9 Construction Communication Gaps – How to Talk to a Contractor

Construction lingo can lead to confusion before your job even begins. This often creates cost overruns and frustration.

This article tells you what to look for in a construction bid so you can avoid surprises.

Anywhere you see something you don’t understand you should expect to be surprised by a cost that you didn’t anticipate. If you don’t know an acronym or brand name or word in the bid, just ask. That’s the goal of reviewing the bid with a contractor.

Here are 9 common communication issues that can cause you pain that is easily avoided:

Allowance: This is a dollar value that a contractor has noted for something in your project.  For example, your allowance for your bathroom tile is $2,000.00.  If the cost of the tile goes up or down then you pay or save the difference.   A large number of allowances means that the contractor is shifting the responsibility of getting certain products for a specified price to you.    Be careful of more than 5 allowances in any bid and make sure you know how to buy something for the allowance price noted.   Often times an allowance for windows is just a small fraction of the windows that you probably want to buy.

OPCI:  Owner Provided Contractor Installed.  You will be paying for these products and storing them on site for the contractor to install.   The contractor is responsible for installation costs. This can be a great way to save money, but you certainly want to be aware of what you have to buy. If you buy the wrong thing or too little then the contractor is justified in charging you hourly to go out shopping for you.

PBO: Purchased by Owner.  This is the same as OPCI.

NIC: Not in Contract.  This is work that the contractor is not responsible for.  You will have to accept a change order and pay additional money to get this work completed

By Owner: This is the same as NIC.  You are responsible for all materials and labor to complete this work.

TBD:  To Be Determined.  There will invariably be something needed that costs you money.  TBD should rarely if ever be part of a construction bid.  The point of a contractor is to eliminate TBD.

Verify in Field or VIF: Danger!  The contractor will verify if some work needs to be completed after he or she starts and it will then be your responsibility to pay for it.  It’s better to pay them hourly to remove any VIF conditions before you sign a contract and before they start work.  Be very clear that the site slope, soil conditions, plumbing, underground utilities, electrical are all included in the bid.  We’ve heard contractors complain that the dirt was heavier than they expected.  While possibly true, it’s their job to deal with that.

Existing Condition: The current condition of anything such as underground utilities, underground rock/soil issues, mold, asbestos, dry rot.  These should almost all be determined prior to accepting a bid.   For example many roofers will say that dry rot (which is a visible fungus) is an existing condition and is not part of their bid but they could easily look at rafters from outside and see that dry rot is an issue.

 T&M: Time and Materials.  The contractor will work by the hour and will bill you for their hours plus their materials and then will typically mark it all up by 15%.  This puts all the risk on you as the customer and gives them an incentive to take their sweet time while running up both labor and material charges.   There’s no reason to use T&M for anything other than a small job that takes just a few days.

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How Long To Build a Custom Home or Remodel a Home

We reviewed all of our completed projects and found the following timeframe for construction:

  • The maximum construction time was 13 months
  • The fastest build was four months (this was during the 2010 recession and everyone was ready to work at a moment’s notice) 
  • The average time to build a project is 8 months.

This includes projects that cost between $100,000 and $500,000. 

Screen Shot 2016-10-21 at 9.55.16 AM

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18 Common Budget Busting Construction “Change Orders” That Occur During Additions, Remodels and New Construction

The New Avenue online project management system reviews hundreds of projects at any given time.  We track all of the change orders submitted by contractors in these projects.

This post highlights the 18 most common change orders.  These are changes that may be called “surprises” on your project and often times they shouldn’t be surprises at all.  You should be planning on these changes.

You can review this checklist and check if your project budget includes them.  Do this and you can be prepared to review any bid.   You can make sure the full scope of work is included in the price you are quoted.

First, a note on what a “Change Order” is.”Change Ordering” is a verb used in the construction industry and it’s something that many owners are completely unaware of.  One of the unfortunate facts of many remodels is blown budgets. One cause of this is that unscrupulous contractors use change orders in a strategic and deceitful way to offer low bids.  They then make your project a miserable experience as they introduce additional hidden costs.  Some (and certainly not all) contractors make all of their profit off of these “Change Orders”.  This is true for projects ranging from small $1,000 projects to billion dollar bridges.  The good news is that many contractors have noble motivations.  They became contractors because they want to build beautiful homes – and they want you to be happy.  Even a perfect project can have 20+ change orders that you willingly choose to make.   In fact, you can have 20 or more change orders and still complete the work on budget.  With a well prepared bid the changes can be fun ways to add things that you love. Use this list to improve your next or only remodeling experience.

