How To Hire A Contractor :: The Construction Management Pro

How To Hire A Contractor

Whether it’s a home repair, addition or renovation project; if you are remodeling your office or building an office building believe it or not, the process is the same.  It can be scary and stressful; especially if your job, reputation or relationship with your spouse is at stake. Control your stress by remembering a few key points when hiring a contractor for your next project.

Step 1: Ask around

Get recommendations from your friends, family and colleagues and then check with the Better Business Bureau for complaints and ratings. The bigger job, the more professional references you may want to get.  These would include speak with a building inspector who might give you some insights as to which contractors routinely meet code requirements, supply companies and trade associations . Depending on your need, you should check for licensing requirements of the potential contractors.

Step 2: phone interviews

After you’ve compiled your initial list, make a quick call to each of your prospects and ask them some questions relevant to your project. These might include:

  • Do they take on projects of your size?
  • Are they willing to provide financial references, from suppliers or banks?
  • Can they give you a list of previous clients?
  • How long have they worked with their subcontractors?
  • How many other projects would they have going at the same time?
  • Who will be responsible for your project on a day to day basis?

 The answers to these questions speak to the company’s availability, reliability, internal accountability and how much attention they’ll be able to give your project.

 Step 3: Meet face to face

After you’ve spoken over the phone, make a “short list” of three or four contractors to meet for estimates and further discussion. A contractor should be able to answer your questions satisfactorily and in a manner that puts you at ease.

Step 4: Ask for references

Ask the prospective contractor for a current job site and see if you agree with how the contractor works. Visit the job site! You can tell a lot about a contractor by how he works and how his team works. See if the job site is neat and safe and whether or not the workers seemed to be respectful of each other and with the owner’s property.

Step 5: Get bids

Now that your list should be much shorter than when you first started, it’s time to get the plans together. Good contractors will have a sense of your expectations and what you plan to spend. To compare bids, ask everyone to break down the cost. Never accept just a lump sum bid. The project can be broken down several ways: by trade line items, cost of materials and labor are the most common. Some projects even want to see the contractor’s estimate for overhead and profit.  Generally materials account for 40 percent of the total cost; the rest covers overhead and the typical profit margin, which is 15 to 20 percent. Also, be sure to ask if the bid is fixed or is just an estimate. Pay close attention to what is not covered in the contract. Most contractors will list “Exclusions.” These may run from permit costs to handling toxic materials and sales tax. These exclusions could add considerably to the project cost.

Step 6: Payment schedule

This is where most owners run into trouble. While you can expect to put down about 5-10 percent at contract signing, don’t accept any contract that requires you to put down 1/3! The contractor should be paid upon work completion.  This is done by establishing a Schedule of Values. As each work item progresses, the contractor is paid. This keeps your payments in line with the work completed. Resist the contractor’s request for equal payments (either weekly or 25, 25, 25, 25 or 1/3, 1/3, 1/3). If you don’t  you could find yourself in a position where you have paid more money than work completed. If you then have a problem with the contractor, he has your money and leverage on what happens next. A check for the final 15 percent can be paid when you feel every item on the punch list has been completed.

Step 7: It’s not always about price

Be skeptical of lowball bids. This contractor is probably cutting corners or, worse, desperate for work. The most important factors in choosing a contractor are how well you and he communicate and his ability to deliver the project as promised.

Step 8: Get it in writing

A written contract will specify what is and what is not included in the Scope of Work, the schedule to complete the job and their associated costs, as well as the payment schedule. Never sign a blank contract or one with blank spaces. Your state may have specific requirements for Home Improvement Contracts which speak to consumer protection issues.  For large projects, make sure they are reviewed by your attorney. Every contract should specify terms for termination.  Remember, a contract is only important when there is a dispute. When there is a dispute, the only thing that matters is what is in the contract.

Even if your project is small, hiring a contractor can be made easier if you keep a few simple tips in mind. If you are still uneasy about hiring a contractor, hire a construction professional to represent you. This could be an architect, if the project calls for one or a Construction Manager.  AT TCAI, we say “If you want it built right, You should be our Client.”

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