I’m sure some of you have been through this before, and I hope many of you are smarter than I am when it comes to contracts and estimating (at least in this case).
Here’s the scenario. Past customer comes to me and says she’d like some additional work done and wants an estimate. I give her a verbal estimate.
Work is completed, during which time I “confirm” the price at least once. This is where I went wrong. The job is 100% labor (surveying and engineering, but the scenario could apply to anyone, so bear with me). When we tally up the final bill, I am shocked to find that the cost is almost double the estimate.
There’s a LOT more to this story, but I’ll highlight some of the deciding factors as to what I should do:
– The customer is not a particularly pleasant person to work with, is pushy and calls constantly, almost to the point of harassment. I put off several other customers to accomodate her once the job started, due to the constant nagging.
– The job was tough. Way more work than I expected, on several factors, including time of year, terrain, vegetation, poor field conditions, etc.
– Halfway through the process she decides to let the buyer of the property have my phone number, and now said buyer is being just as much of a pest as she was. In addition, she expects the buyer to pay the bill, and the buyer has AGREED to do so, but went ballistic when she found out how much it was. (Buyer and seller are both women and, not that it matters, have a bad reputation in town for “bargaining”)
– The buyer and seller scheduled a closing prior to the completion of the documents and are now trying to threaten me into taking additional closing costs off the bill because “it’s my fault they will owe extra money” due to the job not being done by closing.
I really don’t know what to do here. My business partner thinks I should send the bill for the full amount and take them to court if we have to. Court meaning file a lien or small claims. My take on it is that we should give them a copy of the invoice with the full amount and then, because of my stupidity in giving a verbal estimate, take some substantial $$ off the top, up front, and be done with it. My partner and I are both willing to cut some costs but he wants them to make the first move; I say that in good faith, I should back off a bit first. My BIG mistake was giving any kind of estimate and then not checking on progress. I did not get a down payment on this job, because I always get paid at closing. If I had not offered a job estimate, I would not be typing this.
I do know both of the buyers and sellers’ attorneys, and they will both insist on full payment at closing, no matter what the invoice amount. However, these women are so wacky that if I don’t make them happy up front, they will do everything they can to hurt my business. My partner says not to worry, we have plenty of work. I say that I feel like I’ve lied to them because of the estimate, and ANY negative comments are bad comments. I would not put it past these two to put a full-page ad in the local paper or a big letter to the editor saying what a shyster I am and how they got ripped off.
Replies
Jon, the mistake is in giving an estimate. I have done it many times, regretted it many times. Unless the customer misrepresented the work to be done, or there were hidden conditions, you are expected to be fairly reliable in cost estimates. I would probably bill for somewhat more than the estimate, but double?
I always try to do one of the following:
1) give a fixed price and stick to it, using change orders to adjust the cost as the owner and/or discovered circumstances warrant.
2) say nothing about total cost, do your work, and bill frequently.
Give the owner either very clear expectations of cost, or none.
Last year I had a quibble like this with a guy who built a bunch of fencing for me. He threw out a number like "oh... probably about $1300". When the bill came it was $2500. I could see how badly he had underestimated while he was doing the job, so I paid the bill and gave him a lecture. But I was pizzed. I need to be able to plan on how money will be spent.
Without getting into bunch of told you so... or what you shoulda done...
You gave a price on doing a job. The customer accepted the price. You confirmed the price in process. Unless the scope of work was grossly understated... chaulk it up to an expensive learning process.
Been there done that.
Edited 10/27/2007 1:16 pm ET by sledgehammer
Here's the scenario. Past customer comes to me and says she'd like some additional work done and wants an estimate. I give her a verbal estimate.
Work is completed, during which time I "confirm" the price at least once. This is where I went wrong. The job is 100% labor (surveying and engineering, but the scenario could apply to anyone, so bear with me). When we tally up the final bill, I am shocked to find that the cost is almost double the estimate.
So what your saying is that the estimate you gave here for the extras when you were all done came in twice as much?
How could that happen as you were doing the job you confirmed the price with them? Didn't you realize you were going over while you were doing the extras?
How did you even come up with the price for the extras in the first place?
Even if you gave it to them in writing and it came in double in the end, how do you expect to get paid for that? How do you expect to get paid for that now when what you told them was your mistake and if you were right on with your estimate from the stat with the extras and had given them the price that would've been twice the price, with that number they might not have agreed to do the extras.
Problem with survey work is that there are so many variables. It's like giving a price for framing and then find that all your material delivered to the site is rough sawn, varies by as much as an inch in thickness and width, all you have for tools is a handsaw and a Stanley plane, and you have nothing but finish nails and no other options. I based my estimate on linear footage, which works 95% of the time. This one didn't. It was a really nasty job, which I didn't expect.
