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Is it ethical to count on making your profit on change orders?
- Thread starter digger242j
- Start date
I think it is common practice in other industries. but don't count on it too heavily, the customer might make you justify why a change cost $X+Y when he knows it should only cost $X. you might consider bidding a job with known changes at expenses, but I wouldn't go lower. its a good way to get burned if you're not careful.
Wolf
Senior Member
Ethics in Business
What are ethics in business? it means providing good value at a fair price. Should you anticipate customer's problems and making a profit on it--that is deceptive and bad judgment. Bid the job fairly, ,with a fair and reasonable profit margin. That is what the customer expects.
If you treat the customer fairly and the customer treats you fairly, all will succeed together, and you'll stay in business for a long time.
What are ethics in business? it means providing good value at a fair price. Should you anticipate customer's problems and making a profit on it--that is deceptive and bad judgment. Bid the job fairly, ,with a fair and reasonable profit margin. That is what the customer expects.
If you treat the customer fairly and the customer treats you fairly, all will succeed together, and you'll stay in business for a long time.
I worked for a company that bid the improvements for a corps lake, roads, buildings water & sewer.... Their bid was 8 mil... the closest 13 mil.... over 5 mil left on the table... they said they would make it up in the paving.... I don't think they did..they bit the dust a couple years later...
I look a different bid awards.... it's amazing the wide range on some jobs... with a low of 1 mil to a high of 2.5 for the same job
I look a different bid awards.... it's amazing the wide range on some jobs... with a low of 1 mil to a high of 2.5 for the same job
There are major differences in working for private customers and working in the public works arena.
Private work you need to be up front and establish a good working relationship with your customer. If you see problems, let them know up front. The only way to get repeat customers is by being honest and fair. Otherwise it is a one shot deal.
In public works, low bid gets the job, if all the paperwork is in order, period. If you see a potential change coming, it is good business to take advantage of it because you can be sure at least a few of the other bidders will as well. If you do not you will loose work to the ones that do.
I conclude it takes 2 completely different mindsets to work private or public jobs.
Private work you need to be up front and establish a good working relationship with your customer. If you see problems, let them know up front. The only way to get repeat customers is by being honest and fair. Otherwise it is a one shot deal.
In public works, low bid gets the job, if all the paperwork is in order, period. If you see a potential change coming, it is good business to take advantage of it because you can be sure at least a few of the other bidders will as well. If you do not you will loose work to the ones that do.
I conclude it takes 2 completely different mindsets to work private or public jobs.
Dwan Hall
Senior Member
Knowledge is a tool. using that one should get paid more using his knowledge.
We need to find a way for engineers, arketks, and planners to be held responsible for their mistakes.
If you know of a short fall in a project and baring it up before the bid you will not receive credit in the form of $$ just ataboys. To get paid for your knowledge/experience you must make it by doing a smarter job and if that includes correcting someone else's mistake then so be it.
Example, if I was doing a sewer job and could do it using say 4 less manholes out of 20 and save the city money then I need to ask for a change order and get paid for my knowledge. it would be stupid on my part to provide the city with the information needed to do the job before I got the bid. Otherwise how would I get paid for my experience.
another example would be if an engineer estimated a job to use so many tons of material and it shoild have been yds of material then a change order is needed and again knowing that it was going to take 50% more material to finish the job I would be foolish to divulge that in advance of getting the contract. It is not fraud it is capitalizing on what you know.
I do feel the engineer should be held responsible but they never are.
We need to find a way for engineers, arketks, and planners to be held responsible for their mistakes.
If you know of a short fall in a project and baring it up before the bid you will not receive credit in the form of $$ just ataboys. To get paid for your knowledge/experience you must make it by doing a smarter job and if that includes correcting someone else's mistake then so be it.
Example, if I was doing a sewer job and could do it using say 4 less manholes out of 20 and save the city money then I need to ask for a change order and get paid for my knowledge. it would be stupid on my part to provide the city with the information needed to do the job before I got the bid. Otherwise how would I get paid for my experience.
another example would be if an engineer estimated a job to use so many tons of material and it shoild have been yds of material then a change order is needed and again knowing that it was going to take 50% more material to finish the job I would be foolish to divulge that in advance of getting the contract. It is not fraud it is capitalizing on what you know.
I do feel the engineer should be held responsible but they never are.
special tool
Senior Member
That's riiiight.....
"Oh, our office is not 100% sure that strict adherance to our plan was executed....."
Translation - "my name is Judas"
Last edited by a moderator:
Orchard Ex
Super Moderator
I agree with Dwan's post above. I also find it interesting that many have commented on bringing the discrepancy to the customers attention will reinforce working relationships and trust. Yet the customer is still putting the work out to bid no matter that you have a stellar reputation for fair play. Looks like the love is only flowing one way... Never underestimate the cheapness of your customer...
stock
Senior Member
Well when i set out on this journey many moons ago I was full of the "do the right thing" and now to look back at my naivety and laugh.I priced work spent hours and days on bids analysing all and every aspect of the tender documents ,then bid according to my interpretations .Well I would have to say I lost more than I got.
