Here’s a real-life scenario:
I met with a potential Client to review the Proposal that I had prepared. Our Proposal format has three sections- scope of work, specifications, and terms & conditions. In the scope of work section, I had mistakenly left terminology that we will install two ceiling fans. The specifications speak nothing of ceiling fans (either an actual specified model or an allotment). The client wants to move forward after a few minor revisions are made (change flooring in a closet & move to one ceiling fan instead of two).
My question is: When you revise the Proposal, do you add the cost of the one ceiling fan in your estimate or just give it to them at cost. Along those same lines, since they are actually omitting one ceiling fan (which in turn reduces our fixture cost and our sub’s bid), do you give them a credit for reducing the scope?
I hope it goes without saying, if they signed the contract as written we would honor the price, regardless of what kind of mistakes were made. But now, revisions are being made, so should I honor an inaccurate Proposal or fix the mistake and move on?
Replies
It's not final yet.
Both parties are able to make revisions at this point.
Jon,
Since it was just terminology you left out and you already had the two fans figured in your price, why would you add the cost to it when you know that cost was already figured in your price? It sounds like to me that your trying to get paid twice for the fan you already figured for and hoping they wont catch the era.
Make them aware of it when you revise thew proposal that you never included it by mistake and you will reimburse them for one ceiling fan. They already know that they were supposed to get two and they just want one. Even though it wasn't in your proposal, they know it and you know it should've been there.
Joe,It was terminology I left in that was not supposed to be there. No fans were included in my excel estimate (the way I determine the price) but I accidentally wrote two in the text of the Proposal. In other words, had they signed the Proposal as is, we would have eaten two fans (~$600).
Jon Blakemore RappahannockINC.com Fredericksburg, VA
Sorry Jon, I thought for some reason you said left out.Joe Carola
Edited 10/17/2006 11:07 pm ET by Framer
Fix the mistake. As long as you are straight with them, what complaint can they have? If they are not willing to let you straighten this out before there is a signed contract, you might be better off passing on this job.
What might make this problem a little easier would be if you could find an error in the proposal that is in their favor. It wouldn't have to be a big number.
I did let them know about the mistake, unfortunately we did not talk in depth about the fan until after I had their verbal commitment. I guess that's what makes me feel the most uncomfortable about the situation, after they said "let's do it, I would just like to make these revisions..." is when the issue was discussed. I guess it's a lesson to point out my mistakes early on, before they have "committed".It's a tough balance, because I never like to admit that there is a mistake in my Proposals. I'm not too proud, but I do put a lot of effort in to being clear and I really sell this to them as one of the benefits of selecting our company. I also hate to provide more obstacles than necessary to close the deal. I guess I'll learn to proofread more carefully next time.
Jon Blakemore RappahannockINC.com Fredericksburg, VA
I've made errors on proposals before, and can usually clear up the misunderstanding by having a focused conversation on the mistake. Most people will acknowledge your fallibility and conceded the point. If they want to persue the fan, tell them it is a change order with additional cost.
On the point of accounting for the removal of one of the fans, I don't see how you can credit the amount of the deleted fan if you never actually charged them for it.
The worst you can expect to come out of this is taking the cost of one fan in the shorts. Of course, a lot depends on how agreeable the client is.
I've had some that would not give an inch and would try and bilk you for every cent they could.
Is the contract signed? Or just a verbal agreement at this point?
"I am the master of my fate, I am the captain of my soul." Invictus, by Henley.
The contract is not signed, but we do have an informal verbal agreement. I think that's my biggest concern. When they saw the price, they said "Oh, that's not bad" so I don't want to seem like I know they were expecting to pay more and am going to exploit every opportunity.
Jon Blakemore RappahannockINC.com Fredericksburg, VA
Jon, I've had some similar situations and usually eat them. It's like you're saying... there is already an agreement in place (verbal) and it's a little hard to go back and say "oh, the price is actually higher". Most of my budgets have a contingency in them to cover a bit of silly behavior on my part, and that generally covers it. But even so, I go to lengths to make people's financial experience a predictable one. If I do that, they're much more forgiving when I completely blow the schedule!
Now, I have had one or two where I completely, stupidly forgot a major component. Then I've gone back and made the change and let them know. Those were situations where I was a sub, and that's easier because your customer has done the same thing too.
If I do that, they're much more forgiving when I completely blow the schedule!
Ah, a realist! I can identify with that.
