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Your prime contractor should have a performance and payment bond to relieve you of any liability from subcontractors and suppliers for non-payment by the prime contractor.
Your contract should spell out a start date and performance duration. You can write in liquidated damages for late finish, but many small prime contractors will not agree to pay damages.
Your contact can spell out the terms of payment - biweekly, monthly, estimated stages of completion (e.g., 20% for completing foundation work).
When buying appliances, your contractor should be charging you their cost, plus their markup for overhead, profit, and bond. If you know he gets a contractor's discount of 10%, just tell him you know that and expect him to charge you his cost plus his markups. Or, you could buy the appliances yourself and have them delivered.
If this is a large project, you might consider hiring a construction management firm that will do all of this for you for a fee.
BTW. I found I can almost always find better products for a better price than the contractor can. This is imply because I can spend a couple or more hours every night searching for information and pricing on products and i do not have to charge myself anything tfor that time. Your builder cannot do this. Your builder may be able to give you leads, but you will usually find better products at a better price.
however it is then your responsibility to have it there on time, or the builder will have to charge you for the time driven costs. Also the subs may move on to other jobs if you do not have things there on time. Finally, the builder does not take warranty responsibility if you supply the materials or equipment. then you get into disagreements as to whether a warranty issue is a product issue or a labor issue and it the warranty issue is a product issue, any necessary labor is on you.
OTOH sometimes the builder will accept an alternate product or supplier you find and as long as the product is new, the builder might still accept full warranty obligations if he buys the product (naturally with some mark up). If you do that, it should be in writing.
Your prime contractor should have a performance and payment bond to relieve you of any liability from subcontractors and suppliers for non-payment by the prime contractor.
Your contract should spell out a start date and performance duration. You can write in liquidated damages for late finish, but many small prime contractors will not agree to pay damages.
Your contact can spell out the terms of payment - biweekly, monthly, estimated stages of completion (e.g., 20% for completing foundation work).
When buying appliances, your contractor should be charging you their cost, plus their markup for overhead, profit, and bond. If you know he gets a contractor's discount of 10%, just tell him you know that and expect him to charge you his cost plus his markups. Or, you could buy the appliances yourself and have them delivered.
If this is a large project, you might consider hiring a construction management firm that will do all of this for you for a fee.
Bond a residential job? It will be very difficult to find a GC who is at the level of single home work that can or will bond. the bond will cost you the owner an additional 1-2% maybe more. You can protect yourself form unpaid subs or suppliers by following your state's lien/waiver laws. If you have a lender, they will be keeping track of that as well.
Liquidated damages actually benefit a contractor because they replace actual and consequential damages which can be huge, and are a big unknown in any event. Smart contractors welcome reasonable LDs in leiu of unknown actual damages. Usually they will negotiate a cap. They are not going to bet the company on your project.
If you do not know how to manage a construction project, you probably should hire a construction manager. however often the lender will essentially manage the project for you (they will watch for proper lien waivers and notices, they will periodically send an inspector, etc). Still the lenders interests are different from yours, so it is better to hire a CM/owners representative. They are expensive though. Figure on 10% of the cost of the work for a single home job. that will vary with how much involvement you want them to have. If you want them on the site every day all day, it will likely cost a lot more.
The current market favors contractors and subcontractors. In other words, if you make things difficult for them, they will just find a better job to work on. There is plenty of work for good contractors and subs. They do not need a hassle. Trick is to find a truly good one. A bad one will destroy you financially.
And don't think you can just sue them if they do not perform. A lawsuit under $50,000 (or $100,000 if it is at all complicated) is not worth pursuing due to the cost, plus you then have the issue of whether they can/will pay a judgement if you win (unless you get a bond).
If you get a good contractor, you may want to work out a GMP contract with shared savings. In that case, they promise to build the work for no more than $________, but they only charge you their documented cost plus a fee. You give them a bonus if they bring the job in for less than the estimated amount. Typically 20% to 40% of the savings. A crooked contractor will use this to give you an inflated price and then take a share of false savings, so you need to have a good trustworthy contractor to do this.
I can tell you how my contractor guy does it. But there aren't many like him.
Customer picks out the product and pays for it. Or he buys it and gives the customer the receipt. He will charge a small fee for transporting it/gas.
He writes his contract in phases. For example, 1st stage demo. After demo, you pay for demo. Next framing. After framing...etc. At any time of you or he decides to terminate, your project will be at a good point for someone else to continue. He hires subs and schedules all the work, which takes skill.
