Terren’s ready-to-build architectural plans are designed to give our client’s the ability to proceed straight to tender just weeks after they have paid their deposit. In explaining this to new clients we received many questions about the tendering process and the best practices involved.
As such we have written a collection of articles that are designed to go into the nitty gritty of the tendering process.
The first question we are tackling in this article is: Why should you take your plans to tender?
For the uninitiated, tendering can be the way to go to give you the security that you are getting the market rate for your build. It will give you the ability to compare prices against the original budget you had set for the project. Indeed, for many – Tendering is the surest way to test if your budget is realistic in today’s building environment.
That is, of course, only if the Tender is run correctly and the resulting quotes allow you to compare apples for apples. (see our previous article here which explained ways in which to achieve comparable trade breakdowns. )
However, what if you already have a relationship with one builder?
There is no hard and fast rule that suggests you must go to Tender. Whilst tendering, of course, has its place in the market, another option to consider is negotiating with one builder if you like them, trust them and are able to establish a transparent relationship in order to negotiate your plans.
We recommend this if you already have dealings with a builder whose quality is well regarded and whose work has been referred to you by their other clients.
Rod Seidner (of S&K group) explained that “If you have a good understanding of the building process then going off pure negotiation is actually ideal.” This is because if you are open and honest with the builder that they are your primary choice then due to the probability of successfully winning your project, they will likely take up the opportunity to work side by side with you to work through your project budget and how it can be achieved.
This process, commercially called ECI or Early Contractor Involvement requires all parties to be aligned on a common goal for it to work. Best practice is to ask the builder to provide a trade breakdown. From there you will be able to ask questions based on that trade breakdown. You can negotiate and go through a cost engineering process with that builder in order to get their quote to a realistic, agreeable figure prior to contract.
“Cost /value Engineering; the process of working through your quote, pulling apart the project in order to find areas where you could save by removing items or respecifying them.”
It is possible to still do your due diligence without tendering?
For most, building a home is the largest monetary commitment you can make. The decision can weigh heavily so you will want to feel you have done your due diligence and are not merely “going with the option in front of you.”
Some examples of suitable due diligence would be to meet with the builder face to face to address personal character. Remember – you are essentially deciding if this company or person is someone you want to enter a lengthy relationship with.
Although references are typically provided when a builder is chosen at the end of a tender – you can still ask for these references if you enter negotiation with one builder. By speaking with other clients who have built with the builder you are considering, you will become more aware of their pros and cons. You can also visit their other project sites to look at the quality of their work.
Top tip: Whether negotiating or tendering make sure you have a thorough understanding of the cost of variations.
Variations are anything that is added or changed post contract sign off. Sometimes variations will be necessitated from items outside of your control, like site conditions or stock availability. Whilst other times it might simply be because you have changed your mind – for example you might realise you want extra power points in a certain area or to change your tapware.
As such it’s important to understand what your builder expects you to pay for variation and also the process surrounded those variations.
Common practice for volume builders is to charge a flat admin fee (can be up to $300) every time your plans need to be opened in order to make a change and then charge the price of that change on top of the admin fee. Whereas with most non volume builders a 15% industry rate is applicable for variations.
We know that whether you decide to tender your architectural plans or enter into negotiations there is a lot to consider. We hope you will find this article and our series of tendering articles useful and informative. If you have any questions, please don’t hesitate to leave it in the comments or email us on hello@terren.com.au and we will let you know our thoughts.
