NYC Renovation Q's

5 reasons your contractors’ bids are higher than you (or your architect) expected

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Picture this: After months (or years) saving and planning for a renovation that will transform your place into your ideal NYC abode, you’ve got a stellar design from an architect. Now you just need to hire a contractor and get down to business.

But when the bids start coming in, the numbers are shockingly high. The contractors you and your architect have reached out to say the project will cost way beyond what you budgeted for. Now you’ll either have to go back to the drawing board (incurring additional design fees from your architect), shell out far more than you planned, or call off the project entirely. How did this happen?  

"Our data reveals that bids from contractors priced off an architect's design come back on average 90 percent over an owner's original budget,” says Fraser Patterson, founder of Bolster, a New York City company that has designed a transparent and enjoyable process for area homeowners doing major renovations. “About 15 percent of Bolster projects begin with owners in this situation. We advise them to engage a Bolster general Contractor (and architect if necessary) and use our Budget Planner tool to help redesign the project’s scope, specifications and construction methods to help get closer to their intended budget.”

The open living area and kitchen of an Upper West Side home, after an apartment combination, courtesy of Bolster

According to Patterson, the mismatch of budget and bid is most often due to one or more of these five reasons:

1. Your budget was not properly stress-tested against your intended scope of work

To a certain extent, you and your architect are operating in the dark when it comes to how much a project will cost.

“Even architects with years of experience may not have a strong sense of cost, because every renovation project is unique,” says Bolster’s Patterson.

The variables that make it impossible to compare one renovation to another can range from the network of contractors your architect contacts, to the rules for renovating set by your building’s management, to the materials your walls are made

“This all plays a part in dictating price, so the best way to understand pricing is to get a contractor who has experience with, and can take command of, all of these variables and produce some semblance of reliability in the pricing,” says Patterson.

The traditional approach is to figure out a project’s cost once you reach the end of the planning process—but by then, bids may come back as much as 90 percent over the initial budget.  This late in the game, renovators may find themselves eliminating aspects of their project that they would have known to cut from beginning, had they been armed with more accurate pricing information.

This is exactly what happened to Kevin and Mia, a couple who were planning a gut renovation of their three-bedroom home in Garrison, NY. They collaborated with an architect, who created a design they loved—but the bids from several contractors all came in at around $1.2 million, double the owners’ budget of $600,000.

“Why should renovators pay for architects to design things they can’t afford?” Patterson points out.  

This is why before design begins, Bolster produces a Cost Estimate, using an algorithm informed by data from similar Bolster projects, as well as professional estimates based on site visits, to provide a statistically accurate prediction of the cost of every project upfront.  These Cost Estimates then enable owners to plan to their budget, and avoid getting hit by major sticker shock later.

2. Your architect didn’t consult with a contractor early enough in the design process 

While architects have the expertise to transform a client’s wish list into concrete design plans, contractors have the knowledge of construction methods and product costs—and the actual prices from subcontractors and suppliers—that determine the price of a renovation.

“When architects work alone, in isolation from reliable construction and cost information, it increases the likelihood that contractors will eventually come back with bids that homeowners can’t afford,” says Patterson. “It’s a good way to waste six months of planning and $10,000 in re-design fees.”

The best way to address this knowledge gap is for architects and general contractors to collaborate from the outset, creating fast and frequent feedback, applying to the design of your project the same principles entrepreneurs use in lean start-ups.

“Engaging them both at the same time means that as the architect designs, the contractor can estimate the scope of the work and what it’s likely to cost,” says Patterson. “Both can receive consistent feedback from the homeowner as plans develop.”

Homeowners also have the reassurance that they don’t have to commit to a contractor—instead, they’re hiring one hourly for estimation services. Patterson points out that good contractors are happy to do this, as it increases their chances of winning the project. This method also works in favor of the homeowners, as their architect and contractor have the chance to develop a rapport with them and “learn” the project, reducing the chance of unexpected issues arising during construction.

