Living With Your Contractor

The scenario is everyone's worst nightmare: Two men speaking a version of English you can't understand roll in on the wrong day at the wrong time in a muddy, beat-up truck with an ancient backhoe leaking hydraulic fluid on a trailer with no lights, taking out a gate post on the way back to the location of your dream barn project. Halfway through digging up what looks like enough ground for an Olympic stadium, the backhoe sputters and dies. Without a word they disappear, leaving their trailer blocking access to your old barn where a load of hay is arriving on Wednesday. All you have is a cell phone number for them that is out of minutes. Days go by...

Does your impending project fill you with an indefinable, creeping dread combined with the sensation of having no control whatsoever over your life or your money? It's time to hire a contractor.

If you fit this scenario, don't feel alone. This not only describes the typical home or farm owner, but also afflicts major corporations, school boards, Katrina rebuilding agencies, and just about everyone else subjected in some way to the contracting process. Often this results from the mindset that we are paying for a tangible like the actual barn or remodeled kitchen, when in fact we are hiring a professional service.

There is no guarantee that despite your best efforts, you will not end up in the situation described above. But if you follow some basic rules that apply to hiring any professional service--along with some tweaking to apply those rules to construction--odds are you will have a successful, and less painful, project.

Basic Definitions

Owner This is you and your checkbook. If there is a construction loan, add your banker to the list.

Architect and Engineers (A/E) If your project is sufficiently complex, these folks do the design and related calculations that eventually end up in the form of plans and specifications. The architect has overall responsibility for the design process and might hire specialists like structural, mechanical, or electrical engineers to lend their specific expertise to the eventual design. However, the A/E is not a building inspector and cannot guarantee your contractor can and will do a sufficiently competent job. The A/E might work directly for you or, under certain circumstances, for the General Contractor.

General Contractor (GC) The GC has the overall responsibility to build your project according to the Contract Documents. He manages his own work force and his subcontractors.

Subcontractor (sub) These are various contractors who specialize in a particular portion of the work that the GC does not perform. Examples are the bricklayer, plumber, or electrician. These parties work for--and are paid by--the GC. Those services are then billed to you by the GC.

Contract Documents Typically, these are a combination of documents consisting of a contract with enough mystical verbiage to make your eyes glaze over; the plans, which you assume are complete; and the specifications. Smaller projects might combine the contract and the specifications. In any case, if it is not expressly detailed within the contract documents, you might not get it. It's as simple as that.

Building Inspector An often overworked bureaucrat whose primary responsibility is life safety and code compliance. The building inspector does not check or monitor quality.

Selection of the Construction Team

The importance of this step in your building process cannot be stressed enough.

First, decide if you need a separate design team. Your project might be straightforward enough to not require them. If you are not sure, proceed and let the contractors you interview help you decide. Reputable contractors will avoid performing design services beyond their capabilities. If you get conflicting answers from contractors you like, you probably should talk to an architect for another opinion.

Determine the project delivery method. What this mouthful refers to is the basic financial method by which you will arrive at the final cost. One commonly used method is to simply jump in and hope for the best. (Some owners actually survive, but true mortality rates are higher than reported. People lie about this almost as much as they do about the mileage they are actually getting in their SUV.) The other three methods often employed are competitive bid, negotiated fixed price, and the dreaded time and material plus markup.

Competitive bid means that you as the owner have defined and refined the project down to the color of screws, which then allows you the confidence that each bidding GC will provide the same end result. Unless you happen to be very experienced in the building process or your project is simple to define, an architect can be helpful. Theoretically all you need to do is find several qualified GCs to bid your job and the miracle of our competitive economic democracy will ensure the best price. Of course, this is strictly theoretical because no two GCs are created equal.

Negotiated projects mean that you and the contractor of choice mutually agree on the color of the screws (or at least think you do) and agree on the price for end result. You had better love your GC.

Time and material plus markup is reserved for the ridiculously wealthy, incredibly stupid, or for people who really can't make up their minds what they want, but really like the contractor's truck. They better really love their GC.

Selecting a nice, reputable, honest, economical, loyal GC who is approaching sainthood can be done, but it takes an inordinate amount of time and luck. Accept that fact now. You will need to develop a list of criteria to which you can adhere. One of the factors can be whether or not you like the guy, but it must not be the guiding force.

Develop a list of potential contractors. Referrals from neighbors and acquaintances who have done similar projects are ideal. Ask around the area, at the feed mill, the lumberyard, or other venues where you might find like-minded people. If you have an architect selected, you will be subjected to opinions about the local contracting environment. Listen politely to the architect, but always keep in mind that in the end it is you, not the architect, who will have to live with the result. For your initial list, even the yellow pages in the telephone book can help.

