Bid or Negotiate? Picking a Builder Before the Drawings Are Done

There are two common ways to get from drawings to a builder. You can finish the drawings and send them to several builders for competitive bids. Or you can pick a builder early, bring them in while the house is still being designed, and work out the price together.

Neither is the right answer for every house. Each one buys you something and costs you something, and it helps to know what before you start.

Competitive bidding

You finish the construction drawings, send the same package to two or three builders, and compare what comes back.

What you get: price tension. Each builder knows they're competing, and the bids check each other. If you set up the request well, you get numbers you can compare line by line. See How to get builder bids you can actually compare.

What it costs: no builder input during design, so nobody tells you that a detail is expensive to build until the bids arrive. A later start, since bidding adds weeks after the drawings are done. And if the bids come in over budget, you're redesigning after you've already paid for a finished set.

Negotiated, with preconstruction

You choose a builder during design, often around the end of schematic design or early in design development. The builder prices the house as it develops, comments on how it's being built, and gives you estimates along the way. The final price is negotiated rather than bid.

What you get: budget feedback while it's still cheap to act on, constructability input from the people who'll build it, and sometimes an earlier start, since long-lead items can be ordered before the drawings are finished.

What it costs: direct price competition. There's one builder at the table, and you need another way to know the price is fair.

Design-build is one version of this, where one company does both design and construction. This article is about the other version: you keep your own architect and add a builder early. See Design-build for a custom home for the first.

How preconstruction agreements usually work

The builder's work during design is usually covered by a short preconstruction agreement, separate from the construction contract. They vary, but the pieces to look for are:

• Fee. Some builders charge for preconstruction, some don't. Some credit the fee back if you go ahead with construction.
• Deliverables. Estimates at set milestones, value engineering suggestions, a draft construction schedule, input on drawings and specifications.
• The exit. What happens if you decide not to build with them. Can you take the estimates and the drawings to another builder? Usually you can, but it should be in writing.

How to keep price discipline without competing builders

You give up competition between builders, but you don't have to give up competition entirely.

Open-book estimates. Ask for estimates that show subcontractor quotes, material costs, general conditions, and the fee separately, not just a total.

Competitive subcontractor bids. The trades can still be bid. Ask the builder to get two or three quotes on the major trades and to show you the quotes.

Milestone budget checks. An estimate at the end of each design phase, compared to your budget, with a plan if it's over. See Check the budget at every design phase.

A contract you understand before you're committed. Negotiated jobs usually end up as cost plus or a GMP. Read Fixed price, GMP, or cost plus and settle the fee, what's billed as cost, and contingency terms early, before months of design make walking away harder.

How to pick a builder when there's no price yet

Without a bid to compare, you compare everything else: the fee and what it covers, how they handle general conditions, who would actually run your job, how they price change orders, how their past projects ended up against their estimates, and what their references say. See Questions to ask a builder's references.

Questions worth asking

• What does preconstruction cost, and is the fee credited if we go ahead?
• What will you deliver during design, and when?
• Will your estimates show subcontractor quotes and the fee separately?
• Will you competitively bid the major trades and share the quotes?
• What contract type do you expect for construction, and can I see it now?
• If we don't go ahead, can I use your estimates and our drawings with another builder?