Why Are Capital Repairs So Expensive?
While most of the low bids we review for new construction projects are overpriced, the cost of even the best bids for capital repairs and improvements are substantially inflated, and with greater frequency. It’s not often that we find a capital improvement contract that isn’t priced much higher than it should be.
Capital repairs include things like resurfacing parking lots, roofing replacement, heating and air conditioning equipment replacement, painting, window and door replacement, replacement of floor finishes and other work that’s necessary just to keep the building properly maintained. It can also include handicap accessibility improvements, improvements to increase energy efficiency, and similar work intended to improve the value of the property. While some of these contracts can be as small as $7,000 to $10,000, some can be as large as $500,000 or more for even a smaller, single use facility. Those contracts are frequently over-priced by 25% or more, and sometimes by as much as 35%.
Why is pricing for these smaller capital repairs and improvement projects so inconsistent? There can be a number of possibilities;
- The owner’s needs aren’t clearly defined.
- Allowing the prospective vendors that perform the work to define the scope of the work.
- Materials included are not consistent between bidders.
- The bidders selected aren’t the right contractors for the work.
- There’s not much profit to gain with these smaller contracts, so there’s not much effort put into the bid price. The bidder’s job is merely to have a better price than the competition, not to provide the best price for you.
Add to that, many owners don’t get their money’s worth even when they give the contract to the lowest price bidder, because the low bidder often got that way by providing a more limited scope of work, or lower quality materials and equipment, than the higher price bidders.
Manufacturers frequently offer similar building products with a range of quality, even though they’re intended for the same use. Most owners wouldn’t know the difference between a high quality, heavy duty product and its ‘economy’ rated alternative that won’t last as long, or know the real difference between a good price and a bad one, but merely rely on their own perception of competition between bidders, when true competition seldom really exists.
What can be done? Not much if you don’t know what the true cost of the work should be.
We know what the work should cost, and what a fair profit should be to complete your work properly. We’ll identify your best bidder’s miscalculation of your real needs and other mistakes that inflated the price, eliminate them, and save that wasted money for better use on your next repair project.