Given the same bidding specifications for the same jobs, how can prices vary so much from high to low that the high bid is as much as double, triple, or even five times the low bid? That's the fundamental mystery that the annual FDMC Pricing Survey continues to probe.
This year’s survey includes common custom woodworking projects such as kitchens, a bathroom vanity, and a home office project. These were real projects done by real shops that provided the bidding specifications so any shop in North America could try their hand at bidding these jobs for comparison purposes. The results reveal the wide ranging pricing that continues to plague the woodworking industry, causing shop owners and clients alike to shake their heads and wonder how the numbers can be so different.
For example, how can a bathroom vanity earn bids ranging from $5,500 to $12,000, which compare to the $7,000 price the original maker charged? Granted, this wasn’t the usual vanity, since it required complex curved work, but does that really account for the $6,500 difference from top to bottom? The original maker laughed at the variations but wasn’t terribly surprised. He believes it all comes down to what clients are actually paying for. “When you think about it what you are really selling is your work and what it’s worth,” he said.
So, is one maker’s work actually worth double or triple (or even more multiples) of what another’s is? Perhaps. But there are also clearly lots of other pricing factors at play. Simple math shows up as an issue in calculating materials. As the internet and globalization have taken hold, the cost of specific materials continues to tighten up. The price of the same brand and model of hardware or the same sheet goods really does not vary enough across North America to account for the differences in materials costs shown by respondents to the survey. In the case of the same vanity, materials costs range from $2,000 (what the original maker says his materials cost was) up to $4,000.
Some answers come in the notes. The low bidder admits he substituted cherry for mahogany because he couldn’t easily obtain that from his suppliers. But the board foot price of cherry vs. mahogany in a small vanity project still doesn’t account for even $1,000 in difference. We know some bidders rely on linear foot calculations rather than taking the time to make more specific calculations. That can trip you up in smaller but more complex jobs such as the curved fronts required in the vanity project.
Complexity confounds pricing in many projects. It’s really easy to give quick “ballpark” estimates of a project based on a tape measure and a price per foot, but that’s also a good way to lose your shirt on a job. There was another project in the survey this year that received no bids. It was a buildout for a retail store for athletic apparel. It seemed like a straightforward job, but we suspect the complexity of the drawings and requirements scared away custom shops who were more used to estimating kitchens with nothing more than a tape measure. In next year’s survey, we might try to include that project again, but specifically solicit shops that specialize in that kind of work.
This is not to say that respondents to the survey (and shops in general) don’t take estimating seriously. Respondents to the survey this year said that they spent on average more than one hour working on the survey. Some spent up to three hours compiling their bids. While there is no correlation between whether the bids were high or low and how much time was spent, it does show that our bidders take the survey seriously and invest time with their estimates even though these are jobs that they won’t be compensated for.
So, if the numbers are all over the map, even when bidders are making a serious effort, what is the value of the survey? What can we learn? How can you use it to improve your bidding?
The first answer is to study the detailed breakouts in the pricing rather than getting so focused on the total price numbers. Study the materials and see how the numbers compare. Check the shop rates and compare them to your own shop rate. Look at the breakouts for time to see if they make sense to you and to observe how they compare to the original maker’s time and the average of time in the bids.
Even if you did not participate in the survey, you can still download the bid package (bit.ly/2019-Pricing-Survey) from our website and see the same bid specifications all of the other bidders saw. If you have more than one person in your organization who does estimating, you can use the survey to help get everybody on the same page. Have multiple estimates work up the same project from the survey. Then compare their bids and see where they disagree. You might find your estimators are making different assumptions that affect the bottom line.
About shop rates
Another important area to study is the hourly shop rates quoted for construction, installation, and finishing. When is the last time you revisited your shop rate to see if it adequately covers all of your overhead and reflects your current labor costs? These days, it is a rare shop that can cover all of that with a shop rate of less than $50 per hour, particularly if the shop is located in a typically higher-cost area such as an urban setting. We are seeing more shop rates for custom woodworking operations in the $100 range.
Time is money
Of course, another huge variation in the survey comes in the hours estimated for the projects. It’s not uncommon to see one shop estimate construction at only 30 hours while another pegs it at more than 100. We have long recommended that shops base time estimates on real numbers derived from careful records of past work, but woodworkers constantly report underestimating the time it will take to complete a job.
