Contractor costs were way off, do I still pay it?

Do you have an estimate or a contract? An estimate is not a promise, after all, but an educated guess. A contract, on the other hand, is more authoritative. If the contractor made you a solid offer of a shed for $2,000, then you should not have to pay for his mistake. Indeed, he’ll never learn his lesson if you do. And if you have a contract for a shed in exchange for $2,000, then there’s really no way for him to force you to pay more.

Before you decide what to do, however, remember that there’s more to the situation than your legal obligations. Just because something is legal doesn’t mean it is right. What would be the consequences of making the guy take a loss on this job? What would be the consequences for you of paying more than $2,000. Perhaps you could assert your right to pay only $2,000 to remind him of the lesson here, but agree to pay $3,000 as a compromise.

I’m not saying you should definitely do that. You’re the one in the best position to figure out what the personal and economic effects on you and the contractor would be. It isn’t fair for the contractor to take no loss on the project since it was his mistake, but that doesn’t mean you have to make him suffer.

Thank you for your response.
The first estimate was $1400 but he increased it to “about $2K” when I asked if he could add siding to it. I budgeted for $3K as a “just in case” situation because although he never mentioned it, I knew that the labor would increase as a result of the change in materials.
I believe this is an honest mistake. However, if someone asked me to wash their car for $20 and I told them that it took much longer than I expected it to take so now they owe me $40, I don’t think that would be reasonable. I did not ask for a Porsche shed; I just wanted a middle of the road shed. The contractor agreed that he messed up and that he absolutely told me that this would cost about $2k, which is why he is “eating” his profit. But I still think he should accept a loss, just as I am accepting a loss. I was going to propose $4K as a fair price. Thoughts?

As one who works in the contracting field (and has also worked in the field, contracting), my ears perk up at the mention of “a couple of changes”.

“Change orders” are how some unscrupulous contractors make their entire living. They lowball a project estimate knowing that changes are inevitable, then once on the job the cost of changes skyrockets. (This is why one good method of contracting is to include “unit pricing” for extra work, such as a unit price for every likely material item to be used in the process. This is common in industrial contracting, but not so much in residential and small commercial projects.)

But yours doesn’t sound that way (because you would have been hit from the start of the first project, more than likely). This sounds like an honest mistake on the “shed project”, probably stemming from the original order. What were the changes, specifically (this is a rhetorical question; I’m not looking for you to post a list of changes here), and how were the changes estimated and priced?

If you think the shed “as built” is worth the $4500 in materials that is being claimed, then it’s probably worth the invoiced cost, which includes the contractor’s profit. It may very well be that he underestimated the cost of some materials, and it appears that he has agreed to “eat” the difference between his estimate and the actual cost, which is very commendable of him. I’d hire that contractor.

In order to be fair, and to preserve a relationship for future business – because honest and competent contractors are worth having good relationships with – I would ask him to share the basis for his original bid of $2000 for the shed, and then discuss the changes you ordered, too, and how those were priced. Perhaps you can agree that even though the original estimate was in error against him, and he has honorably agreed to hold that price to you, you should pay the full cost of “the changes”, whatever they were. (It’s hard to see how “a few changes” could double and then triple the cost of such a small contract, but you might be surprised, too.)

But it gets down to the contract itself, how changes are to be estimated and agreed-upon, and whether the shed was bid “hard dollar” or “time and materials”. I’d try to work something out that you can both walk away from without a bad taste in your mouth about “how that guy does business”.

EDIT: Welcome to Fluther. This is an interesting first question, for sure!

Welcome to Fluther!

This is very interesting, as my partner and I just went through a very similar experience with a shed. The original amount quoted was just an estimate. Like your situation, the final cost came out to be much more. Part of that was due to a few changes along the way.

It seems like there are three choices: 1.) Pay it., 2.) Attempt to negotiate, as @SavoirFaire suggests., or 3.) Sue. Since there was only an estimate given and no contract was signed, there is little, if any, chance of winning a lawsuit.