Jon Blakemore RappahannockINC.com Fredericksburg, VA
The fact they expected to pay more seems to indicate that they would agree that something was amiss.
Be honest and they will probably be understanding.
Good luck, and let us know how it goes.
"I am the master of my fate, I am the captain of my soul." Invictus, by Henley.
The fact they expected to pay more seems to indicate that they would agree that something was amiss.
The Proposal was for a 250 ft² addition, 200 ft² porch, and 1,200 ft² of concrete driveway, so I doubt that even another construction estimator would have the insight to know that the price was high or low. I do understand what you're saying, and I do agree that a reasonable person standard is a good thing.
Jon Blakemore RappahannockINC.com Fredericksburg, VA
In a job of that size I would just eat a couple hundred bucks and forget about it.
Ok, to play devil's advocate, what if it was a couple thousand?
Jon Blakemore RappahannockINC.com Fredericksburg, VA
I would likely point out the error in that case, again it would depend on the size of the job, but it would have to be a very large job to eat a couple thousand. My point is, the cost of one ceiling fan can not be very consequential to a job of the size you are speaking of. If it is you have cut your estimate too close to the bone. The risk you take by pointing out the error after they have already verbally agreed to the price is that they could lose faith in your abilities or just create a sour feeling which could cost you down the line. This job will take you what, six, eight weeks to wrap up? Does what will likely come out to less than a days pay make it worth the potential problems it would cause? If you didnt at least worry about that you wouldnt be here asking the question.
Seems pretty simple. Conversation should go like this:
You: Oops, I accidientally included this tect for two ceiling fans that aren;t supposed to be there.
Them: I see.
You: and lets move on tho the next section.
It was just an error in text.... just as though you made a typo indicating 11 doors into a room instead of 1.
It shouldn't have been there and there is no price to modify.
Your stated price at the end of the proposal is the proposed price for completion of the entire prohect as stated... plain and simple. The either accept it, haggel or decline.
http://www.petedraganic.com/
I really appreciate the counsel from everyone, maybe this is a position where we have all been so we can understand the different positions you could take. Then again, maybe I'm the only guy who doesn't proof his documents as much as he should...
I'm going to sleep on it (which I need since I have a meeting in 6.5 hours) but here's what I'm thinking.
I will write an email which, along with the revisions already agreed on, I will explain my position to the Client. I have no doubts that they are reasonable people, but I have been wrong before. I am thinking that I may split it with them. Maybe charge them for installation but give them the $150 allotment for free. Like David said, this is why we include a contingency in our bids. I don't know if they are even thinking about it, but I don't want to start off on the wrong foot.
Let me know if you think I'm batty for doing this. On second thought, keep those thoughts to yourself (just kidding). I'll let you know what I will do in the AM.
Jon Blakemore
RappahannockINC.com Fredericksburg, VA
I sent the revised Proposal over today, the price is the same less the price of the fan. I explained to them the same concerns I expressed here.
Hopefully they will appreciate this offer and it will come back in goodwill. I'm hoping they don't say "hey, I think he was trying to screw us and now he's backing down!"
Jon Blakemore
RappahannockINC.com Fredericksburg, VA
On the note of errors in the proposal...We are adding an addition to our house and the Electrician budget was 20K. One electrician came in at 19K. This electrician was someone the PM brought in. We do the happy dance because it fits our budget.We get a call a few days later that he screwed up and it is 27K. Our PM flips out, gets him down to 25K. At this price, the electrician tells us, he is giving it to us. We go out and get other quotes. I get quotes for about 23K. The PM goes back and tells the electrician that we got it for 19.7K. The original electrician magically comes down to 19K. Calls the PM incessantly. Calls me. Comes down to 18K.The result (me being in the A/V industry and not construction) is that we hire the guy who came in at 23K and tell the other guy to screw. I did this for 2 reasons:1. A price is a price. In my business, when I quote a price, it is what it is unless there are changes. If I genuinely screwed up, I tell the client and offer to eat the mistake. Usually we either split the difference or they understand. If I do have to eat it, I will make it up elsewhere (most of my clients are repeat business). This guy just made it like tough sh*t, this is my price and you can't do no better. Also, if he does it cheaper he will hit us with every slight change order. Now keep in mind this sparky does work for the PM all the time so it also reflects on future work w/ this PM.2. The second guy will actually do the work himself (small outfit, him and another mechanic and a helper or 2). This is good since some of the work involves an automated lighting system and is a little intricate. Ed