Interestingly enough, there seems to be no correlation in the survey between shops that use CNC manufacturing and those that do not. CNC shops show up at both high and low ends of the bid spectrum and in the hours reported. Since CNC automation is generally heralded to make shops more efficient and to help them speed work and add capacity, this doesn’t seem to make much sense.
The clearest example of this from this year’s survey is from the big kitchen project. The original shop, which outsourced doors and drawers but does not use CNC, built, finished, and installed the project in a total of 140 hours. The highest bidder, which is a CNC shop, estimates the project will take 202 hours in construction alone plus another 178 hours for installation, and 149 hours for finishing, totaling 529 hours. What happened to all the time that was supposed to be saved with automation?
1. Curved front bathroom vanity
This distinctive bathroom vanity was built to address some very specific customer requests. The original maker said, “I do not have any line drawings as this was built as a one off piece from my mind. I can tell you my customer wanted the curved doors and the difficult task was bringing the cabinet sides around to meet the doors and have a constant radius rather than a box.” The actual vanity is 65 inches wide, 36 inches high, and the depth at the doors is 28 inches to allow for the size of the sink bowls that were installed into the stone top. The cabinet itself is made up of solid mahogany.
Analysis: While bidding was relatively close for this project, the high bid of $12,000 from a shop in California was still more than double the low bid of $5,500 from a shop in Indiana. Still, the average bid of about $7,200 was close to the $7,000 the original maker charged for project. Bidders seemed to overestimate the materials cost for the project. The original maker listed only $2,000 in materials but the average estimates came in at $2,800, a significant variance in such a small project.
2. Kitchen with island
This kitchen has lots of whistles and bells that contribute to the price. The format is a basic L-shape with an L-shaped island to match it. Along the walls there are provisions for two ovens, a microwave, a refrigerator, and a stovetop. The sink is located in the island. Over the stovetop is a wooden hood with raised-panel and moulding details. The corner has a corner cabinet with a top two-door cabinet, open shelves and canister drawers on the bottom. Heights of upper cabinets step up and down to frame the range hood.
Analysis: Here’s a case where the original maker’s bid at $20,433 is the lowest of all those submitted. The high bid came in at nearly triple that: $59,050, and the average bid was $31,751, more than $11,000 higher than the original bid. One clue to the variance is the low shop rate of just $40 for the original shop, which compares to an average shop rate of $64 to $67. Also note the difference in time estimates. The original shop, which outsourced doors and drawers but does not use CNC, built, finished, and installed the project in a total of 140 hours. The highest bidder, which is a CNC shop says the project will take 202 hours in construction alone plus another 178 hours for installation, and 149 hours for finishing, totaling 529 hours.
3. Cherry computer desk
This functional computer desk is made of solid cherry and cherry veneered plywood with accents and edging in walnut. There are provisions for computer, keyboard and printer. The desktop itself is 1-1/8-inch thick solid cherry. Walnut accents include edging on the top, a vertical edging accent on the half-round end shelf unit, handles on the doors, and vertical inlayed strips in the doors. Dedicated hardware is provided for the keyboard and 100-pound full extension slides are specified for the file drawer and printer pullout.
Analysis: The high bid of $9,750 from a shop in Ohio is more than triple the low bid of $2,700 from a shop in rural Oregon that originally did the piece. The average came in at $5,333. Significant variations in the numbers quoted for shop rates and construction hours point to possible reasons for the big differences in price for such a relatively small project.
4. Retro Kitchen
This kitchen is a veritable “blast from the past,” full of vintage details that will take you back to Baby Boomer childhood, right down to the laminate countertop with aluminum edging. But look closer and you’ll find the retro chic doesn’t sacrifice modern conveniences. There are full-extension undermount soft-closing drawer slides on dovetailed drawers and that laminate countertop is illuminated with under-cabinet lighting. Modern appliances with retro styling complete the look.
Analysis: With all the focus on “Mid-Century Modern” design, we thought this retro kitchen would appeal to bidders and perhaps throw them a curve. It turned out to be the widest variance in pricing of all the projects in this year’s survey. The low bid from a shop in Louisiana was only $4,300, while the high bid from a shop in New York came in at $24,500, more than five times the low bid. The average bid was $15,467, which is still lower than the $20,783, the original California shop charged for the job. Wide variances in materials, hours and shop rates account for a lot of the disparities of price.
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