1. Bedroom built-ins and mantle/cabinet project
Like the economy, the 2012 CabinetMaker+FDM Pricing Survey appears to be in transition. Overall participation is similar to last year, but the closer pricing of 2011 is gone although some of the categories that historically have shown the widest variances, such as kitchens, are more competitive.
For 15 years, the Pricing Survey has been the only vehicle to try to track pricing in custom woodworking. It does so by taking real jobs done by real shops and sharing the original bidding specifications. Shops all across North America are asked to volunteer bids on these jobs, and the itemized results are printed here in CabinetMakerFDM and online at CabinetMakerFDM.com. The survey is an attempt to obtain an “apples to apples” comparison of pricing in the industry, but what it really does is provide insight into why pricing is so frustratingly variable for custom work. It helps answer that age-old question: How can he possibly bid that like that?
Kitchens and competition
While wide variances in total price are common in the survey, reflecting differences in regional markets, overhead, shop experience and technology, as well as simple mistakes in calculations, the one category in this year’s survey where that is not the case is surprisingly the custom kitchen project.
Yes, the low bid of $12,584 is less than half the high bid of $29,000, but many of the contributing numbers, such as materials estimates and shop rates are closer together this year. With higher price pressure in the much-reduced custom kitchen market, it looks like shops have sharpened their pencils and revisited their calculators to improve their competitiveness. Average shop rate is down from $66 last year to $54 this year, but the experience level of participating shops is up from 21 years last year to 28 years this year.
And one bid shows the potential price pressure and opportunity of outsourced cabinets. The lowest bid came from a California company that specializes in providing cabinet boxes for other shops. That company submitted bids to the survey for both flat shipped boxes and assembled boxes. Although the company does not provide finishing or installation services, it did estimate those numbers and add them to its bid for the survey. In the tabular results, we included their price for assembled cabinet boxes; the flat shipped number was even lower.
There seemed to be more interest this year in work other than kitchens, perhaps reflecting the slow recovery in the construction market. Custom built-in projects won increased participation as shops look for alternative avenues of work. The bedroom built-in and mantle cabinet project attracted bids from coast to coast, and it shows a wide variance in pricing, with the low bid of just $7,300 from the original shop at about one-fourth of the high bid of $26,016 from a shop in Wisconsin.
2. Lighted bar cabinet
In discussing the results, the original shop owner, acknowledged that maybe there is room to raise his prices. However, he also pointed to the value of his low overhead and competitive stance that he feels have stood him well for the dozen years he’s been in business. His shop rate is $12 lower than the average for other bidders.But another contributor to the built-ins project price variance is less subject to factors such as low overhead.
Materials prices quoted for the project ranged widely, from the original shop’s $1,750 all the way up to a $9,000 estimate from a shop in North Carolina. We suspect the cost of materials doesn’t really vary that widely around the country, but mistakes in calculation do. Or perhaps shops with higher materials quotes find that’s a good place to load in extra profit in an estimate.
Original bidder reactions
One of the most interesting parts of the survey each year is hearing what original bidders say when told what other shops bid for the work they actually did. They all tend to take the information to heart and re-examine their own pricing processes to ensure they are doing the best job for their companies. And, of course, there is more than a little head shaking as the original bidders are amazed at the pricing variances.
One original bidder this year whose board room table project garnered one of the wider bid ranges seemed comfortable with how his bid came out in the middle of the pack. He notes that he has higher overhead than some shops, but he thinks for good reason. “We pay the best wages and we have health insurance and dental insurance,” he explains. “I don’t have to worry about guys leaving.”
Another original bidder commented that he thought the shop rates were uniformly too low and likely don’t account for all the overhead today’s shops actually have. He also said the clear factor missing from the survey is the measure of quality in construction. He was the high bidder for his project, and he suspects other shops cut corners to offer a lower price.
Speaking of which, one shop that regularly participates in competitive bidding noted how important it is to check the final bids after a project is awarded. “Some of these shops are leaving up to 20 percent on the table,” he notes.
How to use the survey
Even if you didn’t participate directly in the Pricing Survey, you can use it as a tool to better inform your bidding and estimate process in your shop. Download the bid package from www.CabinetMakerFDM.com and look at the detailed bidding specifications for projects that are like the work you do in your shop. That will help you better understand the variances in pricing these jobs as reported in the survey. Take the next step and bid the jobs yourself they way you would if they represented a request for proposal from a real customer. Then compare your results with the published bidders and see where you stand.
Another way to use the survey applies to shops with more than one person doing bids and estimates. Give the bid package to all your estimators and have them bid the same jobs without talking to each other. Compare their results and explore variations to make sure all of your people are on the same page.
2. Lighted bar cabinet - This nice bar cabinet project brings the new technology of LED lighting to the forefront to provide a distinctive custom look. The original shop made this for an existing customer and did not have to compete in a bidding process.
Analysis: In this case, the original bidder is a one-man shop, but his bid is at the top of the list at $10,000. That makes it more than double the lowest bid. The original shop owner thinks other bidders may have overlooked or deleted some of the specialized handwork he includes in such a project.
4. Dorm furniture - As work for new home construction disappeared in the recession, many shops explored other areas for work. This is one such example involving a project to produce dorm furniture. It involves a desk, wardrobe and captain’s bed. Opportunities for multiples and scaling the work figures into this project.
Analysis: This project for dorm furniture asks bidders to consider the possibility of pricing for multiples. The original project involved 368 units, and the original shop was able to efficiently produce each room package for just $2,769, the lowest bid in the survey and less than half of the highest bid, which came from a Connecticut shop. The original bidder thinks other shops have overlooked potential efficiencies and overbudgeted for materials costs.
5. Board room table - This is a corporate showpiece project that would challenge many a shop. The circular sectioned table was designed for corporate board room and was built in maple solids and veneer.
Analysis: This striking table design attracted a similarly striking wide span of bids from a low of $18,400 from a Washington state shop to a high of $91,000 from a shop in North Carolina. The original bidder was solidly in the middle at $35, 497. He found the lowest bid submitted hard to believe as being profitably possible, and he suggests the highest bid would not likely have won the contract in his market. Note the huge variance in construction hours estimates and materials costs.
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