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.
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.
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