Updated: May 31, 2019
Blog Version 1 of 6 Released Weekly
During January 2019 seven competing lumberyard/material dealers from the same geographic market were contacted to perform an estimate and submit pricing on a 2600 square foot single family home on one level with a crawl space and a 640 square foot 3 car finished garage. Of the seven dealers, five responded with interest in providing pricing for the project, four of which could perform the estimate in house and one who would need numbers from one of the other dealers or charge $150 to outsource the take off function. Of the two who didn’t respond, one was contacted multiple times and received a copy of the plans and elected not to bid the project and another simply didn’t respond to multiple phone calls and emails. This white paper outlines the various material estimates, comparing take off numbers, pricing strategies, inferences from the plans, mistakes and interesting considerations from the competing dealers in hopes of better understanding the processes builders and general contractors go through when making material purchasing decisions.
In performing a quick, bottom line comparison; a wide range of variety in the pricing occurred between the five responding dealers. The pricing ranged from $51,384 on the low side to $66,240, a range of $14,856 or a difference of 28.91% over the lowest priced estimate. A quick scan was performed on the various material packages to see if any leering mistakes were made or left out. Three of the five material dealers left out the truss package. Only one dealer included garage doors, even when all were specifically asked to include them. Three forgot or elected not to include portions of the insulation package. One dealer, the lowest priced, left off windows, interior and exterior doors in addition to the trusses and garage doors. One dealer included several items the others didn’t including rebar, foundation coating (with rollers and roller covers), doorknobs, closet rod and shelving. Dealers were then given another opportunity to fill in the areas their original estimates left off or excluded. What follows is based on ultimately what information was provided.
Material dealers often perform a degree of gamesmanship in their material quotes. Several schools of thought exist in how to communicate with a customer via an estimate and a couple prevail in the initial overview of the competing material estimates. Most appear to want to be the overall lowest bidder leaving a number of items off the estimate and omitting several packages either out of strategy or simply in error. Each of these dealers perform a great number of estimates each year, so to infer that their processes and best practices allowed them to mistakenly omit entire portions of an estimate is difficult to believe. On the other end of the spectrum, one dealer looks to go over the top including items not normally included in a material estimate, but likely will be used on the project. Are they hoping to be viewed as the ‘complete solution’ and win based on their more inclusive quote? If a builder or GC were looking for a simple answer to which dealer would provide them with the best purchasing decision, their preconceived notion could be reinforced with this type of analysis. However, if they view the available information with any speculation, a degree of uncertainty would require them to dig further into the pricing information to draw out the best purchasing decision.
This LBM blog post is one of a series of posts outlining the findings from a study conducted on 5 various building material suppliers. To download the entire White Paper visit: https://www.lbmsupply.com/lbm-white-paper or visit https://www.lbmsupply.com/shop for purchase options of unredacted versions with pricing included.