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Dealing with contractors
5

Dealing with contractors

Dealing with contractors

(OP)
Hey all,

I'm back!  Ok, so here's the deal:  My first buried waterline design project for a local county Utility Dept. went out for bid and the response was tremendous (the result of a slow economy, I guess).

So, after doing our due diligence, we accept the lowest bid and award the project.  Later, the contractor learned he was the lowest bidder by a significant amount (i.e. He left almost $100K on the table - his bid was that much lower than the next bid).

Now, he's looking to recoup some costs.  He is going through my contract documents with a fine-tooth comb, looking to justify a change-order and he hasn't even broke ground yet!

The estimator, "Frank", is a real piece of work too.  He's abrupt to the point of rude, confrontational, and gets very defensive at any question/request.  In our preconstruction meeting, he demanded the start date of the project get pushed out 14 days.  It was (and continues to be) very unpleasant.

Any others notice a trend in how contractors are responding to the engineers?  Any tips on how to handle them?  Every time Frank calls me, I get tense and find myself at a loss for words.  Logic has always served me well and I have a hard time dealing with angry people that will not listen to logic.

Thanks in advance.

RE: Dealing with contractors

2
Welcome to my world.  I've been doing Building Engineering for the last 30 years and only 1 or 2 in 10 of the contractors are OK to get along with, and want to play as a Team.   Three or four in ten are "competent" and will fit into the bell curve of mediocrity.  The rest are all varying degrees of amateur contract lawyers, incompetent goofs, dunderheads, ignoramuses and idiots.

Now before I get reamed a new one by any Construction people and Trade Contractors out there, I must clarify that I find for the most part, at least 75% of the guys on the ground with tools want to do a good, or great job, and really carry the can, and are great to get along with, and are willing to work together to realize the vision.  It's the business manager/project manager levels that are rife with the "difficult" people.  Power plus ignorance = frustration.

RE: Dealing with contractors

Monkeys like peanuts, some descent humans also like peanuts, but usually if you put peanuts on the table you will attract monkeys.

RE: Dealing with contractors

I have found difficult people everywhere, both on the construction side and on the design side, although always a very anoying but also very small minority.

For me, respect goes a long way, explaining things too, sometimes contractors do not understand the reasons for something and they get very fustrated with what to them are stupid requirements. If I can not explain the requirement, then it is stupid!

Also, when they come with a proposal/alternative that is not acceptable, rather than refuse point blank, I ask for the reason behind (material availability, schedule,...). Many times working together we have come out with a third way which both satisfies my requirements and helps them.

Finally, I always acknoledge the fact that they have to make money on the job, they do not make money, everybody loses and the job suffers, so if there are ways to help them make more money without compromising quality, schedule or technical requirements, I do so.

Now, if the person is just difficult and wants to make my life a misery, I can shout as much as the next guy, use as many swear words or be as bad as them. Usually that does not last very long though. Once the p***ing match is over, they tend to calm down and then we can start working together

RE: Dealing with contractors

(OP)
ajack1 - I completely agree with your analogy - but it was THEIR peanuts that they put on the table.  We simply agreed said, "Yes".  Some contractors forget that, I think.

GmcD - Yeah, I see the difference, no doubt.  And most of the guys in the trench getting their hands dirty don't much care for the ones in the office.  Too many contractor-workers are shocked when they see me at the jobsite in my workboots and hard-hat and I tell them I'm (gasp) and Engineer!!!

Kelowna - See my response to Ajack1 - we agreed to their price.  Now they want more money and their argument is that the specification didn't specifically list it.  Well, this is stuff like Heavy Equipment necessary to do the job, trench boxes to fulfil OSHA requirements, staking of the water line location to meet design measurements, ect. - to me, this is stuff an experienced contractor should know is required and not need the engineer to explain to them.  Am I being unreasonable?  I hope not.

RE: Dealing with contractors

This strategy seems to be becoming more common, go in with a stupidly low price and then really load any changes and dispute every last issue and ask for more money.

The problem is by accepting a quote that was $100K lower than the second lowest bid your company are almost encouraging it. A mid priced bid would probably have a bit of give and take in it, one that low is never going too.