I didn't add up the labor costs until the end. I assumed, mistakenly, that we were still in the ballpark.
I'm willing to eat most the overage. My partner isn't, and he did most of the work. The problem lies in coming to a reasonable solution. I'd be very cool about all this if the client was good, which most are, but this job sucked in all possible ways. I want to charge them 125%, in fact, for aggravation and stress, but the verbal quote is what's biting me in the azz.
Jon, when you gave the initial estimate, did you say "it should be about x dollars"
or did you say "in the past for this linear footage the price has been about x dollars a foot but that can change up to 100% depending on various conditions, up to a maximum of 2x."
You're the professional here, even if the clients suck they are still going with what you estimated. You probably said the first line, thinking the rest of it should be clear but it needs to be said out loud, or even better, written down.
I've been in your shoes several times, and it's no fun. Appease your partner by ammending your systems to prevent this from happening again.
Problem with survey work is that there are so many variables. It's like giving a price for framing and then find that all your material delivered to the site is rough sawn, varies by as much as an inch in thickness and width, all you have for tools is a handsaw and a Stanley plane, and you have nothing but finish nails and no other options.
Short answer. Time to stop all work and renegotiate the price, continuing to work would constitute an agreement to the original price.
Let your partner go for it. What does he have to lose except more money and more time?
What's your contract say? Unless you have a contract that says, "The higher of my estimate or the actual $$ I calculate"...............>I based my estimate on linear footage, which works 95% of the time. This one didn't. It was a really nasty job, which I didn't expect.I base my price on the anticipated size of the job, and sometimes I misjudge. In those 5% of the cases, I honor my price and make less $/hr than on the other jobs. And if I work faster than anticipated, I make more $/hr. The price is the price, and I honor that.You probably don't have a contract that allows for charging more if the client's unpleasant or the job sucks, so while I'm sympathetic on the job sucking more than expected, I'm unsympathetic on the pricing.
It's like giving a price for framing and then find that all your material delivered to the site is rough sawn, varies by as much as an inch in thickness and width, all you have for tools is a handsaw and a Stanley plane, and you have nothing but finish nails and no other options.
Jon,
I don't understand that analogy because that could never happen. The material would be sent back and I would have all the right tools and nails for the job.
It would be more like me getting a set of plans to frame an addition and give a material and labor price. I look at the plans and guess at bother materials and labor and then when I do the job the materials come in twice the price and also my labor. What do I do, ask the customer for more money?
Why didn't you get the engineer in there before you gave the price?
I'm not trying to be a wise guy here, I'm just trying to understand what you did. To me it sounds like you guessed at what it should cost for your labor and the engineer and then gave a price and since it cost double, you're trying to get the money from the client.
We've all been there before with fixed prices an we have to eat it. If you have balls enough to ask your customer for more money and they give it to you, then you got lucky.
Also, like I said in my first post, if the customer new the cost would be twice what you said the first time, maybe they wouldn't have done it.
Joe Carola
Edited 10/27/2007 5:30 pm ET by Framer
An verbal estimate is just that. You estimate what you think it will cost. That is not a written bid.
When I am in that position. I try to find a place in the middle that we can both be happy with.
Unless people ask me for an estimate, I don't give one.
If they want an estimate I go home and work one up. If they want a verbal ballpark I tell them I am not good at that but here is what I think it will be.
I try to track hours in the middle of a job and update them if it is going long. Tough conversation to have.
Been there done that with jobs getting out of hand, with things beyond my control.
Recently 3 of us and the home owner tore off (layer) and shingled 16 squares in one day and took coffe breaks. Two weeks later 3 of us (same 3 guys) tore off and shingled 3 square in one day. Frost on the roof, crumbling shingles, wet plywood, set up and tear down for just 3 squares all contributed to different result.
Not all tuition is pay to schools.
Rich
Lein the property before they close on it. As for them spreading bad things about you......if they have the reputation you claim the only people that would hold it against you would be others who would be likely to screw you.
My tendency in this situation is to charge as much as I think the client will pay without a huge headache and walk away from it a quickly as I can with my tail between my legs.
It's bitter but fighting for the overage when you gave and confirmed a low-ball estimate is not worth the high blood pressure.
Good reason not to have a partner to bicker with actually.
M
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"You cannot work hard enough to make up for a sloppy estimate."
In a court if you said, " I say that I feel like I've lied to them because of the estimate, " what do you think the judge would say?
