Because I work primarily with Contractors, my blogs are primarily targeted to that audience. However, far too often we are seeing owners of construction projects getting screwed out of thousands by bad contractors taking advantage of people who likely don’t know any better. Brilliant people just trying to make a go of a business or a home build or renovation not knowing how to avoid costly pitfalls that come with hiring bad contractors.
Here are some tips for developers or anyone who managing a construction project from the Owner’s perspective.
Design the Project
Hire a GOOD designer! Cheapest is not always the best! Bad design can lead to costly construction over-runs as changes (or corrections) made during construction will not only delay the project, but will also have a domino effect into a money pit. Ensure that the design is EXACTLY how you want it to be built in order to minimize site changes.
Prequalify Potential Contractors
During the design stage, start interviewing possible contractors. Ask them all the same questions in order to provide you with an equal comparison. Ask how long they’ve been in business, insured, bondable, clear with WCB, and has a safety program that is preferably COR certified. Interview the individuals who would be in charge of your project and ask about the companies they subcontract to. Review their finances and ensure they can carry costs without needing to pay deposits (residential contractors must have Prepaid Contracting Licence in order to accept deposits). Message me for a free Contractor Prequalification template.
Once the design is complete, send the drawings out to at least three of your pre-approved general contractors to provide a price. Preferably, provide them with the same form to be completed to ensure you are reviewing the same criteria.
Again, remember that the cheapest isn’t always the best. Ask questions for clarification. Specifically ask about how they would handle difficult situations or changes.
Issue a Detailed Contract
Ensure that you have a solid contract in place with the successful contractor. The contract should reference the drawings, scope, schedule, and contract price, and identify project management procedures as it relates to invoicing, payment, delays, change orders, insurance, indemnity, and warranties.
Follow and enforce the contract!
Request Documentation with Invoices
Ensure that the contractor submits a WCB Clearance Letter AND Insurance Certificate with each invoice. Prior to releasing second and subsequent payments, ask for a Statutory Declaration which is a statement sworn under oath that all subcontractors, suppliers, and employees have been paid.
Make Frequent Payments
Make regular payments not more than every 30 days. Frequent payments will enable the contractor to pay their subcontractors and suppliers in a timely fashion, avoiding liens, and will help keep the schedule moving.
Withhold 10% from Payments
Withhold 10% from each payment to the contractor for the builder’s lien holdbacks.
Complete weekly documented inspections. Review the progress of the work frequently, and follow-up with every conversation with your contractor with a notice in writing.
At the end of the project, ensure that your contractor provides as-built drawings and operations and maintenance manuals that includes warranties for each scope. Withhold 10% from each payment to the contractor for the builder’s lien holdbacks.
Release the Holdback
Wait the full lien period prior to releasing the 10% holdback, and don’t release prior to getting a signed and commissioned Statutory Declaration, your as-builts and operations and maintenance manuals.
Provide a Reference
Lastly, if your contractor did an amazing job, there is nothing better than writing a testimonial or providing a referral.
As always, if you need any assistance with your next construction project, I’m always happy to help. ~ Rebecca