When Adam and Kat planned a gut renovation of their three-bedroom Brooklyn home, for instance, they hired a Bolster architect and contractor at the same time, who guided them through advance planning, selecting and committing to details like fixtures, tiles, and other design features before the project kicked off. Thanks to this early attention to detail, the bid that ended up being on-target, and their project was ultimately completed on time and on budget.

The living room in Adam and Kat's newly-renovated home, courtesy of Bolster

3. Your scope of work kept increasing as your design was being developed

It’s not hard for renovators to get a little carried away: As you start to feel more excited about your project, it’s common to add new upgrades and other items as you go, without realizing how quickly all those little details can accumulate—and dramatically raise costs.

“With traditional renovations, owners typically wait quite a while before they get a global view of their projects, and when they don’t have access to the final numbers, they can be in for an unpleasant surprise by the time they see contractors’ bids,” says Patterson.

To avoid this, it’s important for the owner, architect, and contractor—all working together—to create a very specific list from the outset, in order to see each line item and understand what it is really wanted.

“Clarity from the beginning makes it harder to deviate from plans and trigger extensive changes later on,” says Patterson.

4. The information provided to contractors was not suitably structured to obtain “like-for-like” pricing

A common complaint Patterson hears from renovators—in addition to bids coming in over budget—is that they can’t understand the pricing on a bid, and what they’re being charged for.

“There is no standardized structure in the industry for how the various components of a project are presented on a bid,” says Patterson.  “For a $1 million renovation, for instance, a renovator might receive a bid with hundreds of line items, multiple columns, and dense pricing data, structured at the whim of the estimator.”

Not only is this difficult to read and interpret, but it will also likely be apples-to-oranges different from other bids, with variations in how items are listed and calculated. When you can’t compare one bid to another, it becomes impossible to make an informed decision. And trying to get to the bottom of confusing bids by questioning contractors over the phone or email is very difficult, adding a layer of distrust between client and contractor that can slow down the whole process.

A couple who wanted to renovate the kitchen in their Upper West Side apartment faced this issue: Several general contractors bid on the project, but each one was so different in how they were itemized and priced that they found themselves unable to decide who to hire.

Ultimately, they decided to work with a Bolster contractor, who presented a bid that was fully itemized and detailed to educate the consumer and enable them to ask the right questions of all the contractors who bid on the project. Bolster also provided them with a sanitized version of the bid—that is, the same structure produced by the Bolster contractor, with all supply and installation data but with the prices removed—so that they were able to get bids back to within two percent of each other, and make an informed decision about who to hire.

5. The pricing information that's coming back from contractors doesn't carry any penalty for inaccuracy

Unfortunately, contractors don’t face any penalty for presenting false or inaccurate information, which places the onus on homeowners or architects to dig deep and figure out whether or not to trust a bid.

“When you’re not receiving apples-to-apples pricing across bids—and you don’t understand the techniques that contractors use to make their calculations—it’s challenging to determine who is telling the truth, and who might be undercutting the competition to win your project,” says Patterson. “It’s tempting, naturally, to go with the contractor who is presenting a lower total cost, but if they’re underestimating, you might have just walked into spending hundreds of thousands on your project that you did not intend to.  That’s one reason Bolster offers a financial guarantee to ensure your project is successfully completed on time and on budget.” 

When Eric and Allie decided to combine their two Upper West Side apartments into one unit, for instance, they received bids from several contractors that were difficult to interpret. Lacking clarity on what exactly they were being charged for, they reached out to Bolster. The couple worked with a contractor who showed them, using Bolster's Budget Planner tool, an itemized list of all the direct and indirect costs of their project. Armed with accurate pricing information, they were able to plan to their budget and schedule, and avoid sticker shock.


About Bolster

Every year, New Yorkers waste over $700M following the usual renovation process. Bolster is different, using a scientific approach to match you with the highest-quality professionals and financially guarantee your project is delivered beautifully for a fair price - all at no extra cost.

To start your major home renovation project, visit bolster.us 

Read more from Bolster:

The Bottom Line

The Winning Bid

How much does it cost to combina two Tribeca condos into a three-bedroom apartment--the right way? 

Here's how much it costs to renovate a Tribeca rooftop

Here's how long it takes to gut renovate a three-bedroom apartment in NYC

 

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