In our review, 13 of the 18 most expensive change orders were “discretionary”.  Discretionary change orders are changes the customer asked for. This was not part of the original bid.  It is an add that the customer requested. We consider those good change orders. They often pop up as a project is progressing on budget and the customer had a little reserve money socked away and they decided to add something nice.

However, five of these change orders were “non-discretionary”. These are the unpleasant changes. These changes are difficult to manage because sometimes the cause is beyond the owner’s or builder’s control. A building inspector may exercise their authority and request something that is not in the plan or the budget. In this case disagreeing with the inspector is an issue of fighting City Hall.  From what we have seen, City Hall never loses that battle. Other times, a designer, engineer or contractor overlooked something. Again, in a complex project this if common and a little leeway is fair.  But if this happens too often then it becomes a real question of competence or even integrity. This varies wildly by professional and most professionals are very fair and honest. However the bad apples are also very good at figuring out how to get you. It might be that you didn’t read the plans or it may be that you love custom woodwork… or both.

A well run project will stay within 10% of the bid.  If an invoice is 25%, 50% or even 100% over budget then you should tell your contractor these two things: 1) “I’m paying what was in the bid, I’m sure you can make it up on the rest of the project” or 2) “I’m canceling the contract and going back to bid with different contractors”.

Here is the list of top 18 Change Orders. This list is from all of the projects reviewed not just one project! The average of 8% increase from the original construction bid to the final completed project cost with the 8% split evenly between discretionary and non discretionary changes.

1-13 Discretionary Change Orders: 

1) Add a new bay window to the home.  Since windows were being added in the addition, it made sense to add a bay window to the existing living room at the same time.  Amount: $5,684

2) Upgrade window quality Marvin windows and Velux skylights.  Amount: $4,086

3) Landscaping:  Install a fenced in trash area and stone flatwork in the yard. Amount: $3,393

4) Add a gas line to a backyard cottage to upgrade from electric stove to gas:  $3,000

5) Change siding from Hardi board concrete to wood board and batten.  Amount: $2,325

6) Add tile to main home entry stoop.  Amount: $1,880

7) Add crown molding to living room and kitchen.  Amount: $1,761

8) Install a new skylight in a loft.  Amount: $1,487

9) Additional tile wainscoting in bathroom and tile nook in shower.  Amount: $1,050

10) Change from stained concrete floor to tile floor throughout 610 square foot space.  Amount: $1,050

11) Add false wood beams to living room.  Amount: $996

12) Addition of extra lighting fixtures throughout house.  Amount: $835

13) Provide and install 8’x4′ fence and lattice made of redwood for trash cans.  Amount: $771

Non Discretionary: 

14)  Foundation improvement: Excavate an additional two feet for foundation improvements, fill with compacted gravel, additional concrete.  Amount: $6,042

15) Fire proofing of laundry room.  Amount: $2,151

16) New water line from the street to the main home in order to increase capacity for fire sprinklers. Amount $5,505

17) Add fire sprinklers due to a new building code requirements. Amount $4,360

18) Replace electrical panel in main home with a new 200 amp service, including a wire from the street, new panel and all breakers.  Amount $3,272

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Speed, Quality or Money: Be Wary of Fast Growing Websites That Are Overrun by Shady Contractors

NBC just investigated a contractor matching service and found that 60% of the contractors providing bids are unlicensed. Many ripped off clients by running away with the deposit money or not completing the work.  At New Avenue we are not surprised. We built a project management system the eliminates the risk of these scams happening.  Then we recruited a network of architects and builders who we can trust. We work with our partners for years to create efficient processes and verify that the trust we put in our architects and contractors is well placed.

Matchmaking sites don’t help with the significant risks of quality, licensing and payments.  New Avenue protects owners from all three of those risks.  The nightmares and theft noted in this piece by NBC won’t happen on New Avenue.

These three lessons are critical to remember:

  1. If you focus on speed you sacrifice quality
  2. If you focus on large numbers of vendors you lose the personal standards of licensing, insurance, and integrity.
  3. If you focus on just matching people you overlook managing the project and managing payments and people get ripped off.