He doesn't have a crew so he works for less and sometimes falls a little behind schedule depending on circumstances. No one beats his price though and his customers always have him back to do more.
His work is perfection.
Get customer references and ask to see his work.
There is a bit of good here, all of which will be in your contract.
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Originally Posted by MrRational
Start with the contractors that you already know and have reason to trust their competence and business practices for suggestions on who THEY would use.
And if it's TRULY a 'major remodeling project' your first stop should be an architect. Accept their counsel
on the design aspects of course but once that is complete they'll prepare a good set of drawings and specs.
Having that objective set of numbers and details is invaluable.
The really good contractors are so few... they don't need to advertise or to have your business.
They also (rightly!) won't even consider using any material you might supply.
And they won't be cheap or even budget sensitive.
There's about 20 more pages of advice but this will get you started.
...and here too.
So, let's assume your remodel is at least a $100,000 job. Anything much less than that might have a different character to it because of it being such a small job.
So, you have a kazillion pictures, articles, and ideas. You sit down with a well regarded architect and he will do some sketches. If you like his work, you might hire him to do some actual plans. Expect to pay him about 10% of your total project cost. Don't get a guy who is a part timer at is dining room table. work with a real firm.
He might give you some ideas on good contractors. After all, he works with them throughout the project, so he will know who is good, and who to stay away from. Ask you local lumber yard (NOT Home Depot or Lowes or Menards) and develop a list of names. The good ones will show up on more than one list. Ask three or four or five of them to come over and discuss your project. If a couple of them seem like to understands your project, as them for a proposal. Review the proposals and select a GC from whom you get a DETAILED CONTRACT. The Contract will include EVERY single item from permits to hinges to nails to sheetrock to exact finishes down to Brand and quality of paint. Everything. If it goes into your project, it goes into the contract. The Contract will also include a procedure for change orders, contingencies, and a procedure for remediation should you come to blows. DON"T let it come to that if you can at all help it. Hiring someone to finish a project someone else started is NOT easy.
Now, what type of "deal" do you write? Fixed Price? Cost Plus a Percentage? Cost plus a fixed Overhead and fixed Profit? The last house I did I had the latter. The GC provided receipts for everything which I then paid to him, plus a portion of the overhead agreement and the profit agreement.
The GC will hire the subs and they will be responsible to him. You do NOT want to be in the middle of that. Trust me. a good GC will also be a good business person.
You pay according to your contract. If your GC can't float you between payments, you picked the wrong guy.
The architect will work with you regularly as the project goes along to ensure you are getting what you wish, and the work is consistent with the plans which you signed off on.
Make sure your contract has a timeline. Make sure your GC is sticking to it. Each week you sit down with him and go through "issues" and progress. Timeline is one of the things you talk about.
Allow 10% for changes and other items which pop up. "I really like such and such hardware" even though you had previously selected a different product. Change is $1,000. Happens multiple times during the project. Nobody's fault. Life happens.
So, there you go. It is business. It is personal. This guy is going to be in your house every day for several months. Be nice. Don't be a pushover. Don't ask for anything more than is reasonable; and make sure the GC understands to give you nothing less. Good contracts with good builders give you good results. Don't be cheap: good work costs a LOT. Don't be silly either. You don't need those gold plated faucets that looked so sparkly in the showroom! And don't get taken in with BS. "Don't worry. It will be fine. Trust Me. I'll have my guy take care of it" is all BS. Put it in the contract so you have a minimum of those moments where uncertainly creeps into your job.
Good Luck. Enjoy. One sign of a good job is that you and the GC are still speaking at the end of the project. Maybe even become friends. And he wants pictures to show off his work. And you want him to take them. That is a good project!
I am embarking on a major remodeling project and before I get in too deep I was hoping to find some advice about selecting and dealing with a general contractor. So far I've met with someone and discussed general idea. They've prepared an initial blue print that I've paid for, but that's as far as I've gotten. Additional, more detailed blue prints, will cost more,
The cool people refer to them as 'plans' or 'construction documents'. You have probably paid for schematic design (SD) or design development (DD) level documents. If you want full construction documents (CD), that does cost more, as there is a lot more detail involved. Fair warning, you don't want to continually redesign as you go through the design process. Every time you change things it will cost you money in one way or another.
