One of your big concerns when building a new construction home or taking on a major remodel is making sure you’re getting a fair price. Bidding has been the obvious answer, but it might not be the best one.
In theory, bidding seems like an ideal approach to ensuring fair pricing. What could be more revealing than sharing plans with various builders and asking them to determine the cost of construction? The truth, however, is that bidding is far less straightforward than you might think.
Builders tell us that bidding is less common now than it was 20 years ago. In its place, pre-construction is becoming the new standard. Pre-construction offers a collaborative and effective process for aligning design with budget while also building a trusted team. Find out what this process entails, the benefits it provides, and how it supports quality.
Pre-construction is a collaborative process where a builder is hired to consult during the design phase of a project. Working alongside you the homeowner and your architect, the builder advises on cost, scheduling, and the practicalities of the design. “Building the project on paper,” is how Nick Schiffer, Owner of Boston-based NS Builders, describes pre-construction. Ultimately, it makes sure the blueprints created are buildable, i.e., they not only reflect a design you love, but they reflect a design you can afford.
“A lot of people come to us with plans already drawn, and they had no parameters for what they wanted to spend,” said Heather Tankersley, Vice President of Operations and Co-owner at Sacramento, California-based Tankersley Construction. “They’ve spent all this money on an architect, and they’ve designed a home that is now going to cost three times what they thought it would cost.” This scenario can be avoided if you involve your builder early by hiring them for pre-construction services.
Pre-construction benefits the entire project. It improves the quality of the home that gets built while also strengthening the team working to build that home. Here’s how:
"Our role is to play devil’s advocate to both the architect and homeowner,” said Michael Conneely, Owner of Chicago-based Greenside Design Build. “We’re there to make sure the target budget is always the target,” he said. This is how you avoid designing a project you can’t afford. The builder brings to the conversation knowledge about the true cost of construction in your market. As the pro who’ll hire the labor and buy the materials, they’re best positioned to price a project.
The builder will also bring a boots-on-the-ground perspective on how design translates into reality. They can anticipate challenges and opportunities that might not be obvious on paper. “We’re making sure you’re not leaving opportunities by the wayside, asking the good questions, and really understanding what it’s going to take to execute the project before starting,” said Schiffer. Their perspective can positively impact design. In fact, most architects agree the best projects involve the builder early.
Pre-construction allows for an extended getting-to-know-you period with the builder. “Pre-construction builds a high level of trust,” Conneely said. Generally, pre-construction contracts are separate agreements from building contracts, so you're not committed during this phase. You get to wait until the detailed plans (design, schedule, and budget) are set before you decide if you want to move forward with the builder.
"Our role is to play devil’s advocate to both the architect and homeowner. We’re there to make sure the target budget is always the target.”Michael Conneely, Owner of Chicago-based Greenside Design Build
While the specific deliverables will vary by builder, a pre-construction contract will typically include the following:
Ask what pre-construction services include when you interview prospective builders. Want the complete set of questions to ask a builder.
Pre-construction empowers you to be a better-informed consumer. In a confusing process you might not have experienced before, it allows you to understand the cost implications of the design decisions you’re making.
This process specifically helps you:
“Generally speaking, we’re all paying the same amount for labor hours and materials,” said Schiffer. One builder’s overhead and fee could be different from another’s, but even with variations, the difference between what one builder charges versus another shouldn’t swing wildly. “Everyone should be within a few percentage points of each other,” said Steve Tankersley, President and Owner of Sacramento, California-based Tankersley Construction. “If you’re working with a builder who shows you the information you need to make your decision and explains how they came up with the total cost, then it’s a fair price,” he said.
TIP: The right fee structure lends transparency that can make accepting the cost easier. One of the most popular fee structures used by builders is called cost-plus. Under this model, builders bill for the cost of construction and their agreed-upon fee as the project is being constructed. This means you see the costs as they’re incurred, and you can ask questions. You might even be involved in some of the decision-making. Ask about fee structure when you interview your builder — find out what other questions you should ask your builder before hiring.
TAKEAWAY: Bidding and pre-construction aren’t the same thing. Instead of parsing bids that likely aren’t equivalent, pre-construction gives you a deeper understanding about why the cost is the cost. It informs your decision–making and empowers you to collaborate with both your builder and architect on a design that leverages their expertise while also making the most of your budget.
Jake Bruton is a custom home builder in Kansas City and Columbia, Missouri. As the owner of Aarow Building for more than 15 years, he brings his education in art and architecture to ensure energy-efficient, durable, and architecturally significant homes. Growing up in construction also positioned him for success in building, having renovated or repaired nearly every mistake made in the industry. He is a contributor to The Build Show, co-host of the UnBuild It Podcast, and contributing editor to Fine Homebuilding. As a speaker, he has presented at IBS, JLC Live, the Fine Homebuilding Summit, and the Midwest Building Science Symposium. He is currently raising a family with his wife in Columbia, Missouri.
Michael started early in the home-building business. As a youngster, Michael would work alongside his father — first sweeping up job sites, then “knocking out” punch lists. Through time, Michael mastered every role in the home-building trade from handyman and superintendent to sales and finance to management. In partnership with his cousin John, he founded Greenside Design Build, which builds upper-market luxury custom homes in the Chicago area.
He’s experienced in site acquisition, the entitlement process, site improvements, and project feasibility. Michael also earned the status of PHIUS Builder. PHIUS is the leading authority for passive home-building standards.
Michael is a Build Show expert contributor and speaks at industry events on all subjects related to high-end residential construction.
Owner of NS Builders in Boston, MA, Nick leads a team of experienced carpenters, project managers, cabinet makers, and apprentices. He started his business in 2014 and has turned it into one of Boston's most sought-after building companies. Constantly challenging himself and his team, there’s nothing standard about their approach.
Heather Tankersley is the Co-Owner and Vice President of Operations at Tankersley Build Co.. While she’s always worked for Tankersley Construction, she joined full-time in 2019 as the Vice President of Operations. Before her current role, Heather managed complex electrical projects for some of the largest electrical contractors in California.
Steven Tankersley is the Owner and President of Tankersley Build Co.. He has 15 years of general contracting experience on a variety of projects from education, medical, federal, private works, and government agency contracts.
Traditionally, bidding has been the established way for homeowners to select a builder. But is it the best way? And if not, what should you do instead?
