Construction Contract Review Tips?
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Construction Contract Review Tips?Posted by Hendry at December 12. 2005
Today, I will have my first look at costs, the specification schedule, allowance schedule, contract, and warranty documents for our project. What are some of the specific content areas that I should pay particular attention to? What GC ‘tricks’ can look for within the documents?
Thanks in advance!
Re: Construction Contract Review Tips?Posted by Jeffrey Rous at January 04. 2006
Great question, I wish I had asked it. You know, you read the shelter magazines on this and they tell you to make absolutely sure A, B, and C are NOT in the contract that that X, Y and Z ARE in the contract, then you talk to builders who say they have never done it that way and are not comfortable with that. Sure, you can find a builder who will give you a guaranteed price (so that they eat any increases due to material's cost changes) and allow you to hold back 10% of payments until the end, but they will charge you an extra 25%.
Knowing what is the status quo for a fair contract is really important and I still have little idea. I have been asking people and I keep getting different answers so my frustration is rising faster than my knowledge. Are there any builders listening!
Re: Construction Contract Review Tips?Posted by mordo at January 04. 2006
I am a construction project manager and have seen many horrible contracts from general contractors that shift much of the liability to the subcontractor, limit their liability in unreasonable ways, etc. The best, most equitable contracts I've ever seen or used are the AIA contracts. They have a range of standard forms suited to nearly any scenario, e.g., contract between owner and contractor, contractor and subcontractor, gov. org. and contractor, etc. Your local AIA bookstore will have copies for sale and will no doubt let you peruse them.
One major caveat I would give for your position is to include realistic milestones in schedule and specific penalties/processes for when the contractor does not make the milestones. I hear frequently people complaining of schedules not kept, materials not ordered timely, manpower commitments not kept, ad infinitum.
Remember that they are working for you. Try to get the terms that you want rather than have them call the tune. You may find this difficult just now because (at least in my Balto/DC market) most contractors are fat with work. They're not desperate for work and will likely price the work high and try to have things their way because they can afford to.
Another way to approach it is at a cost-plus agreement. AIA has documents for this arrangement also. It reduces risk for the builder and the client. It is however less desirable because everything is transparent and there is less opportunity for the builder to hide big profit margins. A quality, conscientious builder should not have a problem with it if they want to maintain their reputation as being client satisfaction-driven.
Re: Construction Contract Review Tips?Posted by Gregory La Vardera at January 04. 2006
for a house, go to the AIA bookshop in your city and get a copy of the Owner Contractor Agreement Small Projects Edition. Its only 4 pages, nobody could complain it was too complicated.
Re: Construction Contract Review Tips?Posted by Steven at January 05. 2006
Just remember w/ cost plus you have to be diligent to avoid too much cost creep w/out firm number bids. Also in cost plus builders can have cozy relationships w/ their subs material suppliers and show you invoices but not show you kickbacks. Similar to car dealers selling you a car for $100 over invoice.
Re: Construction Contract Review Tips?Posted by Bob at January 11. 2006
sorry if i'm too late...
aside from costs, make sure you agree with the payment schedule and exclusions. You might also want the contract to include if/when/how often you have meetings with the contractor to give you the status of the project. Most good contractors should already do this, but it's good to have a set time to discuss things with the contractor instead of leaving messages for the guy wondering when he will return calls. Many days it will be his subs on site and not him.
I don't think the majority of contractors are absolute sheisters, but i do think some aren't very good at conveying what's included and what's not included during negotiations - things most people may not consider. This usually assures that projects will get started and before you know it costs start adding up. All goes well until something comes up and they expect the unexpecting homeowner to pay for them since they aren't included in the contract. While it's not illegal etc, this obviously messes with the budget that the homeowner is trying to stick to. Some examples of minor things that might not be included, but add up in the long run = cost of obtaining permits, disposal of debris, seeding of lawn, etc.
Another thing that also comes up is contractors calling you on a friday expecting a decision on monday on this this and this or the schedule will be delayed. One way to avoid this is to ask for a responsibility list of some sort - something telling you what decisions you have to make and when they need to be made by in order to avoid delays. While some contractors may not do this, they should agree to something like minimum two weeks notice.
If this is an addition to a house you currently live in, make sure you are comfortable with the hours they will be working. most townships have regulations for this but you should be comfortable with what time some guy will be running a table saw outside your window.
Lastly, take plenty of photos during construction and smile - it's supposed to be fun!!!!!!
Re: Construction Contract Review Tips?Posted by Hendry at January 11. 2006
you are too late by about 24 hours! But, in considering your comments, I didn't do too bad.