What are the low to mid priced companies going to do in order to win work?
 

RE: Dealing with contractors

That's why I think low bid has to be abandoned and replaced with going with the 2nd low, or even median bid.  Any bid substantially outside the cluster in the middle of the pack probably has problems and should generally be avoided.

RE: Dealing with contractors

Ahhh, the lowbid swamp.  I have been mired in it for quite sometime, and can relate to some comments.

100K is not much if the contract was  5 mil., but I'm sure it was not.

I have seen it both ways: Contr. folks in the field good (and bad), and contr. mgmt./owner types good (and bad).

Dealing with contractors is not something someone green should ever do. (without major oversight)Engineer or not.
Some will smoke your arse before you know it, then you pay them for it.

RE: Dealing with contractors

A couple of ideas:

1.  Geee...it seems to me with the downturn in the economy and lost revenue that a lot of Capital Improvement projects are either being cancelled or put on hold.  Maybe he would like to join the unemployment line in back of the rest of us.

2.  The acceptance of the contract does not give him the right to abuse you.  YOU do have the power here to give him heartburn - with your inspections.  The next time he gives you heartburn - one on one - remind him of that.  If what he wants is an adversarial relationship, you can oblidge.  Say it with gusto, and in his face.

3.  Think of any and all ways to delay sequential project payments.  If there are any complications - blame them on him.  

4.  Look over the contract closely too, looking for whatever additional leverage you can muster.  If you find any, hold the aces for an appropriate time.

5.  Refuse any change orders.  Make him stick to the contract.  Maybe they will default.

Mike McCann
MMC Engineering

RE: Dealing with contractors

6. Tell him the start date is not important, it's the completion date he has to comply with.

RE: Dealing with contractors

Seems to me that when you go out to tender you should have some expectations of what would constitute a reasonable price... like you should know roughly what the answer will be when you do a calculation.
Ergo, when bid review time comes around you have the means to spot the "wrong 'uns"; too high and too low.
Too high could be because they've got so much work on they'll do this job only if it is financially too good to pass up.

Too cheap ought to ring a few bells;
they either made a big error in their bid,
they are planning to cut a lot of corners if they can get away with it or
they expect to revise the price up once they get the job

To be fair, the last option seems to be accepted practise for government contracts - I think the term is "cost over-runs"? But usually isn't that approach only adopted once you are so far into the project that it is too expensive to back out?

So if you must take the lowest bid, what do you expect is going to happen? Are you obliged to take lowest bid or did everyone think it was Xmass?

JMW
www.ViscoAnalyser.com
 

RE: Dealing with contractors

(OP)
Great suggestions, all.  My engineer's estimate was about $750K - winning bid was $475K.  Median was $650K.

We have suggested to our clients (repeatedly) that they through out lowest and highest bid, then select the lowest responsive and responsible bidder from the remaining group.

When times are 'fat', we may only get two bids on a project - yikes!

When times are 'lean', my clients continue to think from a 'fat' economic period - plus they have a board of supervisors to answer to (my clients are municipalities) AND contractors will (and have) taken my company to court when we do not recommend the lowest bidder, regardless of our reasoning.  (Would we honestly award a $1M project to a three-man crew that usually does residential waterline tie-ins?)  

RE: Dealing with contractors

I'm a fan of 2nd-lowest bid, but that's not an option around here.

I take it as a matter of course that the contractor will go through the contract with a fine-toothed comb and look for areas where they can justify a change order or a claim.  I've heard that some contractors employ staff just for this purpose.

For the current job, all you can do is make sure that you can justify everything through your contract, specifications, drawings, etc.  See if there are published codes of common practice for your industry and buiding materials.  Document everything.  Document "verbal" agreements.  Document conversations.  Document timelines.  Respond to RFIs in a timely manner; you don't want them coming after you for lost time on top of everything else.

For future jobs, go through your own contract looking for the kind of hole a contractor could take advantage of, and plug those holes.  Develop some boilerplate language about various activities (labor, equipment, etc.) being subsidiary to the main bid items.  Remove ambiguity (maybe there was a day when ambiguity would work on the side of the client, but from what I see ambiguity mostly works for the contractor).  Read everything with an eye for willful misinterpretation, just in case.

