When constructing multiple facilities, each unique in their own way, it’s important to calculate independent pricing for each facility to account for the variable nature of construction projects. At the most basic level, the construction contract price is determined by the direct project cost. This cost includes the cost of field supervision and the contractor’s markup for overhead expenses and profit.
Although determining the cost to build a facility is dictated by many factors, it’s imperative that you have a comprehensive understanding of how these costs are calculated to ensure that your profits are maintained throughout a broad range of distinctive projects. In this two-part series, the Houston construction attorneys at Cotney Law will take an in-depth look at construction pricing and contracting.
Factors Influencing Price
Depending on the type of facility you are contracted to build and the location of the proposed project, your pricing will vary greatly. There are four major categories of construction:
- Residential housing
- Commercial buildings
- Industrial complexes
It’s vital to procure an accurate cost estimate before proposing a price to the owner. Once you have signed the contract, you will be legally responsible for fulfilling the contents of the contract. The cost, pricing scheme, and payment terms should be clearly explained in the contract. Since projects across these four categories can range from thousands to billions of dollars, you should always consult with a Houston construction attorney to make sure that you clearly understand your responsibilities before proceeding to sign a contract.
Submitting a Competitive Bid
If you want to procure lucrative contracts, it’s imperative to build a fundamental understanding of the bidding process. Submitting a competitive bid requires the contract to procure a detailed plan of the proposed project and any specifications to help illustrate how the job will be completed. This must take into consideration the objectives and requirements of the owner. You should also reflect on your prior jobs to see if the bid seems like a good fit. While submitting a cheaper bid might help you procure a contract, if you are unable to meet the requirements of the contract, you could find yourself embroiled in a legal dispute. Plus, another contractor could hire a Houston construction attorney to dispute your bid. If you want to protect your bid, a Houston construction attorney can assist you.
How do you establish that you are a “qualified contractor?” First, you will need to present evidence of past projects and exhibit financial stability. Procuring a bid for a private project is often easier than a public one since owners have the freedom to choose a contractor at will. They can allow contractors to openly compete for jobs or restrict applications to pre-approved contractors.
When it comes to public projects, the rules governing bid proposals are closely monitored by the government to give all contractors an equal chance of winning their bid. This process is enforced strictly to eliminate collusion or any other unethical or illegal actions.
To learn more about construction pricing and contracting, read part two.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.