Historically most owners have been of the opinion that to get the best deal on their project they had to beat every subcontractor and vendor down to their last penny. At times, I have seen Owners be pretty darn proud of themselves and even brag about how they squeezed every last penny out of this contractor or that, “They didn’t make a dime on my project”. Well I can tell you from 25 years of experience in this business that that Owner may have gotten the LOWEST price but in no way did he get the BEST DEAL.
You say that doesn’t make any sense, how could that be? Isn’t the lowest price always the best deal. NO, NO, NO!
Here is the reason why I know that they are not getting the best deal or the best value for your money.
Trade contractors are business people just like you and me. Most of them are small business owners not only with all the same day to day pressures that you and I have but actually they have a lot more. They have costs to own and maintain equipment, shop & office expenses, labor costs, overhead to make sure they perform the work when they get it, material costs, lines of credit, cost to bid projects to get the work and the list goes on and on.
If sub-contractor takes a job that has no profit in it or in some cases maybe they miss calculate their costs or material prices go up before they do the work and their bid is actually below their costs how excited is that sub going to be to go to your job and perform their highest quality work? Not a lot of incentive for them!
Of course you can contractually obligate them to perform under their bid price but it is highly likely that sub is going to be a PROBLEM! With a Capital P!
The things the usually suffer is the workmanship because they are not going to put their best tradesmen on the job, they are not going to put enough people on the job so you schedule is going to suffer badly, they will have trouble paying their vendors for the materials, or they just don’t show up at all. These are just a few of the bad things that can happen.
I can tell you with certainty that this scenario is a nightmare just waiting to happen. I don’t want you to get me wrong here. I am not saying that negotiating a good and fair price is wrong, that is good business. A fair price is the key. If the Sub-Contractor negotiates a price they feel is fair the number of problems they bring to the project will be minimized and you will get the BEST VALUE for your money!