A moderate dose of paranoia during contract development can save a lot of headache in the field.

Hg

Eng-Tips policies:  FAQ731-376: Eng-Tips.com Forum Policies

RE: Dealing with contractors

even though this contractor seems to be trying to pull a fast one, he did after all leave at least $100k on the table which should give both you and the owner a little breathing room. Make the contractor follow the rules, but you don't have to be the bad guy here.  You may get a lot more cooperation and an overall better job done if you let him know you will be fair and will at least consider his legitimate requests for extras. Also consider a partnering or team building session to help get things off on the right foot (although it sounds like it may be too late for that...)

RE: Dealing with contractors

I work in a different engineering environment but have to deal with several large value (>US$2million) projects that go out to tender each year.I have to justify final choice of vendor selection to management and have found that putting together a questionnaire at the bid stage and asking all bidders to complete it helps to make things easier.

Some of the questions are along the lines of:

a) How many full time, company staff are employed by your business

b) How many projects of this size has your company successfully completed in the last (i) 2 years (ii) 5 years. Would you provide references that we could contact regarding the projects?

c) What is the hourly rate of your site supervisor?

d) How many direct hire staff will be on-site for the duration of this project?

e) How many contractors will be on-site for the duration of this project?

You have to tailor the questions to suit the project, but the aim is to get an understanding of competence and costs for other projects so that all vendors can be compared. Putting the answers into an Excel spreadsheet helps to find the extremes - the reputable vendors have no problems with supplying the requested information and I always tell all bidders that I assume that anyone who doesn't answer has something to hide and will be disqualified.

I make sure that all vendors are fully aware that the information provided is treated confidentially and will not be shared with any 3rd parties. You might need to run the questionnaire past your legal/commercial people first

If they want to delay the start date, then you should ask for, and agree to a new completion date: how about adding a penalty clause so that every day late in delivering the ompleted project costs them say US$5k?  

RE: Dealing with contractors

I hope price is not the only criterion for placing the contract. An organization should have a qualification program that allows rejection of unqualified contractor bids. This is built into modern qaulity programs. Visit the contractor, review org charts, rate the qualifications, etc.

RE: Dealing with contractors

That's a big issue. When we assess vendor bids we are supposed to look at past history, technical expertise, and a whole bunch of other stuff, as well as the price. But of course if engineering select anyone other than the cheapest bidder then at best there is a certain amount of whingeing, at worst we get overridden. (This is pretty obvious if you look at a car, it is covered in brand name parts rather than knock-offs for good reasons).

I'd guess something like 60% (probably more) of jobs go to our preferrred source rather than the cheapest ones, but of course they get a lot of pressure to meet the cheapest bid while preserving the quality of their initial bid.

Hwever I am lead to believe that in some environments (especially government) it is compulsory to accept the cheapest bid. I'd be spending a lot of money on contract lawyers and spec writers and systems engineers in that environment.

 

Cheers

Greg Locock

SIG:Please see FAQ731-376: Eng-Tips.com Forum Policies for tips on how to make the best use of Eng-Tips.

RE: Dealing with contractors

for public works projects (as this waterline most certainly is), the low, responsible bidder almost always gets awarded the contract. This is one of the problems with the traditional design, bid, build method for public works. With alternative delivery methods such as construction manager at risk or design build, the public agency may choose a contractor partially or completely on qualifications without undue influence on the price. (however, in my opinion - some contractors use this to inflate prices or pass back as much risk as possible to the agency).  As many have noted, in the private sector and industrial markets, you can choose any contractor you want for any reason. In that case, by all means throw out the low bid, check all references, require complete statement of qualifications and ask the shortlisted firms to come in for an interview and you should get the best contractor that money can buy.

RE: Dealing with contractors

Buyers market, nobody holding a gun to his head when he submitted the bid.  I'd call him in and throw the hardball back at him.  Do you want the job or not.  If yes, let's work amicably together.  It's your let, you're the boss, don't relinquish your position as such.