Then when I engaged the services of a QS and got him to bid a job beside what I had done,and was there some difference.The Qs referred to my bid a what the client would like ,and he bid on what he asked for,lets say that they asked for a proton car but I was giving them a Ferrari and charging them accordingly,hence I wasn't winning any work.
His idea was that they supplied the specifications and bill of quantities and if they were wrong,well that's what they wanted and when the job was unable to be done as it was their mistake so we could use charge orders day rates etc to sort it out.A lot of jobs here now are using a design build for certain aspects to help reduce these errors.
Then when I engaged the services of a QS and got him to bid a job beside what I had done,and was there some difference.The Qs referred to my bid a what the client would like ,and he bid on what he asked for,lets say that they asked for a proton car but I was giving them a Ferrari and charging them accordingly,hence I wasn't winning any work.
His idea was that they supplied the specifications and bill of quantities and if they were wrong,well that's what they wanted and when the job was unable to be done as it was their mistake so we could use charge orders day rates etc to sort it out.A lot of jobs here now are using a design build for certain aspects to help reduce these errors.
ForsytheBros.
Well-Known Member
I view our particular field of business as an allocation of risks. IMO, we as businessfolk "roll the dice" each time we take on an engagement with an owner. The better informed we can be, the better prepared we are to reduce risks (and thus put or increase cash in our pockets at the end of the day)
It is often difficult in bidding public works projects to put in disclaimers/caveats in the bid as many jobs are unit priced with clear specifications. I actually prefer these somewhat over the open-ended "lump sum" jobs where it might be difficult to get an apples to apples comparison with the competition (we bid sidewalk as 5" thick, competition uses 4" ,etc...)
If we see a scenario at pre-bid stage which we think will jack up overall unit costs that the competition may have missed, we'll bring it up to ensure that we don't get lowballed on bid day. Let's face it, the owner, like us, doesn't like surprises, and to hear a contractor say "that wasn't included in my scope of work" makes the ears ring......At least the owner can prepare for such angst prior to bid opening. Many times we get the "bid the plans as you see them" response.....
If we see an opportunity to execute a particular phase of work in an intelligent , well-thought manner, which the competition may have neglected, we may not bring it up to the engineer (if we're sure it's an approved method) because often all questions posted pre-bid are public record for all contractors to see, thus "showing our hand". Rather, if we are fortunate to be the low bidder, we'll engage in "value engineering" with the owner.
We're not good gamblers, so we seek to try to make reasonable profits through mechanisms other than "banking" on change orders. A previous poster mentioned an outfit "making it up on paving" and followed up that the firm was now out of business.
is it ethical to count on making your profit on change orders?
ethical- i'm unsure..... risky- i'm certain......
ps- I've heard some stories recently through the grapevine that some firms are taking projects at "loss" so as to reduce the amount of cash that must be infused into the company (given a set rate of overhead)........hopefully that won't go on too long.....
It is often difficult in bidding public works projects to put in disclaimers/caveats in the bid as many jobs are unit priced with clear specifications. I actually prefer these somewhat over the open-ended "lump sum" jobs where it might be difficult to get an apples to apples comparison with the competition (we bid sidewalk as 5" thick, competition uses 4" ,etc...)
If we see a scenario at pre-bid stage which we think will jack up overall unit costs that the competition may have missed, we'll bring it up to ensure that we don't get lowballed on bid day. Let's face it, the owner, like us, doesn't like surprises, and to hear a contractor say "that wasn't included in my scope of work" makes the ears ring......At least the owner can prepare for such angst prior to bid opening. Many times we get the "bid the plans as you see them" response.....
If we see an opportunity to execute a particular phase of work in an intelligent , well-thought manner, which the competition may have neglected, we may not bring it up to the engineer (if we're sure it's an approved method) because often all questions posted pre-bid are public record for all contractors to see, thus "showing our hand". Rather, if we are fortunate to be the low bidder, we'll engage in "value engineering" with the owner.
We're not good gamblers, so we seek to try to make reasonable profits through mechanisms other than "banking" on change orders. A previous poster mentioned an outfit "making it up on paving" and followed up that the firm was now out of business.
is it ethical to count on making your profit on change orders?
ethical- i'm unsure..... risky- i'm certain......
ps- I've heard some stories recently through the grapevine that some firms are taking projects at "loss" so as to reduce the amount of cash that must be infused into the company (given a set rate of overhead)........hopefully that won't go on too long.....
rshackleford
Senior Member
i don't think ethics has as thing to do with it.
make money on change orders as much as you can, but don't count on them.
consider your self lucky, not smart, if you find a job that you can predict a change order at bid time and you the bid schedule is set up that you can crank that item way up.
i was on a job that we changed ordered a significant quantity of mainline and for some reason, just luck, at bid time we lowered the price of some other items and cranked up the mainline price. what a lucky break.
make money on change orders as much as you can, but don't count on them.
consider your self lucky, not smart, if you find a job that you can predict a change order at bid time and you the bid schedule is set up that you can crank that item way up.
i was on a job that we changed ordered a significant quantity of mainline and for some reason, just luck, at bid time we lowered the price of some other items and cranked up the mainline price. what a lucky break.