Negotiating with builders- tips?

riva

We're about to start a huge renovation project and have finally found some builders after seeing the work of 4 sets of builders. The ones we have chosen were mid range in price and very decent finishing (although could be better but the best builders were way too expensive). We also get along well with them (so far).
The final specs for the work will be out soon and they still don't know we have chosen them and my architects have said that we can negotiate hard on the prices. I've asked this question on other boards before and hoping to get more luck here. Many were under the impression that I should just pay what they quote. Their rates are market rate. Has anyone got experience in this and if you were negotiating, how far should we go? I understand profit margins for them are not as good as it used to be.
They are very keen on the project as well as it will be a big boost to their company and I've already said that I'd be happy for them to show it to future clients.

fluffnutter

Like any bargaining you just offer a price (or suggested discount) and see if they accept it. I don't know what you're after? 5%? 10%? See what they say. I'd do it as a percentage of their quote rather than a fixed sum, because your final invoice is likely to be different to the quote anyway. With negotiating a discount, it's always wise to add an incentive - why should they do this for less? There's got to be something in it for them. The free advertising should help as a sweetener. Make sure you mention it, and anything else you think might help.

Or just pay the damn price they've quoted. Everyone's got to make a living

riva

Its a six figure renovation- we have to watch every penny. Basically I'd like to be able to negotiate so that its something that allows them to make a decent profit, not !!!! them off and also make me feel like I'm getting value for money. I'd also like to be in a position where I can find a reliable team to work with in the future.
I've always negotiated on smaller projects before but pretty small ones and just feel a bit out of my depth here.
We're doing most of the sourcing (ebay etc), have spent a lot of time planning as we know its expensive to change things halfway and will be very proactive in the whole build.
The incentive for them at this point is that its not a run-of-mill project being a warehouse conversion so will be very good for their portfolio. It also very much design led and exciting in terms of these types of projects. Also total project value,hence profit.
Thanks for the suggestion of doing it as a percentage- that's a good idea.
Any other tips?

poppysarah

Get a proper contract drawn up detailing payment, work etc.

Make sure you have planned everthing out properly first so no changes of mind.

dodger1

fluffnutter wrote: »

Like any bargaining you just offer a price (or suggested discount) and see if they accept it. I don't know what you're after? 5%? 10%? See what they say. I'd do it as a percentage of their quote rather than a fixed sum, because your final invoice is likely to be different to the quote anyway. With negotiating a discount, it's always wise to add an incentive - why should they do this for less? There's got to be something in it for them. The free advertising should help as a sweetener. Make sure you mention it, and anything else you think might help.

Or just pay the damn price they've quoted. Everyone's got to make a living

If a "quotation" is given then the final invoice should be the same providing no changes are made to the work by the householder. If an estimate is given then all hell can be let loose.

tyllwyd

You've probably got this all in hand - but do make sure you've agreed payment in stages, don't pay too much up front.

When we had building work done, we found the builder had given us a good price for the work he'd quoted for, but the profit was all in the extras that came up as the job went along. Make sure you've got something kept back just in case.

riva

Pretty much have done all the above but still don't have much of a clue as to how much/how far to negotiate. We based our original decision on an estimate but now have a much more detailed schedule of work. So I suppose I never thought of quotation being different from estimate....How can I tell the difference?

fluffnutter

dodger1 wrote: »

If a "quotation" is given then the final invoice should be the same providing no changes are made to the work by the householder. If an estimate is given then all hell can be let loose.

I agree. But on large projects unforeseen things happen. If extra work is required, and both parties agree, then the price can often be different.

fluffnutter

riva wrote: »

Pretty much have done all the above but still don't have much of a clue as to how much/how far to negotiate. We based our original decision on an estimate but now have a much more detailed schedule of work. So I suppose I never thought of quotation being different from estimate....How can I tell the difference?

Ask the builders whether it's an estimate based on what they think needs doing, or a quotation based on what they plan to do. A quotation should match the final price unless changes have occurred during the build. As a further point, changes MUST be agreed to as they arise. If your building firm finds some issue with your foundations, or your wiring or whatever, and extra work which has not been included in the quote is required, they MUST agree with you first that you're prepared to pay for this extra work before they plough ahead (with the extra).

If they spring you at the end, 'oh yeah, we had to do this, and we had to do that' refuse to pay. However, if you agree the schedule of works up front (which you should do as this sounds a fairly large build), then make sure you also agree how changes will be handled. That way you shouldn't have any surprises.

Out of interest, how large is this build and how long will it take? If you're talking whole new house, then you really ought to be project managing the work.

riva

Currently stands at around 150k, we expect it to go up a bit, understand that it will throw up unknowns along the way which may change things and cost us more. We're working with architects who will be project managing along with the company. I intend to be on site everyday as well (or close to) as this is a fantastic learning opportunity and am considering the fee that is going towards someone else project managing to paid back in terms of what I'll be learning (for future projects), being able to get back in quicker (before Christmas) and hence saving rent, less stress and decreasing the risks as due to location we can't afford to get this wrong- stand to increase its value considerably. However, we have to borrow quite a bit to do it so I'm quite anxious to get it right. 4 months is the rough time scale but I have to rent for 6 anyway so I would say 4-6 months.
The question still stands though. What percentage to knock off? How much do builders mark up assuming that most clients will be knocking some amount off? I'm sort of going by Sarah Beeny's price the job book to get an idea.

poppysarah

riva wrote: »

we can't afford to get this wrong-.

Well have 10% at least contingency for when it does.

and 40% contingency when you decide only the uber-best will do.

One of my favourite[1] grand designs was the one abroad with the ski chalet and Monsieur B'stard. That kitchen was ugly and insanely expensive.


[1] OK it's a close run thing with the gull wing maple roof.