RE: Dealing with contractors

Variation in bids is usually due to uncertainty in the tender. The more you leave to chance (or the contractor's determination) the more variation in approaches you get. Some contractors assume the worst and bid for it and some assume the best case scenario and end up begging for extras when things don't go their way. To avoid the variation in bids, be exact in the wording on the tender, and try to think like a contractor when you're putting it together.

Ultimately, remember that your job is to get a good product, on time at a fair price. Not to put contractors out of business or to teach lessons in contract law or "fine print". Work with the contractor on his concerns and you will be more likely to get a good product with fair pricing.  

RE: Dealing with contractors

"Variation in bids is usually due to uncertainty in the tender."

Not in my world.

RE: Dealing with contractors

It isn't necessarily poorly written tenders that produce a wide range of bids but understanding the response.

There can be some surprises with high bids.

I remember well an example from my very early days when I worked for a flow measurement company, and we received a ender request from Sri Lanka for 40,000 water meters.

The Metropolitan Water Board had said of the company that its meters were the "Rolls Royce" of water meters. This   pleased the engineering department, though it shouldn't have as it was shorthand for "too expensive"  (by sixpence, in old money) and they only ever sold in very small numbers.

But this, some years later, was the opportunity to finally put them in the market they were intended for now that all those added features were valued.

The problem was purchasing who went into deep discussion with the suppliers and who then determined that volume production would require that we increase the unit price quite significantly. They had their reasons.

It was probably the first bid to be vertically filed by the client.

Then too, beware the "contingency".
I've seen bids where each contributing party has included a "hidden" 10% contingency in case anything goes wrong and where whoever put the final costs together from its component parts added his own 10% on top.
Now add margins to compound the problem.
Thus, the final bid assumed everything that could go wrong would go wrong and with every part of the project, and then some.
Also vertically filed.

Then too, some of the bids will be there just to make up the numbers and will have had no real effort put into them.
For example, in cases where clients are obliged to obtain at least three bids. The tender is carefully written to favour the preferred bidder and the others are just there to satisfy the legal obligations and some of them know it.


 
 

JMW
www.ViscoAnalyser.com
 

RE: Dealing with contractors

Another twist:  Someone who's done exactly this thing before knows all the pitfalls and bids accordingly.  Someone who hasn't done it before (but yet has enough relevant experience to be qualified) has a rosy view and bids low.  There's no way to evaluate that aspect of it with just a list of per-item dollar amounts.

Hg

Eng-Tips policies:  FAQ731-376: Eng-Tips.com Forum Policies

RE: Dealing with contractors

sOeebuch

We operate under the low bid system.  The contractors that are certified to bid have to meet certain criteria in order to qualify for bidding. The most important of these is their Bonding/Surety Insurance.

Our specifications are pretty sound/detailed and based on industry standards. In order to bid on our projects a certified check (% amount based on the contract) from the contr. is submitted with the bid documentation. After the bids are opened the contr. has the right to withdraw his/her bid and forfeit the check if they are the apparent lowest bidder, and are having issues with being significantly lower than the others. This appears to be a good practice.
If the contr. really screwed the pooch on the bid and cannot complete the work according to spec.s and drawings then his Surety takes over and retains another contractor to finish the work. This appears to be a good thing, have seen it executed. Our spec.s/contract language allows us to default the contractor under several situations. We also install a contract time amount that includes an amount of Liquidated Damages for every day the contract is not completed. We have detailed outline/format procedures that the contr.'s bid document has to meet, and if we find an error in his bid package it will be disqualified and not included in the process.

It has been my experience, municipalities, counties, cities, and private construction PS&E packages "can be" substandard and rife with potential areas of concern regarding many issues such as: no penalties for exceeding contract time, unclear sequence of work, material spec. issues, omitted bid items, etc. and so on.