New Avenue makes all three of these risks go away.  We replace them with a quality experience, proven contractors we’ve learned to trust over years, and a payment processing platform that makes sure you only pay for the work after it is done.

http://www.nbcbayarea.com/news/local/Popular-Website-Allows-Unlicensed-Contractor-to-Solicit-Business-423198104.html?_osource=SocialFlowFB_BAYBrand

The reporters sum it up well.  Take your time, check their license and by law contractors can only charge up to $1,000 or 10% of the total job up front. The rest is paid as the work is completed.

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Top 3 Challenges in Remodeling or Building New: Knowledge, People and Clarity

There are three key problems facing every owner who is remodeling an old home or building a new one: Knowledge, People, and Clarity.

It is really time consuming to navigate all three challenges.  New Avenue has a unique way to automatically solve all three problems so you can have a delightful experience as we work with you to create a beautiful addition, remodel, or home.

New Avenue applied insights from thousands of projects and interviews to to build a project management system that makes it easier for you, your architect and your contractor to work together happily.

Here are the problems and how we solve them:

Problem #1 – Knowledge:  The architecture and construction industry does not share accurate or comprehensive pricing.  It’s partly cultural as people don’t want to give away their knowledge for free.  It’s mostly a practical problem, as it is really hard (or impossible) to provide a price for something that you are about to design. No one can determine what something will cost when you don’t even know what “it” is yet.  This is why your best bet used to be “Expect your contractor to take twice as long and cost twice as much”.

Our Solution:  First, some perspective can help.  Creating a new home is really really hard.  It is a bit like raising a child, there is a good chance you’ll do this once, maybe twice.  And you have no idea what’s about to happen:)

Realistic expectations are critical.  We have learned that an independent architect or contractor should only know the cost of their personal part of a project. They are not responsible for knowing what everyone else is charging you and they can’t tell you what to expect as a result.

To learn about what you should expect, New Avenue shares our data from completed projects. You can’t get this quality information anywhere else.

Problem #2 – People: It’s hard to find a good architect or contractor. Then you have to figure out how to interview them and if they are right for you.  This takes so much time, and it’s not even effective. Worst of all, good people can still lose each other’s trust during the job and great people can end up at each other’s throats!

Our Solution – People You Can Trust:  New Avenue interviewed thousands of architects and contractors, recruited the best and we work with them to continuously improve our service.  We work with our network repeatedly so their incentive is to maximize your happiness and not to maximize how much they can increase the costs of your project.

Problem #3 – Clarity: Don’t have years of experience managing architects and contractors?  That’s ok. Nobody does.  Don’t have the time to find, interview, hire, manage and pay them. If you had that kind of time, you might as well DIY.

When interviewing, talking design or making construction decisions you are basically trying to assess what someone else is thinking, and measure the quality of a design (which is subjective) and that design hasn’t been created yet (i.e., designed).  Oh my.  Good luck!

Our Solution – A Better Way to Communicate: Our Owner Toolbox makes it easy for you to find, interview, hire, manage and pay your architect and contractor. This system is free to use. It brings clarity to your project, from start to finish.  Our system makes it easy for an architect or contractor to tell you what they are going to do, tell you what it will cost and show you that they are doing it for the cost they quoted.

This clarity reduces confusion, stress and mistakes – and saves our owners 10% or more.  Get a competing bid, and we’ll prove it!


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Cost of a two story office, bathroom, mudroom addition

This story addition with an office, master bath, laundry and storage/mudroom.  This is about 300 square feet and it is costing just under $200,000.
This ground floor will be an office:
Addition of a ground floor office
Addition of a ground floor office

The second floor will be a utility, mud, bathroom and storage.

Second floor mudroom bath and storage

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Have any questions? We are available to discuss your goals & ideas. There’s no fee or commitment. To request a time for a call, just click here and tell us when to call you.

