How to compare building quotes

You’ve made a decision to invest in expanding your family home, but there are so many building companies out there, who do you contact and how do you select a builder and feel confident that you are making the right choice? What type of builder should you be looking for? And how can you avoid facing the common pitfalls and horror stories?

It can be a daunting process, and if you’re in the process of obtaining quotations for a potential second storey addition or ground floor extension on your home, you may be wondering why the quotes you do receive are coming back varying in price.

To help, we’ve compiled a list of items to consider when comparing the value of the quotations you are receiving.

What impacts a build cost? Put simply the following items below will all impact your quotation;

• Builders experience
• Building timeframes
• Allowances & inclusions
• Ambiguous quoting
• Items missed or not outlined clearly
• Service delivery and project management

So, how are all of the quotes so different in price?

It is quite normal to receive quotations and see a 5%-10% difference between them, any more than this would raise a red flag, and it is suggested that you approach your builder and ask the following questions to help determine where the cost differences may lie.

Is the quote apples for apples? Is it comparable?

It’s important to understand that allowance items and finishes are different between builders; for example, you may have an allowance for a $10K bathroom package vs a $3K bathroom package in your quotation. Immediately this will impact the build cost and also may be a deciding factor in the quality of the build you will receive.

How does the builder operate? Do they use employees or contractors?

If the builder is a smaller company, they may use contractors or have less employees, if this is the case, what are the timeframes for your build? The duration of the build may take longer, and you then have to weigh up the additional cost to you of a more prolonged disruption to your family and if you may incur potential additional rental or storage costs over this time. If they are a smaller builder, they may only complete 1-5 projects a year vs a medium-sized builder who completes 20-30.

This would then raise follow on questions of how long do they take to complete a build? How big is their team? And how will the project be managed? Will you be able to talk with the Project Manager during the build, will you have a site supervisor, how can you reach management if there is an issue, is there a support team in place to help guide you through the process?

If they use contractors or employees – how is the quality managed and how can they guarantee the timeframes?

By having employees, they are paid to turn up on time, every day as projected; this ensures no downtime and your project can run smoothly. Unfortunately, some contractors work to their own schedules which don’t always work in with the build and can result in delays. If they use contractors, can your builder guarantee the duration of your build and also the quality? What happens when something goes wrong with the quality, can they get the contractor back to resolve it or will there be project delays while they source someone else to resolve it? Where do you stand if there are delays in your build?

What type of contracts do you work with?

What type of contract used is important to understand very early on in the quoting process as this can have significant impacts to the cost of your build. We recommend only choosing a builder who is using fixed price building contracts such as the Housing Industry Association (HIA) and Master Builders Association (MBA) contracts.

These contracts have been made easy to understand and contain space for the parties to fill out information such as the price, contract completion date, any excluded work.

What is a Fixed-Price Contract?

Fixed-price contracts are contracts where the price agreed upon is a fixed lump sum. This is the most common type of contract used for residential building works.

There are several ways in which the contract price can be changed. This includes ‘variations’, i.e. changes or additions to the scope of works. It also includes provisional sum items (allowances) which may not have been decided at the time the contract is entered into, such as bathroom/kitchen allowances. If the amount allowed is more than the cost of the item, then the owner will receive a credit. If the amount allowed is less than the cost, then a variation will be created.

Cost Plus Contract

An alternative to the fixed-price contract is a ‘cost plus’ contract. These contracts have a capacity to become very expensive, and you should carefully consider these contracts before entering into them as there is no upper limit for the final price.

These contracts differ from the fixed-price contracts as, rather than agreeing to a fixed-price for the building works, the owner agrees to cover the builder’s costs plus an agreed margin for any overheads and profit encountered by the builder. In other words, the price is the actual cost of the works plus the builder’s margin.

How we can help you with your addition, extension or renovation

Your home is one of the most significant investment decisions you will make in your lifetime, and it is an emotional purchase and, as exciting as it can be, it can also be quite stressful at the same time. You need to be able to put trust into who you are engaging with to ensure a positive outcome and stressfree seamless process and this means that it is not always about taking the cheapest quote. You should feel comfortable with being able to approach your builder and talk over your quotation to understand what is included and how you will fit in and work together on your home.

At 32 Degrees Building, we have a team to guide you through the process to help you understand your quote, the process and work together with you on your build. This includes having your own access to your own project management team during your build for peace of mind and quick response.

If you would like to discuss your upcoming second storey addition or ground floor extension with our team and receive a detailed build cost estimate, please reach out to us.