Beware of contractors who say they can build anything from backyard storage sheds to a 50-story high-rise office complex. In reality, all contractors and subcontractors fill niches. Their expertise (yes, they have some), size, equipment base, and overhead are all suited to certain types of projects. It is up to you to do some homework and determine whether the contractor fits your project.

At the same time, don't expect competing GCs to be a free estimating service for comparing every possible whim that you might think you want if only you had a little more money. Estimating costs the contractor money. He will provide a good estimate only if he feels there is a reasonable chance of a return on the investment of his time and effort.

Once you have a reasonable list of potential contractors (at least two), you can start the evaluation process. In addition to their having a nice trucks and Carhartt jackets, there are other crucial basic criteria to address.

The GC must have insurance--lots of it. He must have workers compensation insurance in case any employees get hurt on your property. Even if the GC says he has no employees, his subcontractors do. Demand proof of his insurance. It is not your job to chase all his subs to find out what insurance they have. If he has the insurance, you are covered for all his subs. If you pay the subs directly, the GC's insurance will not protect you. Not a good idea. Liability follows the money trail.

The contractor should also have liability insurance that protects you from accidental damage to the rest of your property as well as that of your neighbors caused by the GC or his subs. This insurance also protects you if you or members of your family get hurt at the construction site.

The GC and/or subcontractors must have all licenses required in your locality. This varies widely, especially in rural areas. The typical minimum required licenses are electrical and plumbing, but increasingly GCs are required to have their own licenses. This is often done as a means of tax revenue generation, so don't assume a license means the GC is qualified and competent.

Require the GC to have references from previous projects. These should be from projects of a similar size and scope. It does not have to be an identical type of project, but common sense should tell you that if you are hiring a GC to build a horse barn, experience in remodeling a bathroom might not apply. If the GC has horses at home, this can be a good sign, but go look at his operation. Is it clean, safe, and attractive?

Ask for subcontractor and supplier references with contact names and phone numbers. They can tell you how the contractor does business. If the contractor suggests that you can save money by buying the materials directly, it probably means he can't pay his bills. Run away.

Check your local Better Business Bureau. Ask your banker if he has ever heard of the GC. No news is not necessarily bad news. While you are at it, ask your astrologer, rabbi, pharmacist, car mechanic, and the neighbor down the road with the really nice barn. Information is power. In this case it is the power to not hire the total loser who will be really difficult to get rid of once you sign a contract.

Once your prospective GC or GCs have passed these basic tests, it is time to determine if you can live together for months, if not years. Many marriages don't last that long. At the same time you have visions of the perfect palace for your equine family members, free of mud and bugs, your GC might be thinking this is the project that will get him out of the cash flow trouble the last barn project got him into. You have to share your goals for the project.

Unlike your spousal relationship, you and your GC must be able to communicate with each other clearly, honestly, and frequently. The means of communication are almost infinite. Whether face-to-face, by telephone, e-mail, or smoke signals, you and your GC must be able to work together to make the myriad decisions required in all construction projects. There won't be time for group therapy. Just remember--he is as afraid of you as you are of him.

On the other hand, don't be dazzled by flashy marketing. Fancy brochures and well-designed web sites do not guarantee competence. They don't even ensure financial solvency. Far more important indicators are the chosen contractor's relationships with clients, subcontractors, and suppliers. The past remains the best predictor of the future.

Once you have selected a candidate to become your contractor, the real fun can begin. However, before you proceed, let the unsuccessful contractors off the hook. They need to be able to plan ahead and manage employees, subcontractors, and other clients. The sooner they know, the better. It is only fair, and you owe it for asking them to participate in the process.

If you are competitively bidding your project, the rules are essentially the same, except narrow the process down to the best two or three candidates. Getting eight or 10 competitive bids greatly increases the chance that the successful bidder is the one who made a mistake on his estimate. "Why should I care?" You might ask. The lowest price is not necessarily the best price. If your GC or his subs are losing money going into the project, they will need to cut corners to survive financially. Those cuts might not be readily visible, but will ultimately come out to haunt you.

Make sure your contract documents reflect what you really expect the outcome of your project to be. You, the owner, have the responsibility to lead the process of planning your project. If you abdicate this responsibility, you will be accountable for the failure of the project. Don't rush to break ground until you and your contractor expressly agree on what to build, where, and when, and how you will pay for it.

No matter the Project Delivery Method, the best projects are those where the owner pays a fair price, the contractors make a reasonable profit, and the end product is what you ordered and expected. These are the projects that can be done on time, within budget, with fewer change orders, and without sacrificing quality.

About the Author

David Preston

David Preston, president of Preston Construction Group, specializes in unique commercial and equine projects. A horse owner and sportsman, he has built and remodeled several barns in Kentucky and Illinois ranging from development of complete Thoroughbred farms to small horse barns.

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