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and I haven't yet selected subcontractors
As others have noted, you don't select subs. They are selected by the GC.
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or committed to the overall project.
Fine. You are being prudent. Good plan.
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Before I do that, does anyone have any tips of red flags or good signs when evaluating the potential contractor? Are they any kind of major terms that I should be sure to include in the ultimate contract if we proceed with the project, such as when and how funds are disbursed,
Yes. There are several ways to dealing with this. You can agree in advance to pay certain amounts as significant mileposts are reached. That might be 10% up front, another 15% when foundation is poured and inspected, 20% more for framing, another 15% when the roof is installed, another portion after finishes, etc. Usually somewhat negotiable. You can also do this based on time, so if it is a 6 month project, they get 1/6 of the contract price each month.
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or penalties for going over budget
Why did they go over budget? Did you change the construction documents? That is your fault, not theirs. Did your documents have 100% accuracy, including that boulder hidden 6' under the ground that needed special equipment to extract? The GC has no way of predicting that, it is your responsibility to take that financial risk, not his. Did the city/county inspector impose additional requirements somewhere during construction that the GC could not have predicted? You chose to build, not the GC, so this is also your problem.
If you write in a penalty for going overbudget, the GC will either refuse to take your contract, or increase his base price to moderate this risk. A good rule of thumb for a small project (anything under $1 million) is to reserve 10% of the base contract price for changes and unforeseen circumstances.
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or time?
Again, why was it over time? Was there a union strike? Not the GCs fault. Did you ask for something additional during the project? Your problem, not his. Was there a blizzard that caused work to stop? Acts of god are not the GCs fault. If you want him to take on all risk for these things, he will need to increase his initial bid to compensate for the risk. Can you prove the additional time cost you money, vs simply inconvenience? Look up liquidated damages for more info, and do your absolute best to avoid any situation that may lead to anything along these lines. You will pay more in legal fees trying to collect than any actual payment you may receive.
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I'm also curious about where the contractor expects to make a cut as a middleman and what is considered standard. For example, they told me to go shopping for the kitchen appliances I want and to let them know the make/model so they can plan for the dimensions. But when I talked to the appliance salesman he also gave me "contractor pricing" which was a good 10% off the listed price. Would the contractor expect to buy the appliances from the store at that price while charging me the listed price, and if so am I going to run into issues with them if I buy direct to keep the savings? A similar thing happened when I went shopping for windows and asked that vendor for pricing. They asked who my contractor was and said they'd reach out to them directly.
You can always go OFCI (owner furnished, contractor installed). Remember that all contractors expect to make a bit of money on the materials, so if you take this profit center away from them they will need to increase their base contract to compensate. Also, they often get a greater discount than you can get, so their markup does not hurt you much, if at all.
You can go the route of supplying materials yourself, but as coldjensens mentions, you increase your risk of a claim for a change order because you did not coordinate properly and failed to provide materials when the subs needed them. They may charge you for lost days, they may wander away and do a job where they supply the materials and know that they can work that day.
Have you ever seen a sign at a mechanic's shop that says you will have to pay double if you help? You are getting close to that territory. If you insist on micromanaging the GC, if he thinks you are going to be a difficult client, he will build in additional margin to his base cost in order to compensate for the PITA factor.
The BBB is a joke today- they can be "bought" for a price! Savvy?
That is why I said an "A" rating does not mean you should automatically go with the company. However, an "F" rating is a clear sign of concern - probably reason enough to scratch them off the list without going further.
Thanks for all the input. A lot to digest! To answer the question regarding scope of work: it is a kitchen / great room model. Basically taking an older space and making it more "open concept" including rebuilding an old screened in porch. I'm projecting a budget of about $150k although I don't have a budget from the GC yet.
Someone mentioned the difference between SD/DD documents and CD documents. I'm at the SD/DD stage for which the cost is $10k. You suggested the CD is where the real cost is but my architecture (GC provided) contract is only $5k for the CD. Think that's unusual that cost seems flipped?
Someone else challenged about late penalties. I understand things outside GC control, but there's also GCs who decide they'd rather prioritize other projects while your project sits, and there's nothing you can do when you've paid 75% out already but you can't switch GC to finish the last 25% of the job. I had a friend do a whole house $400k reno. GC quoted them 4 months. Project took nine and they were paying lease holdover penalties because their place was uninhabitable, and they probably lost 3/4 a point on their APR due to changes in rates between when the project should have been completed and actually was.
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