Personally, I'd delete the previous post that is quoted, send them a bill for everything minus a few small items to help them feel better. They will get over it. If you are good at what you do your reputation will be just as strong with or without their blessing.
It's not your fault they have poor judgment and wanted to close before it was possible to do so. Business isn't a perfect profession. There are often no exact results and that's just the way it is.
You are allowed to feel like there might be things you would do differently and learn from it, but don't forget it takes billable hours to keep the lights on. If you overcharged and actually played golf then shame on you. If you worked the hours, send the bill and shame on them.
Best of luck
Beer was created so carpenters wouldn't rule the world.
I would really like to do automobile repairs on your vehicle. I'm sure you'd understand why the price I gave you over the phone and you agreed to are 1/2 the actual amount you owe.
It would seem once he knew it was going to be more than the estimate, that he owed the client that information so that she could make a decision to continue or not. As you pointed out, that's what happens with auto repairs. I'm not aware of too many open-ended, charge me whatever you want to contracts.But wait, he didn't know he was over the estimate till the job was over. However, that doesn't justify this becoming the client's problem.Ultimately, the solution is determined by the contract.Wanna lay odds on there being no contract? Then to whose side does the pendulum swing?
My take on this is if there had been a written contract for a set price, the price would have been the one quoted and still 50% less then the amount being finally sought.
From any angle I'm just not seeing this as any more then an expensive learning experience. If I had all the money I missed in estimating over the last 30 years I could be sipping umbrella drinks full time in the tropics by now.
Edited 10/27/2007 10:15 pm ET by sledgehammer
I've read all your replies and I thank you for your time. I'm trying to do the right thing, I don't need negative publicity as this is a small town and I depend on this to get by.
I just need to figure out how to eat this and learn my lesson.
And no, there wasn't a written contract.
In my opinion, the right thing would be to call whoever hired you and tell them the truth; that the job went over the initial # for x, y, and z reasons. Ask them how they want to handle it.They may come back and say no problem, may come back and say ()*(&*(&$ you, etc.The bottom line here is that you will at least get back the amount you quoted them. If you get nothing more, consider that a learning experience.I had this situation w/ an electician. I told all trades to get changes/extras approved $$ wise before doing the additional work. The sparky hits me w/ a huge CO bill at the end to which we had a "discussion". His point is that I was there to see the work being done and I shouldn't have been naieve to the fact. My point was had he told me lighting in the closets would have been an extra 2,000, the closets would have had no light!!! The point is after the fact gives the HO no recourse when the work is already completed.W/ respect to the electrician, I mentioned him removing non approved CO stuff and he started to sweat...in the end we met somewhere in the middle $$wise.HTH,Ed
when i get into a situation lik this i make a list of all the reasons that the job costed more than estimated
then i recheck the list and get it to look orderly and business like
if i feel a lot of it was my own fault i will sometimes split to difference for quick payment as court time is time lost
however i once years ago spent $50 to lean a guy who only owed me $47.50
however a x wife of his got in on the deal it took him 6 months to get the sale through and she got nearly $20,000 out of it and he called me everything but a white man
there are a lot of people who would haggle the price of there own grave just on principal
I would really like to do automobile repairs on your vehicle. I'm sure you'd understand why the price I gave you over the phone and you agreed to are 1/2 the actual amount you owe.
Are you misunderstanding the difference between a fixed price bid (call it an estimate if it want, but it's agreed to as a fixed price) and a good faith best estimate?
In any profession that works by the billable hour there shouldn't be any bad feelings or second guessing if a job takes twice as long, it simply takes twice as long. That's EXACTLY how long it takes. If you want a fixed price, then go to someone who gives fixed price bids.
Beer was created so carpenters wouldn't rule the world.
I can't think of one industry that provides labor and doesn't base their price on a cost per hour basis. Entering into an open ended agreement of only a cost per hour is like giving someone a signed blank check. Who would agree to such a thing. You can say something like I think it will take 40 hours at x dollars per hour, and when that point is reached it's time for renegotiation. I don't think that is what happened.
I give out prices all day long, recently quoted a small job lots of odds and ends. Customer asked "will you charge less if you get done faster then estimated". I said "only if I can bill you more if it takes longer". At that point they realized it was kinda a stupid question... I can do slow real well... I'm sort of a professional at it.
Entering into an open ended agreement of only a cost per hour is like giving someone a signed blank check. Who would agree to such a thing.
That's where your experiences and mine diverge. We run almost all our jobs on just that. Over the years I've worked on $1M custom homes, $300k remodels on down to a $100 repair on a T&M basis, which means the time isn't known before hand and both parties agree that whatever it takes to complete the job is what's charged. Our clients have been tickled with the results, which is insurance for future clients as to whether it's a good idea or not. Our prices end up being so low it's make the clients say Boo. (poor halloween humor).
