Do you know what questions to ask before signing a construction contract?
Finding the right contractor is one of the biggest challenges when embarking on a new home construction, addition or remodel. One way of the best ways to meet this challenge is through an interview process.
I developed my interview process as a project manager for a small real estate development company in San Francisco where I was continually evaluating new contractors, craftspeople and artisans. The goal of an interview is to expose an applicant’s weakness with respect to your needs. You want the best applicant for your project. It doesn’t mean the others are not qualified—it simply means they were not the best fit for you or your project.
For our clients at Hoffmans Architecture, we’ve created 8 questions we feel are essential to selecting a contractor or builder.
1) Do you have a management system for managing projects?
Builders, like any successful business, have customized services to best meet their and their client’s needs. How a builder accomplishes their work varies from company to company. Therefore, it’s important to understand what system(s), if any, a builder uses to effectively manage a project.
2) Do you have an internal team or do sub-contractors perform all tasks?
It’s important to understand who is most likely to be doing the work on your project. The makeup of a builder’s team is a good indicator how they run their business and manage talent. For example, a remodel specialist most likely will have a fine carpenter or two on their team who can repair or install various odd molding and cabinetry jobs. Luxury homebuilders might have earthmoving specialists or framing teams who can construct custom designs. Understanding how a builder’s internal team composition can benefit your project could be the deciding factor.
3) How do you communicate with your clients and other project stakeholders?
Communication during (and before) construction is critical to a successful project. Changes, unexpected circumstances, outstanding decisions and general progress updates require clear communication between the builder, owner, design team and other project stakeholders. Builders should have efficient and clear communications tools and systems. Owners need to receive written communication on critical items and decisions made verbally during construction. The biggest source of owner and builder conflict is a misunderstood directive, approval or agreement to a particular item. The best way to avoid confusion is to receive in writing what was agreed and what the action plan is. Most builders don’t bother with formal follow up, which is a failure in their construction process.
A builder’s communication with the design team is equally important. Drawings, product selection and specifications can either be in conflict or leave a void of information critical to executing a design. The design team typically (not always) needs time to resolve a conflict or get owner approval, otherwise delays can occur in the construction schedule.
4) What is your project sub-contractor selection process?
I prefer builders who use multiple subs of the same trade. However, many builders use the same plumber, drywaller, painter, etc., from project to project. There could be a good reason for using the same plumber on every project. But in each market there are typically multiple qualified tradespeople. The question is: How many does your builder have a relationship with? A builder who uses multiple sub-contractors should be able to get better pricing and be able to better manage a construction schedule. The best subs are not always available.
5) How do you control quality workmanship for each project?
Maintaining quality control during construction is challenging and requires empirical knowledge. It’s a core responsibility of a builder to verify a sub is executing work to industry standards and is true to the project’s design.
Quality control starts with preconstruction planning and ends with a closeout checklist. It requires foresight with an anticipation of problems—foreseeable or hidden. Sometimes, finish details need to be realized during the early stages of construction. Good quality control requires not only onsite inspections, but also the knowledge to identify when the work is not being executed correctly. A quality builder should have a quality control system established for their jobs. I’ve worked with builders who require subs to ‘sign-off’ on the previous subs’ work before starting their work. This protocol helps reduce finger-pointing down the road when work is not executed to the project’s standards.
6) What insurance coverage is required for this project?
All construction projects need various types of insurance coverage. Before signing any contract, require your builder to provide proof of insurance. The amount needs to be enough to cover your property.
All builders are required to have general liability and worker’s comp insurance. Most projects, particularly new home construction, should have Builder’s Risk insurance. Builder’s Risk coverage is mostly a project-specific policy that can vary based on the terms of the construction. A builder or homeowner can procure this coverage. Some builders, but not all, do this as a common practice. Therefore, it’s important to have this discussion prior to signing any contract. Additional information on Builder’s Risk coverage can be found in the Home Building Resource page.
7) Do invoices include receipts and conditional waiver lien release?
How a builder invoices should be outlined in the owner / builder contract. It will vary from builder to builder and by the construction contract. A fixed-fee contract’s invoice will be much different than a time-and-materials contract.
Fixed-fee contracts typically invoice by work completed and might include upfront product down-payments for items like appliances and light fixtures. A time-and-materials project’s invoice should be an itemized list of expense for work completed. Time-and-materials invoices should include all material receipts and timesheet logs for worker’s hours. Otherwise you might be overpaying for inefficiencies and markup costs.
Once payments are made, insist on a conditional waiver-and-release for progress payments. An example can be found in the Home Building Resource page. A conditional waiver-and-release form requires subcontractors and materials suppliers to acknowledge the builder has paid them, relinquishing their right to lien your property.
8) What is your project closeout procedure?
Builders and owners both want a project to be completed. The sooner the better. A successful project closeout is more about procedure than speed. It’s important to understand a builder’s punch list protocol. Does the builder have a standard checklist to work from or do they simply walk around and look at the final product? A builder should perform a punch-list review with each sub-contractor to insure the work is done to code and is true to design specifications before doing a punch-list review with the owner. Once all items are corrected, then the owner needs to do a final walk-through to confirm any corrections.
Another important subject to understand is warranty of work and callbacks. Make sure your builder’s intention is not to just walk-away once the job is done.
An item not normally provide by builders is a Project Book. A Project Book contains all product warranties, instruction manuals, maintenance requirements, paint and stain schedule, sub-contractor contact information and any special operation tools.