I am bidding a new residential housing project. The builder is requiring all subcontractors to guarantee their pricing for one (1) year. The project is slated to start in the Fall of this year.
I can understand his position of not wanting an increase in cost after he awards the contract but I don't feel the subs should shoulder this burden. Anyone else here ever deal with this type of situation ?
I can understand holding prices for a while but not 1.5 years. With the way steel and copper have fluctuated in the past who knows what the future holds....
In the early '80s we always based pur quotes on "BLS." It looks as if it may be the 'CPI' now. Take a look at this index: http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=dropmap&series_id=CUUR0200SA0,CUUS0200SA0
Note that the index is based upon a based period of 1980-82 at 100%. In January '06 it was 190.8% which means if you bid $100 in 1982 the bid would be $190.80 January '06. A bid submitted Jan '05 at and index of 184.1% would be 190.8% Jan '06. So, if you wanted to, your pricing could be based upon the CPI March '06 index and adjusted per the U.S. Department of Labor Bureau of Labor Statistics CPI table at the time the P.O. is submitted to you based upon an immediate start date and your quoted lead time for the project to be completed. But, it then depends upon your competitors. Are they going to gamble and quote prices based upon the present market, stick to their prices of complain after the job finally starts that they have to withdraw their proposal or cry for more money. Or, take a shot in the dark at what your cost will be in one year and take a calculated gamble. Again, it depends upon the competitive makeup of the market you are in.
(edited to add link)
[This message has been edited by electure (edited 03-10-2006).]
Add a speculated calculated loss.... Itemize that item on your bid, and see how that goes down.
Just plain ol' overbid what you could loose by jacking up the mark-up. Spread that through the bid. If they ask why you are so high, tell 'em its adjusted for inflation.
Or get the project awarded, purchase the material, and not take delivery until needed, and require payment for the mats right then. Or, in some states you could qualify for lien by just having the matierial dropped on-site right then... (If the project ever starts or not...) Don't forget to add the APR of that money to your bid right from the get go... (As if it were still in the bank....)
Mark Heller "Well - I oughta....." -Jackie Gleason
Wow. What balls. This builder is trying to cover his rear end at your expense. No way would I go along with this. Just as sure he is not likely to offer a house at X dollars today and guarantee it to be sold at the same price when it is actually built in a year.
Scott, they do it down here all the time, sell a year or so before its even built. The market is booming so much down here people buy at pre construction prices then sell when its finally built at a 30% and up profit.