My partner and I negotiated a bit. The contractor installed a nice tile floor at his cost for a bit of compensation. My takeaway from the experience is to spend more time on the front end with the contractor getting detailed estimates, and a contract if possible.

In the long run, we won’t remember the total cost, but will always appreciate the quality and ascetics of it. For both you and I, it could increase the property value should either of us sell our houses.

@kdbabym I do agree that he should have to take some sort of loss, even if not a large one. But I would join @CWOTUS in saying you should look for a solution that both you and the contractor can walk away from happy. Perhaps explain that you had budgeted for $3,000 at most, but have scraped together the means to pay $4,000. This shows that you’re willing to take a loss (of sorts) as well. And if you have a future job, hire him again and work with him during the estimation process—not as an overseer, but as a partner. Like @Pied_Pfeffer says, you have little chance of successfully suing the guy. And as @CWOTUS says, a scrupulous contractor is a good find. Don’t burn bridges just to stand on principle.

Did he talk to you as he was doing the work about the costs possibly coming in higher? I have a friend who is a contractor and jobs often involve more than he estimated once he comes to do them. And he has also mentions that changes that people request become an issue sometimes too.

I think it is part of the nature of the beast that costs change as a job proceeds but it helps if you have good communication throughout the process. I, too, would try to walk away with a solution that you each are happy with.

There’s something in what @janbb says, and I was thinking along the same lines as I wrote my original response: Any good contractor can make a mistake in estimating; that happens. But as he begins his processes for ordering material and making a schedule and man-loading that schedule, he will quickly realize his error. He should have been talking to you (or maybe he was attempting to?) during the construction process.

Still, I would definitely try to work something out with him if I were you. Perhaps you can agree to pay whatever you two agree upon over a time period that suits your budget, as he has already agreed to forego his profit.

Thanks to all of you who have given this some consideration, I appreciate it!
To provide you with a few additional details, I can tell you that the additional expenses weren’t the materials but the labor incurred as a result of the choice of those materials. Yes, he thought the cost would go up as a result and he communicated this to me but neglected to accurately estimate just how much the labor cost would be. This caught him by surprise and he has told me that never in all of his years of work has he been sooo way off an estimate provided to a customer. I believe him; he has also gone above and beyond on more than one occasion for me while completing the basement and he is a reputable contractor. So yes, we need to find something we both can live with. I will try what savoirfaire suggests; I will let him know that I scraped together $4K, which is way above what I had intended to spend and would like him to accept a loss as well and hope that this can be achieved while leaving a good working relationship intact.

Okay so “Yes, he thought the cost would go up as a result and he communicated this to me but neglected to accurately estimate just how much the labor cost would be.”

Maybe if that you didn’t ask him by how much it would go up might have led him to assume that money is not/no longer an object?

When the contractor said that the cost would go up, I asked him by about how much and at that point he said that the total would increase from 1400 to about 2000.

I guess I’m going to revise my earlier response in light of this information. If $2000 was his revised estimate of the cost after he knew that they’d rise, and he told you that and you agreed with him to “go ahead on that basis”, then that’s the cost to you. He blew his estimate – twice – and you’re under no obligation to make him whole at this point.

This is simple business. In fact, I’m now quite surprised that he attempted to present a bill for three times that amount. No wonder he was embarrassed to present that! He had no business presenting it to you.

You do owe him some negotiation on the “change orders”, whatever those were, unless those were included in his revised estimate of $2000. Contractors do make these mistakes from time to time (in our case they can cost us – have cost us – tens of millions, not a few thousand), and you suck it up, learn the lesson you should have known already, and try to make it up on the next ten projects.