5 things you might find in a new $1,000,000 home

We recently bid a 3,000 square foot custom home in the heart of Silicon Valley.  I grew up in a 1910 Sears Catalog home that would sell for $180,000 today.  $1,000,000 is an insane amount of money. Except it’s quite common today.
At $333 per square foot I have to admit, I was surprised this wasn’t more expensive…
Because this home is in the most expensive real estate market in the country. People can spend $1,000+ per square foot in this town.
Because it is designed with magazine quality, fantasy finishes.
So, let’s see what kind of goodies techies drop their money on:)
These are the five big purchases that I find most interesting:
– Fancy staircase
– Special cut hardwood flooring
– 4 exquisite bathrooms (in a three bedroom home)
– Custom kitchen cabinets
– A 10 piece wall of windows and sliding doors.
Here are some details about these finishes:
–  A special order $38,000 staircase.  This is the kind you’ll see in Dwell Magazine.  The staircase has floating wooden steps, a structural steel stringer, steel supports, and a metal wire railing.
Inline image 2
– 35,000 hardwood flooring that is “rift sawn”.  Rift sawn is the most expensive way to harvest wood from a tree trunk, it’s also the hardest and most durable.
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Rift Sawn
– $5,600 in glass shower doors, tile everywhere, waterproof floors throughout.
– $36,000 in custom kitchen cabinets

– 10 part glass doors running the full length of the kitchen and living area.  A truly open living area like this, in earthquake country, with another story above requires that you build the walls like building a steel skyscraper vs. a traditional wood framed house.
Inline image 4
To see some of the design of this home, and the full budget, you can read another post here.
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Cost of a custom home in Silicon Valley

We recently completed a bid for a 2,886 square foot custom home in Los Altos, CA.  This is the heart of Silicon Valley.

This is a just under $1,000,000 for just under 3,000 square feet.  That budget does not include the architecture, engineering and permitting which can be another $250,000.

You can review the full bid 2886 Los Altos Bid

The home was a small ranch home that is being torn down and rebuilt as a 3-bed, 4-bath plus an office.

An elevation, or the exterior view of the home:

Los Altos Elevation

An elevation of the front of the home: Los Altos Elevation 2

The first floor plan:

Los Altos Ground Floor Jpeg

The second floor master bedroom, master bath and office:

Second Floor Master Suite

A quick rendering to get a sense of the size and look – details are intentionally left out of this:

2,886 Square Foot Los Altos Home

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3 Easy Steps to Get A Construction Estimate or A Fixed Price Construction Bid

If you are an owner or architect you can get a contractor bid in three easy steps.

Keep in mind, a good bid for a remodel or new build can easily take 30-40 hours of work – so while it’s easy for you to ask for one, you are asking for a lot from the contractor.

Here are the steps:

1) Load your plans, pictures and notes.
2) Click the button “ask a New Avenue admin for help”
3) We will follow up with you to set up an initial call.  A proven New Avenue contractor will meet with you and then enter their fixed price bid on your project page.
It’s simple and transparent.  We won’t send your information to anyone other than our local vetted partner.
First load the plans and/or pictures you want estimated to the timeline and click “make visible to bidders”.

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2) Contact us.  We have contractors in almost every major city. If we don’t have a proven partner already, we are really good at finding a new one and we will invest 10-20 hours of our own time to find one.

To add your own contractor sign into your New Avenue project page, click on the Proposals & Bids tab, and then select the blue button for + “Invite my own pros” then enter your contractor’s email.  They will get an invitation to see the information you loaded. They don’t see anything else.

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3) Review your bids.   The estimate or bid will be posted in New Avenue’s standard format. The team who is on the project page gets an email. This is usually an architect, and the owners.  All of you can sign in and can see the bids or download them.
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This is the bid format.
Don’t be intimidated by all those rows.  Even a $2,000,000 home only uses about 1/3 of them.  For example, you can view or download this expensive custom home Bid Example.  You will most likely have about 40 line items in your bid.
The rest will be left blank.  We show you all of these lines because it’s really  useful to see what you are not getting!  You don’t want to be surprised that landscaping, a driveway or a deck isn’t included!

Cost of a remodel and restoration of a 100+ year old historic home in The San Francisco Bay Area

This article is part of a series of posts on real project costs.  New Avenue is the leading national design/build network.  Our architect and contractor partners use our online platform to provided their bids and process their invoices.  As such we get a unique collection of project costs.  We share these costs to help inform owners, architects and contractors. 

You can review the actual construction budget for the restoration of a 110 year old 4,800 square foot home. This restoration included an almost gut remodel and seismic steel frame throughout. This home is located in the gold coast neighborhood of Alameda.

4800 square feet of remodeling

Construction Budget 4,800 square foot restoration 1908_70 Lines

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