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Thread: Covering for cost increases on proposal

  1. #1
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    Covering for cost increases on proposal

    I haven’t had an issue with this yet because most of the stuff I bid is fairly small, but it’s something that’s been on my mind.

    I do bid and get some larger projects here and there, and I’m curious what others do in case there is a drastic increase in commodities pricing (copper, steel, etc....)

    My supplier quotes are good for 24/hrs, and I expire my proposals after 30 days.

    I recently bid a job (that I did not get) that was just over $2M, and about 2/wks after the deadline, and before a contract was awarded, the material cost went up by $20k.

    I need to be including some sort of language to account for this. We obviously wouldn’t have signed a contract knowing the cost went up by that amount, but how do others approach this? Is it as simple as saying, “I can’t do it for this amount now.”

    I don’t know how the GC’s cover for this on their end but certainly they must.
    Last edited by brantmacga; 02-25-18 at 09:05 PM.
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  2. #2
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    You can try to put some weasel words in your proposal language to cover this kind of thing but if you have this language in your contract and somebody else doesn't there's a good chance this will be not looked upon favorably by the person evaluating the contract. For most of the stuff that we buy the prices are held by the distributor for 30 days except for things like wire and pipe and strut. But it is a small enough part of what we do that doesn't really matter much if the price goes up a little. You can sometimes get price guarantees from either the distributor or the manufacturer if you ask. It has to be a big enough contract to make it worth their while to do that but the chunks they're willing to do are often surprisingly small. I bought as little as $10,000 worth of strut and the manufacturer held the price for us for 60 days and gave us a pretty good deal on the pricing too.
    Bob

  3. #3
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    Quote Originally Posted by brantmacga View Post
    I haven’t had an issue with this yet because most of the stuff I bid is fairly small, but it’s something that’s been on my mind.

    I do bid and get some larger projects here and there, and I’m curious what others do in case there is a drastic increase in commodities pricing (copper, steel, etc....)

    My supplier quotes are good for 24/hrs, and I expire my proposals after 30 days.

    I recently bid a job (that I did not get) that was just over $2M, and about 2/wks after the deadline, and before a contract was awarded, the material cost went up by $20k.

    I need to be including some sort of language to account for this. We obviously wouldn’t have signed a contract knowing the cost went up by that amount, but how do others approach this? Is it as simple as saying, “I can’t do it for this amount now.”

    I don’t know how the GC’s cover for this on their end but certainly they must.

    gc's normally contain costs by beating their subs down.

    20k on 2m is 1%. if you are bidding stuff where a change of 1% is a problem,
    you need to evaluate your bidding strategy.

    some people will, and should put language in their bid so if catastrophic unforseen
    things happen you can adjust the bid.

    in 2005, i was a PM for an A contractor, putting in a 2,500 acre devopment, roads sewers,
    and utilities.

    then, katrina hit. took out all of the gulf coast, where PVC is born. within a week 2" schedule 40
    pvc touched the price of 2" GRC. the EC's pvc bill exceeded his entire contract. i looked at his takeoff,
    and had my wholesale house price it. he was that upsided down.

    he had *not* signed his contract yet. in a private conversation, i suggested as it was a green book
    job, he could re negotiate under the "acts of god" stipulation..... he'd a got a fair price, we'd have
    passed the increase on to the city developing it, and everyone would have survived the hit.

    he was concerned about having to do that, and signed the contract. i still don't know why he did that.
    he went broke halfway thru the job, and we had to use his bond to finish the work.

    sometimes sparkies don't bid well. my suggestion is to put enough in the bid to
    cover oopsies, as they happen. if you don't get the work, bid something else.
    if you aren't getting any work, either race others to the bottom, or find a niche
    you can thrive in.
    ~New signature under construction.~
    ~~~~Please excuse the mess.~~~~

  4. #4
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    Quote Originally Posted by Fulthrotl View Post
    20k on 2m is 1%. if you are bidding stuff where a change of 1% is a problem,
    you need to evaluate your bidding strategy.
    1% of the job sure, but certainly not the profit margin. 20 grand is 20 grand.



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  5. #5
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    Quote Originally Posted by Fulthrotl View Post
    gc's normally contain costs by beating their subs down.