It is my opinion that it is hard to be objective and open minded when you are dealing with a contractor that does not have good people skills. (to be nice)
It is always good to keep in mind that in a low bid system the work is being done at a pretty good savings to the owner, this being said if change orders are merited they should be executed without delay. For instance, your PS&E did not include a pay item or language about the hydro testing of the new water line. (C.O. no.1)

Documentation is always a good policy.  If your contractor feels strongly about something (error in plans/spec.s) have him put it in writing to you or your org. This practice usually eliminates fishing expeditions, as well as gives a good trail after the work is completed.  Be sure and respond to such letters in a reasonable time period.
 Having qualified/experienced inspection is a must. Daily documentation (weather, conditions, matl.s delays, non conformance to spec.s, time work began, time work stopped, equipment on the project, etc.)
If no one (on your end) is watching the work being prosecuted/installed you will more than likely be at a severe disadvantage to say the least.

Sounds like Frank may be used to dealing with Engineers that have no fortitude/experience. Maybe you should show him you have both (may include hours other than 8-5).

Their are things to learn from every contractor, I am certain Frank's bunch is no different.

Good Luck
 

RE: Dealing with contractors

s0eebunch,
I have several years experience on the construction side as an esitmator and project manager.  Now I'm one of those "damn engineers".  I agree with Drumchaser: you have to be stern and documentation is the key.  This is just a dog and pony show that is commonly done when a company relizes it screwed-up the estimate. $100k left on the table is a major mess-up.  Don't forget that you wield a very big stick, the contract.  It can be used as a nice "reminder" for the contractor on what can be defined as a change order or not, especially if you have performance clauses or liquidated damages in it.  And remember there's nothing more unnverving to a contractor than having the project engineer show up, un-annouced at the site with a clip-board and a camera.   

RE: Dealing with contractors

CCB1 says "there's nothing more unnerving to a contractor than having the project engineer show up, un-announced at the site with a clip board and a camera".

I say that's a good thing. The greatest compliments, the best advertising our little company (usually a sub) has ever recieved was under those exact circumstanses. The end result is a reputation with prime contractors and owners that you could'nt pay for even if you tried.
There are companies out there doing the work right, to spec, who welcome close scrutiny as it ALWAYS works in thier favor.
We've had some very good years, as the result of a few simple comments on our work by project engineers and others in positions where thier opinion carried significant weight with the people who actually hire us.
But then of course we are very rarely the lowest price available either.
We welcome close inspection as it quickly weeds out the low bidder hacks for consideration on future projects.

JTMcC.

www.firstratefabricators.com

RE: Dealing with contractors

used to deal with that all the time.  guy named eddie.  shell contractor who was mean as the day is long.  if you're not a confrontational person, just walk away and hang up the phone when he begins to yell and be rude.  not that i did that.  but i'm a confrontational person, too.  and that didn't always work out well for me.  CCB1 has it right.  you're the customer.   

RE: Dealing with contractors

I have dealt with low bid people and they hit you with every change order possible.  

Usually if they come back with a low bid I think its the responsibility of the engineer to ask do they understand the requirements?  Usually low bids are missing something.

If your the management type that takes the low bid and then laughs at the construction company for there bad understanding, then you got what you deserve.  YOu picked their low bid and probably knew that they were missing something.  Would not it of been more benefical to you before you accepted their bid to go over the requirments to see if they were meeting them?

RE: Dealing with contractors

(OP)
FOLLOW-UP

So, the work was progressing and there was only one change order to the project.  The change order was less than 5% of the total bid amount - not a big deal.

However, we (the client and myself) noticed that even the change order was low.  We inquired of the contractor and were told that the estimator (the rude guy I'd been dealing with) had been fired the previous week.

Apparently our project wasn't the only project on which he bid extremely low.

I'm now dealing with the vice president of the contracting firm until they can get a new estimator.

...and Mr. VP is absolutely great to deal with!

Thanks for everyone's advice.

RE: Dealing with contractors

Damn, now I know why being an agnostic is a safe bet; seems there might be a God after all.
You don't often hear of one of the "Franks" in this world getting found out and canned... usually the rest of us have to pick up the pieces around them.

Good luck with the new arrangement, let's hope Frank hasn't so low bid them they fall by the wayside before they get finished and get a chance to get it all together again.  

