Does this system of quoting work seem unethical to you? (details inside)

I don’t think there’s anything unethical about quoting extra for unforeseen problems, as long as you don’t stick to the “top of the range” if those unforeseen problems do not occur. In other words, are you being honest? If so, then your precaution is very sensible, and your client should appreciate it. But from their point of view, it likely makes sense to make you aware that they expect you not to “pad” the invoice.

Did you explain again what you had originally meant, and how did they react to that?

I don’t find the “padding” unethical. You gave her a range and talked about that there might be extras; when they pushed for a firm quote, you had to build in some wiggle room so you don’t get screwed.

If you want this job, perhaps you can say that is the upper limit of what you will charge and if there is no extra work and it goes smoothly, the final cost will be less than that.

Really, I think all that is needed to reassure the client is to say that the final bill will be less if there are no delays.

Thanks for the answers. Just to clarify a bit, conversation could be shortened to (simplified with made up numbers)

funkdaddy: I think it will take 40–50 hours at $10/hr, so $400—$500.
client: great, that’s doable

c: I need a hard quote
f: Ok, let’s say $470, I like to figure in a little time for the unexpected
c: I don’t like that you pad it for the unexpected

Maybe next time just give the firm quote – if insisted on – without the explanation. But in this case, you can come back and say if there is no unexpected, it will be closer to the $400. If you are doing something professional for them, it sounds like they are getting a bargain anyway if you estimate at $10 an hour! But you can either get self-righteous at this point or get the job.

f: Then, basically, you are expecting me to give you work for free if there are any delays I haven’t foreseen.

I’m sure there’s a polite way to say this, right? What she’s asking is unreasonable. I guess you either have to take a stand or turn down the job.

I asked my brother who is a contractor/home re-modeler.
He said he gives a solid quote without telling the client that he has figured a certain percent of overage. For instance, he tells a client a bathroom will cost 10,000 but in with that quote he has added 1,000 in case he runs into issues. If the bathroom doesn’t run into issues, he doesn’t charge the full amount, he tells the client it didn’t cost as much for materials.
If it costs even more than the 1,000 he has figured in, he tells the client that the unforseen issue will cost more. I don’t think he has ever had a problem with this way of doing business.

Not unethical at all, in fact the potential client’s attitude about the “padding” tells me there is a good chance they haven’t really worked with contractors (of any kind) much.

You were dealing with a go-between. She doesn’t understand how the bidding and job-cost process works. She’s speaking on behalf of her boss and, because of her own lack of knowledge, she doesn’t understand that you had to protect yourself by locking-in a higher amount.

Suggestion – Maybe things would have gone more easily, and been more pleasant, if you’d explained that your single-number quote had to encompass the entire range, and that you’d bill less if you spent fewer hours on the job?

Personally, I would appreciate it if my contractor gave a quote that was higher than the amount I would end up paying, so that I would not be unpleasantly surprised when it actually came time to pay.

One option is to give a firm quote plus or minus a percentage—say 10%. That’s leeway without waffling on a number. Sometimes that seems to go down a little more easily than a range.

Another is to give your $470 quote and define exactly what that covers: number of hours, say, or range or speed. When I’ve quoted a client $2400 for a 300-page manuscript and he has come back and said “Can you do it for $1200?” I say yes, and here’s what that will look like. I show him a sample and outline what that does and doesn’t include; for example, a fast copyedit but no fact checking and relatively few queries about inconsistencies and lack of clarity.

I can work to almost any rate. For $100 I would turn the pages this fast (demonstrating) and mark what jumps out at me. For $2400 he will get the works, at what I consider the right and necessary pace for a thorough, in-depth editing pass.

I also have a checkpoint at 10% completion and at 50% completion to let the client know how it’s going against time estimate and confirm that what I’m doing is giving him what he wants. (I appreciate that not all jobs are incremental in this way, but no job is finished in a single stroke, and if there’s progress, I’d think a progress check—and course correction if needed—would be possible.)

Anytime I see estimate I assume it could be more. That is what estimates do, they estimate off the facts how much work would be involved. If you estimate tearing out a kitchen and putting in a new kitchen will be $4,100 in material and labor, but then discover there is an electrical problem that has to be fixed if the kitchen is to perform as they expect it when remodeled, that is more cost. They are paying more to have an electrician correct the problem, but that might mean he had to tear into the wall, so either he/she will charge to have the wall patched or I would, because it was not counted for in he estimate or known when it was made, had it been, then it would have been included because I know I will have to do it once the electrician got the wiring squared away. Padding is just adding on the top to increase profit, to me ’padding” means markup.