    20k on 2m is 1%. if you are bidding stuff where a change of 1% is a problem,
    you need to evaluate your bidding strategy.

    some people will, and should put language in their bid so if catastrophic unforseen
    things happen you can adjust the bid.

    in 2005, i was a PM for an A contractor, putting in a 2,500 acre devopment, roads sewers,
    and utilities.

    then, katrina hit. took out all of the gulf coast, where PVC is born. within a week 2" schedule 40
    pvc touched the price of 2" GRC. the EC's pvc bill exceeded his entire contract. i looked at his takeoff,
    and had my wholesale house price it. he was that upsided down.

    he had *not* signed his contract yet. in a private conversation, i suggested as it was a green book
    job, he could re negotiate under the "acts of god" stipulation..... he'd a got a fair price, we'd have
    passed the increase on to the city developing it, and everyone would have survived the hit.

    he was concerned about having to do that, and signed the contract. i still don't know why he did that.
    he went broke halfway thru the job, and we had to use his bond to finish the work.

    sometimes sparkies don't bid well. my suggestion is to put enough in the bid to
    cover oopsies, as they happen. if you don't get the work, bid something else.
    if you aren't getting any work, either race others to the bottom, or find a niche
    you can thrive in.
    there is a huge difference between an act of god situation and the "normal" price fluctuations of this kind of commodity.

    i wonder what the other bidders are doing to protect themselves.
    Bob

  6. #6
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    Quote Originally Posted by brantmacga View Post
    I haven’t had an issue with this yet because most of the stuff I bid is fairly small, but it’s something that’s been on my mind.

    I do bid and get some larger projects here and there, and I’m curious what others do in case there is a drastic increase in commodities pricing (copper, steel, etc....)

    My supplier quotes are good for 24/hrs, and I expire my proposals after 30 days.

    I recently bid a job (that I did not get) that was just over $2M, and about 2/wks after the deadline, and before a contract was awarded, the material cost went up by $20k.

    I need to be including some sort of language to account for this. We obviously wouldn’t have signed a contract knowing the cost went up by that amount, but how do others approach this? Is it as simple as saying, “I can’t do it for this amount now.”

    I don’t know how the GC’s cover for this on their end but certainly they must.
    Get your supplier to validate his quotation for the same period you do for your customer or go elsewhere.
    Si hoc legere scis nimium eruditionis habes.

  7. #7
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    Quote Originally Posted by Besoeker View Post
    Get your supplier to validate his quotation for the same period you do for your customer or go elsewhere.
    24/hr pricing is standard across all of the suppliers here; it’s coming down the line from the distributors.


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  8. #8
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    Quote Originally Posted by brantmacga View Post
    24/hr pricing is standard across all of the suppliers here; it’s coming down the line from the distributors.


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    In the case of major market fluctuations or Acts of God, I can see the supplier being no more able to absorb an unforseen price increase than the contractor, so long term fixed price quotes are going to be very unlikely.

  9. #9
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    Quote Originally Posted by brantmacga View Post
    24/hr pricing is standard across all of the suppliers here; it’s coming down the line from the distributors.


    Sent from my iPhone using Tapatalk
    Surely just on commodity items wire/cable, strut, raceways.

    If you want a price on switchgear, MCC's, panelboards, even lighting products you might be waiting a month to even get that equipment on some large projects.

  10. #10
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    Quote Originally Posted by brantmacga View Post
    I haven’t had an issue with this yet because most of the stuff I bid is fairly small, but it’s something that’s been on my mind.

    I do bid and get some larger projects here and there, and I’m curious what others do in case there is a drastic increase in commodities pricing (copper, steel, etc....)

    My supplier quotes are good for 24/hrs, and I expire my proposals after 30 days.

    I recently bid a job (that I did not get) that was just over $2M, and about 2/wks after the deadline, and before a contract was awarded, the material cost went up by $20k.

    I need to be including some sort of language to account for this. We obviously wouldn’t have signed a contract knowing the cost went up by that amount, but how do others approach this? Is it as simple as saying, “I can’t do it for this amount now.”

    I don’t know how the GC’s cover for this on their end but certainly they must.
    GC's don't cover for this. Your price is your price for 30 days.

    When you are bidding large jobs, you should know the feel of the market because of constant contact with distributors. We would have outside sales people from various supply houses roaming our offices every day.
    They would usually warn you about commodities going up or down.
    Then we would consider this when summarizing our bids on bid day. Quoted items were never a problem of holding their price.
    Suppose on your $2M job example had the price gone down $20K? You going to give that to the GC?

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