construction bids

Subcontractors: Prepare Bids This Way to Protect Your Bottom Line

Have you ever had the unpleasant—and costly—surprise of a general contractor putting additional job requirements into your scope of work? Fortunately, there’s a way to protect yourself: by preparing an itemized bid that lists exactly what you agree to do for the reflected price. Itemizing your bid and then thoroughly reviewing the subcontract before signing is the best way to be clear about your expectations and to prevent financial ruin from an unexpected work requirement. So—prepare your bids this way and protect your bottom line as a subcontractor.

Writing Your Bid

It’s true that the scope of work and the bid you submitted are rarely the same, but sometimes, general contractors sneak in responsibilities that far exceed the payment of the subcontract, or even your capabilities. For example, they might include electrical work in the scope even if you never do electrical work. But if you’ve signed the subcontract, you’re on the hook for everything it contains.

First, let’s take a look at the bid, the offer you send to the general contractor saying that you will do the work described for a certain price. You have two main options for writing your bid. One, you can generally reference the scope of work for a stated price. Two, you can use the itemized method, which lists exactly what you agree to do for the reflected price.

Negotiate better subcontracts

Want more advice on how to negotiate subcontracts that work in your favor? Find Karalynn Cromeens’ new book Quit Getting Screwed on Amazon. For materials referenced in the book, visit subcontractorinstitute.com.

As a best practice, we recommend always taking the second approach and itemizing your bid. A bid is a legal offer that can be accepted once it is provided to the general contractor, so if the bid you send isn’t itemized and is missing something, you could wind up on the hook for thousands of dollars of extra work.

Let’s say you are an HVAC subcontractor, and you receive a request to bid a rehab facility. You submit a bid that isn’t itemized, simply stating that you will do the HVAC work on the rehab facility for $300,000. The general contractor reviews the bids for the HVAC work, and your bid stands out because it is about $100,000 lower than the other subcontractors’ bids. It is clear you missed something.

The general contractor immediately sends you a subcontract before you realize your mistake. You can withdraw your offer before it is accepted, but once the general contractor sends you that email stating that your offer is accepted, you cannot back out. You are now on the hook for an additional $100,000 worth of work you did not budget for. What would that do to your company?

If you had sent an itemized bid, it would have been clear what you were agreeing to do for your $300,000 offer and that you were not offering to do the whole scope for the $300,000. Now, if the general contractor sends you an email accepting your offer, you are only on the hook to do what was in the bid—thanks to your itemized list.

An itemized bid form template is included in Chapter 1 of the Mastering The Subcontract Course at The Subcontractor Institute.

Review Each Subcontract as if It were a New Bid

Hand in hand with itemizing your bid, we recommend reviewing each subcontract as though it were a new bid. Remember, the subcontract and its scope of work will rarely match your bid exactly, so it’s important to notice the differences before you sign. An itemized bid will create a paper trail of exactly what you agreed to do, but you still want to avoid signing a contradictory subcontract.

What if the general contractor from the example above sends you a subcontract that includes the whole scope for your $300,000 price?

If you are in the habit of reviewing the scope attached to every subcontract as if it were a new bid, you will catch that the scope is larger than what your bid included. If this should ever happen to you, do not sign the subcontract, and immediately contact the general contractor. Let them know that the extra work was not included in your bid, and if they need you to do this additional work, it will cost $100,000 more. In short, make sure you’re getting paid appropriately for the work you agree to do.  

Your Texas Construction Lawyer

Don’t lose out on the hard-earned money you are owed and the job you have secured and planned for. Contact us at The Cromeens Law Firm for a free consultation today at 713.715.7334. With offices in Houston, Austin, and San Antonio, our knowledgeable team is here to help protect you on the front end and avoid liabilities down the road.

Know What You’re Signing

As one of the first steps of any job, preparing your bid the right way will help get your projects off to a smooth start. By itemizing your bid, it will be clear to the general contractor what your bid price includes, and it will be easier to spot discrepancies between the bid and the scope of work. Then, by closely reviewing the subcontract before signing it, you’ll know exactly what you’re agreeing to do and won’t be caught off guard by surprises in the scope of work.  

Conclusion

The best thing you can do to protect yourself as a subcontractor is to create a clear paper trail for your work and diligently review every document before you sign. Knowing what you’re signing will keep you from making catastrophically expensive mistakes and help you maintain control over the work you do.

 

 

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