Thank you, CWOTUS. I guess this is why I posted this question in the first place: it seems like this guy should suck it up beyond simply losing his profit. I thought the 2K estimate was off, which is why I quietly budgeted 3K. I knew that his guys were here beyond the two day original estimate due to the change we agreed upon so I was ready to pay more than we had agreed upon. But I cannot in good conscience pay this guy $4500 and feel OK about it. I had that additional $ set aside for another project and sure as heck would never have put it in a stupid shed (and I told him that one solution to this problem is that he bring a truck over and take the shed away…he squirmed and didn’t seem to like that idea :)! So, I will pay him what I believe is fair and reasonable; he will have to suck up some of the loss just as I am reluctantly doing for the sake of understanding that errors are sometimes made but we can move forward with a greater understanding of what went wrong and what cannot happen again.

I’m sorry but you appear to have a great new shed from a great contractor, yes estimates are not accurate but you didn’t have a fixed price contract and you yourself stated it was worth the 4.5k. I’d pay him and make sure it didn’t happen again. I’ve just renovated my house and it’s been a constantly changing work in progress, compromise and communication. Unless you agreed to 2k in writing pay him.

@Arewethereyet So if I come to your house and build a $4,500 shed that you don’t want against your will, you’ll still pay me for it?

Against your will? Didn’t the op commission the guy and watch the build happening?
Yes is my answer I would pay the man and learn from the experience.

If the op doesn’t want to pay him it’s their decision not mine.

@Arewethereyet No. What OP did was commission a $1,400 shed and then agree to a change order for a $2,000 shed. You’ll note that @kdbabym explicitly said that no deal would have been made had the estimate or contract been for a $4,500 shed.

So perhaps a better counterexample would be the following. Say you ordered a meal at a restaurant and remarked to the waiter, “That meal was so good it would have been worth twice the price!” Would it then be fair for your bill to be doubled?

@SaviourFaire the OP asked a question I gave my thoughts I have no need to argue hypotheticals with you it is pointless.

I don’t care what kind of business it is, I think it’s the business person’s responsibility to establish effective two-way communication with their customers and to actively avoid surprises. After all, they’re the professional, with the experience and knowledge to know what lies ahead for the customer during the transaction.

I’ve been in your contractor’s shoes. I used to cringe when I was finishing up a job, and the homeowner said, ‘While you’re here, how much would it cost to do XYZ?’ The original job was formal: estimate, contract, and payment schedule. While on the job, a comfortable, casual relationship would develop. Then the homeowner, liking me and my work, would ask me to do more. I found it difficult to go back to the beginning and present an estimate, contract, and payment schedule. It was just too easy to casually and informally offer a quick bottom line number. And that’s when I most frequently screwed myself, because I didn’t handle the business transaction properly. I felt it was on me to eat my screw ups because that’s how I was taught to handle the situation.

From my point of view, you are within your rights to hold him to 2K, but I’d think you were a butthead for doing so. But you sound like a contractor’s dream customer: reasonable, rational, and willing to compromise. He quoted 2K, and billed you 6K. Your willingness to meet him in the middle at 4K to help cover his errors, makes you an outstanding customer in my book; it makes you somebody I’d enjoy doing work for again.

Thank you. BTW, we had gone “shed shopping” before agreeing to this project. We found a comparable shed for $2800 and another for $4500. The contractor was outraged at these prices and quickly pulled out a calculator and declared that he knew he could build me something that would be better than these sheds for $1400! So you can imagine my surprise when the bill was $6K! The whole point of having him build one was so that I wouldn’t be paying a ridiculous amount of $ on a shed. Ah yes, the irony. And yes, he recalled all of this quite clearly when we first discussed the um, problem, with this bill. He blew it and admitted to it. And it might look like a $4500 shed to shed connoisseurs but I assure you that this shed did not just add $6K to the value of my property or to me personally.
Tomorrow I intend to give him a heads up re: check he will be receiving from me and that I hope we can continue working together while learning from this mistake and let that be the end of it. $4K is my offer. Thanks to all who assisted me with this, I truly appreciate all of the responses!

^^ Sounds like a good compromise, good luck with it and I hope it hasn’t soured the experience too much for you.