JMW
www.ViscoAnalyser.com
 

RE: Dealing with contractors

i am an engineer and also own a concrete construction company. we perform millions of dollars of work each year. when we are asked to bid a set of plans, that is what we do. especially in this hard bid / low bid environment. there is no negotiation with the GC's, architects, or engineers. we bid what we see. to get the job, we have to be the low bid. which is moronic from the start. most of the plans we see are pathetic and should never be used for construction. most have been put together by architect / engineer underlings that have used way too much "cut and paste" to get the job done. yet they are permitted. so with that said, we jam the architect, engineer, or GC every chance we get. when we bid the plans we make a complete list of all of the shortcomings of the plans and then someone else can pay for them. that is the "bid" environment. the negotiated environment is much more relaxed where we come in with coffee in hand and sit down and point out all of the problems with the plans from the start. then the owner turns to the engineer/architect and says get back to work....  

Thanks,
Scott

RE: Dealing with contractors

purdue87,
Yup, been there. I've also seen that when bids are extremely low, the exemption/exclusions list is unusually  high.  It's best to read the entire bid before making a decision, but that is stating the obvious.

RE: Dealing with contractors

Have you seen a bid where the answer to the first item on the short comming list was explaned in the first paragraph of the bid document.

Lets don't be so hastey to beatup on the engineer. I've seen plenty of these where the item was bid on the title, and not on actual bid document. (Apperently it wasen't worth the time of the sales engineer to read).

But you are right about it's not common to have complete drawings either.

RE: Dealing with contractors

I typically try to have a conversation with the bidders, face-to-face if possible. Just to review the project and make sure they understand the scope. This can weed out some of the bidders that do the bare minimum and don't actually understand what the functions required are. If I'm talking with them about a water pipe and have a 3" pipe for 3,000,000 cfm, I'm much more confident with the contractor that points it out in the bidding process. If I get a bid from somebody who didn't question it, I assume that they will just put in a 3" line and say, "That's what the spec said."

I see it as buying services in addition to the contracted work. Sometimes it makes sense to go with the bidder that seems very knowledgable and will be able do so some of the checking (typos, ridiculous items that work in theory but not in practice, etc). In a simple system, (i.e. cover existing level slab with grating and anchor), maybe I go with the cheapest because everything should be straight forward.

Hope I made my thoughts clear.

-- MechEng2005

RE: Dealing with contractors

On a recent job bid for civel work we had interest expressed from 33 contractors. With that number it becomes difficult to meet fact to face with all of them.

But in general you are correct, where possible.

For general things, like planting a copper grid in the dirt, a bunch of questions can develop very quickly. However, in general we are required to take low bidder unless there is a very good reason.

RE: Dealing with contractors

90% of the time construction is about finding the dog-ass cheapest price from each sub-contractor. then the gc adding his markup and voila... you have yourself a project. then the co's start flying. have done Millions of $ worth of work and have yet had an engineer ask to meet with the subs. 17 divisions with 3-5 subs each? wow. what a big meeting.  

Thanks,
Scott

RE: Dealing with contractors

(OP)
purdue87,

I'm not sure where you are located, but I (and other consulting engineers in my area) regularly meet with sub-contractors.  Sometimes the GC or primary contractor doesn't have the time to review all aspects of the project or the competency (some areas of the work are outside thier area of expertise).

Most of my projects do not result in "COs flying".  We discuss and approve change orders as the situations warrant.  Some change orders are the result of the the client wanting additional work in the area.  Only a very few are due to plan or spec errors.

And as far as "jamming it to the engineer" - I have only had the one instance (see this OP) where a contractor was blatantly and maliciously trying to take advantage of what he perceived to be omissions in the scope of work.  We try to be as thorough and accurate as possible in our contract documents - to minimize the types of omissions that less honest contractors try to take advantage of.  So far, we've had minimal issues.

We have a good relationship with most of our GCs, clients, and even sub-contractors.  The good contractors understand that there will be another project - and doing good work and building good relationships are how repeat work is generated and maintained.

I'm sorry you've been burned so bad to have the kind of attitude you now have.  Good luck on future projects.

s0eebuch

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