Reputable National (working with for over 3 yrs) informs me that "HUD has reduced your bid". The reduced bid is excessively low. HUD reviewed my appeal (according to the National) and the appeal was denied. National informs me that according to HUD regs, I have to complete at the reduced rate.

Questions:
Is there a HUD reg that requires subs to complete work when bids are reduced? (I doubt it. It is probably a new rule that the National is trying to implement), but since I am not sure, I have asked the question.

Is there a way to see the appeals process between the National and HUD?

We are still undecided on whether or not to complete this item at the reduced rate. I am undecided because the relationship with this National is very profitable and I don't want to ruin it because of this, however, reduced bids from HUD are becoming increasingly common. Because we have to rely on the National to plead our appeals to HUD, we don't know if the National is really processing the appeal, we don't get to see the results of the appeal directly from HUD, etc. I would prefer not to be in a situation where I have to "trust" or depend on a National to justify my pricing to HUD.

Most contractors dealing with FHA properties have experienced this. How are you dealing with this problem?

Hello Ron,
I have never seen the process but I have also received work orders where they said the bid was reduced or they would not put the bid in because it was not within pricing guidelines.
The important thing is that we know what it costs to do the job. If they tell me I have to do it for less, I decline. Yes you can decline it if it is not for what you bid.
Don't get me wrong I have reduced bids for 1 or 2 private customers in the past but I will not reduce any bids for nationals.
Good luck

The national just put you in a Catch-22 situation.

You can accept the work at a loss, in order to keep their business. But this will make it easier for them to reduce bids in the future.

So, you have 2 choices from what I can see. Do the work for less and keep their business. Or decline and risk losing their business.

If I was asked to do the work at a loss, I would turn it down and risk losing them, depending on the client. If it's one I trust not to make it a habit, then I would negotiate and find a way to work with them. Still couldn't do it at a loss, tho.

You DO have the right to refuse to do the work.

Good luck!

Linda

Thanks Linda and richb,

I declined the work at the reduced rate. Even though it is one of my best customers (volume wise), I cannot in good conscience start down that slippery slope. When reductions came in the past, they were minimally profitable or break even at worse. If the reduction was too low, we would go back and forth until we reached a number that was acceptable or the work order was reassigned. The rep I am dealing with now, (for about two weeks) introduced this "HUD reg" that requires me to complete the work at the reduced rate. Pure bologna. The relationship with this National is good because it is PROFITABLE for me and I hope it is profitable for them. Take the profit away and it is no longer a good relationship.

After thinking about this, the decision was very easy.

Honestly, I think you made the right decision. "Slippery slope" is a good way to put it and, yes, once you start accepting work for less than profit, the relationship typically goes south.

I don't work with nationals so I haven't had to deal with that for a very long time. We keep our pricing reasonable enough for all parties involved. We don't gouge anyone but we don't work at less than break-even either.:)

Linda

The nationals are getting almost impossible to work for. They excpect us to lose money or break even on certain jobs just to keep their business.

We have been working for SG and CPX for over four years and they consistenly have been reducing rates and adding new requirements. We have been doing this for almost five years and enjoy it, but now we are contimplating an exit strategy due to these unfair business practices.

Linda, is there any advice you could give to get more realtor work. We are in Florida and most of the realtors have to use nationals. Any advise would be greatly appreciated.

The nationals are used for the repetitive type work. The repair issues are not necessarily sent to those losers. Almost all my trashouts, winterize and such go to the nationals. Heating systems, septic systems, heavy repairs and such go to my locals. Nationals do the grunt work, locals handle the craftmanship work. Money wise it's about 50/50. AND my locals get paid upon completion, none of the 60-90+ BS waiting. They jump on my jobs and I jump when they need their money.

JackReo
I am little confused about what you mean by locals. Do you mean local Real Estate Agents or is there a situation where the large banks (Wells, Chase, US, BOA, etc.) are dealing directly with local contractors?

The contractor is hired by me. I pay them and submit for reimbursement. My preference would be for them to do everything, like it was years ago. But...the influx of underfunded (or padding the invoicee) agents over the past few years has resulted in the nationals comong aboard (and maybe padding the bills). When my hired contractors were doing the work in NEVER has a freeze up or a kickback for quality. Nor did they ever charge me for work not needed. Nor did my copper disappers with no sign of forced entry.
I had a recent case where the neighbor called and asked if the "fat guy with the white truck was supposed to be taking all the pipes and appliances? three other local REO agents had similar issues with him. Well I had dumped the chubster years prior due to his ethical challenges. I reported this to the national. They kept right on using the gravationally gifted party. So I followed up with the client. Calorically impacted party changed his company name. I followed up with the client. They dropped the national and shifted back to local agent hiring. Another national now uses him.

Jack, would you PM me his name?

I have a lot of vendors in Massachusetts and many more who want to work with me. He sounds like someone I would not want in my network and I want to make sure I don't already have him in my system or even in my potential vendor list. Too much liability.

Thanks!

Linda