit written notification of any additional costs which occur during the project due to unforeseen circumstances (i.e. – mould remediation, hidden structural issues, etc.)