@Hypocrisy_Central But the point on this is that the customer came back and said they wanted a firm quote.

^ But the point on this is that the customer came back and said they wanted a firm quote.
If they wanted that, I would give them one with most usual unexpected happenings built in, with a stipulation that if that occurred which I hadn’t anticipated (which they would not know either, but was not factored into the cost) cost 10% over the hard quote, I would be unable to complete the job, or it will be completed if the unexpected can be worked around even if it had to be left in an unfinished or unattractive look. I would also tell them if things with much smoother and the job got done quicker than if I had to do all the unexpected, the final price would have some rebate in it.

We get asked these kinds of questions all the time on large multi-year power plant projects from clients (potential clients) who have no firm project in mind but want an “engineer’s estimate” of “what would it cost if I …”

They’re difficult quotes, because there’s no specification to bid to, no specific project site in mind (is it an island somewhere? in Siberia? – that was a real instance, by the way – what kind of fuel will they burn in the furnace? what kinds of air pollution control devices will they install? – the rest of the world does not usually operate according to the standards set in North America and Europe). So we tend to go on the high side of everything: figure difficult access, poor fuel, inexperienced construction labor / contractors, inattentive and unsophisticated customer project engineers, difficult suppliers (meaning schedule delays), etc. – and we add a factor to “that project X that we did once before” (maybe years ago) so inflation will be a factor, too.

Even so, on the rare times when the hypothetical project turns into an actual project specification, a defined scope and site, a more or less “real” schedule, etc., we often find that our supposedly conservatively-high estimate was not as out of the ballpark as we thought. (That’s partly because we, like you, apparently, try to keep our bid process in the real world and not automatically double the cost of these hypotheticals. But it’s also because our Sales and Tendering people enforce that method of bidding.)
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I’m also reminded of a rigger that my father knew and told me about once. He used to splice cable slings, chokers and other rigging supplies by hand, and was known in the industry for the quality of his work, which he performed by himself. Since the things he made were more or less identical and he had years of experience in making them, he could quote the prices that he knew would work for him, and which would make him price-competitive with others in the business. But he would also quote T&M rates (time-and-material, for those who aren’t in the contracting biz; he would quote an hourly rate for his labor, and a set price per unit of material, and the price charged would be a mathematical function of how long it took and what materials were used). He liked to quote and get T&M work, because he could do that as fill-in work at his own pace when he had no other work to perform, meaning that his business had very little “down time”.

But some potential customers would avoid taking him up on that offer, and insisted – just like your friend’s boss – “give me a firm quote” so that they would know they weren’t being taken advantage of. (One of the problems with T&M work is that if it’s not supervised or the contractor is inefficient or dishonest, the time takes a lot longer than it should, materials are wasted, and prices are consequently higher than they should be.) So when he got a “firm price” order he would typically do it as quickly and cost-effectively as he could, as if to demonstrate to the client, “See, you could have had it for half the cost, but you thought I was going to rip you off with that T&M rate.”

I don’t see anything wrong with your method of quoting. Customers always balk when they see the actual price. (And with undisciplined or unsophisticated customers, the inevitable change orders blow the estimates out of the water in the first place – and it’s never the customer’s fault, in their minds.)

No, if you had estimated say 8–12,000, and they want a fixed price, I would say it makes sense to have the fixed price be higher than half, or even to say 12,000, if you are not in a position to be able to do substantial work for free, but instead of saying 12,000, you could say you can’t do a fixed bid due to the way your costs work.

Such negotiations can devolve into guessing if the other side is bluffing, which doesn’t lead to a friendly business relationship. So it’s best to know what you will need to charge, and have that in your pricing. If it’s something where there is the possibility of things going very wrong, It might be wise to think about what’s the best thing to do in that case, and build that into the contract too, one way or another.

For what it’s worth… It sounds as if these aren’t people you’d want to do business with, and you might have regretted having committed to a relationship with them. You deserve better-quality clients, people who understand how fee negotiations work and why you carefully figure a fee range.