From your prospective I can imagine how foriegn my ideas are. From mine they simply make sense.
Good building
Beer was created so carpenters wouldn't rule the world.
I understand completely. The OP gave a price and confirmed it.
Now if you're telling everyone you would work for a known PITA customer on a million dollar job with nothing more then an hourly rate, giving them a bill when the job is all finished.... You are a bigger gambler then me, and you are pegging my BS meter.
A $1M summer home is a year long project and it's not unlike any other job with frequent draws based on what's completed. All of our jobs are invoiced once a week so the client is only writing a check for work they can see has been completed. It's a minimal risk on both parts.
In some part of the country most construction is T&M. Sometimes an outside estimator will be hired by the client to confirm any ball park guestimates by the contractor. I know an architect who worked on $3M design build projects that are completely T&M.
In Boise there are probably more contractors working on bids, but that's fine. We've been asked to bid on projects and simply said we'll do our best work, but it takes what it takes, and we got the job. In the end we were close to the other bids, but provided many more extra features that weren't in the original specs.
As for quality, we're known for overbuilding in ways that make long-term sense in addition to good looking results when we finish the last item on the punch list.
Remodeling and custom building is full of T&M, at least in the rocky mountain states.
Cheers
Beer was created so carpenters wouldn't rule the world.
>Over the years I've worked on $1M custom homes, $300k remodels on down to a $100 repair on a T&M basisOn how many of those do you wait till the job is over before telling them the kind of tab they're running up? What if they have the money for the estimated cost but not the actual billing?My sense from the OP is that he thought open-ended and the client thought firm price. In the absence of a contract, given the quote and subsequent reconfirmation, and in the absence of other info, I'm guessing Judge Judy wouldn't look favorably on the contractor, because I don't see any evidence that the client thought this was T&M. You?Really, the lesson he should learn is to get a contract or else a sheet explaining his pricing method and that the estimate is no indication of final price, which will be calculated by X, Y, Z.
What if they have the money for the estimated cost but not the actual billing?
That's the most stressful part of the way we work. Letting them know week to week how things are going is the best we can do. Sometimes the client thinks we are bluffing a little and that the finish stage isn't that expensive--we can't help if they don't trust our judgement. If we aren't paid that week we pull off until they want us to begin work again. Luckily it's very rare that it even comes up.
Beer was created so carpenters wouldn't rule the world.
>Letting them know week to week how things are going is the best we can do.That's a key diff b/tween your jobs and the OP. They didn't know till completion where things stood. An open-ended contract with no guidance or milestones should be rare indeed. While he's entitled to try for whatever payment he wants, he's also advised to update his practices to avoid this in the future.
It may be a regional thing, the Balt/Washington area indeed isn't like the rest of the world. Here is alittle story I was involved with. Customer wants new toilet says nothing special cheap and white, with a white seat. Customer was told $110.00/hour and toilet was $180.00. She says do it.
3 months later toilet develops leak at the lid bolts. Says she really never liked it so she went and got a new one, has it now... could you please come over and switch it out and make sure you bring a check for $180.00... Reimbursement for the original toilet.
Maybe it's just me... I never had a knack for resolving problems on T&M jobs. Too much time wasted on placing blame.
My answer is bill them the way you would expect to be billed. I personally would accept a small amount over an estimate but not double. one customer bad mouthing you in your cummunity can negate a dozen or more praises from others. complainers are heard loud and clear. don't give here a reason to ruin your name.
"it aint the work I mind,
It's the feeling of falling further behind."
Bozini Latini
http://www.ingrainedwoodworking.com
It comes down to your original intent as to what "estimate" ment. If you gave an estimate as a fixed price then you are stuck. If you ment a best guess and the client could reasonably take that to mean a fixed price, then you never had a meeting of the minds then a judge would sort it out as to what was reasonable.
What I do know as a fact is that if you bill them for the lower amount there is abosolutely zero chance of getting what you really earned.
Beer was created so carpenters wouldn't rule the world.
I agree with most of the replies that you need to eat the loss, not because of any repercussions by either of the women but because it is simply the right thing to do.
I would be more worried about your partner's attitude. He should be behind you 100%. You made a mistake but your reputation and value to the company are still important to him. The mistake may cost him some money but if you are not worth it, you should not be working together.
I know this from personal experience. I have made costly mistakes and so have my partners. We always rally around the poor guy and tell him that the money is just not that important. We have plenty of time to make it up. This is what watching your back is all about.