Help! My contractor is adding additional terms!

The following is a question and answer session from the Norwich Bulletin, followed by a response from Richard Cartright, the Construction Conductor founder.

Q: I hired a general contractor to oversee a home renovation to my property, a 988-square-foot two-story farmhouse. The contractor charges me 20 percent plus an hourly rate when he is on the site.

He does not inspect the work his subs do because he says they are professionals and don’t need to be watched. He has come up with two payment plans. Plan A is $5 per hour plus 20 percent ($80,000) and plan B is $50 per hour plus 10 percent ($70,000). If I don’t agree to his terms on things, he says he will be following plan A rather than B. I feel trapped, confused and helpless. Not to mention everything is breaking. Can you help me?

A: by Dwight Barnett, a certified master inspector with the American Society of Home Inspectors. So the general contractor is making 20 percent profit on the work performed by the subcontractors, plus he charges you by the hour when he’s there, but he does not oversee their work. Bad idea!…

The general contractor is responsible for all work completed by the subcontractors….

It’s time to sit this person down and explain that you want a contract with a finalized price, a time frame for completion, a copy of his insurance and licenses, if required, and all permits filed with your local building authority.

Do not pay another dime until you have had the work inspected and approved by a building inspector from the county or by a home inspector of your choice….

If the job is already finished, hire a home inspector to check the completed work, and if there are damages, improper or incomplete repairs, seek the advice of an attorney.

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Richard Cartright’s Response: Dwight might be a top-notch home inspector and he does have a point about getting the work inspected by a professional inspector, especially since the contractor has stated he will not inspect it. However, in this case his advice doesn’t actually solve the problem.

First, think about the question being asked. While on the surface it seems like an inspection question, the greater question is one of contractual obligation and responsibility.

-Was there a contract put in place when the owner initially hired the contractor?

-What does the contract say? What the contract says and doesn’t say are equally important.

-Is the contract valid? Every state’s laws can differ, but each state recognizes that for a contract to be valid it must contain some basic common clauses.

Answers to these questions help determine the best solution.

What we know from the question asked is that the homeowner hired the contractor and, after the fact, was provided with additional terms and feels trapped by the limited choices. We don’t know the terms of the contract, that may or may not have been, executed by the parties or how much, if any, work has been done. Every project and its circumstances are unique and there are different strategies you would employ depending on the specific circumstances of the project.

For example:

If the project has not started, take a step back and use something like Construction Conductor to assemble a bid package, competitively bid the project, select the best bidder, define your terms and issue contract(s) that protect you and manage the construction. Saving time, money and headaches.

Alternatively, if the project is underway and near completion of any of the critical construction points such as foundations, framing, rough in, commissioning or finishes, immediately get an inspector to inspect the property and get an official report. Use any problems you find in the report to slow the project down, by getting the contractor to address them before continuing. In the meantime, carefully read your contract (assuming you have one) to find out why the contractor thinks they can spring seemingly ‘new’ terms on you during construction. Consult with an independent project manager, and depending on what you find, strategize a solution with your independent project manager. There is no one-size-fits-all solution so don’t even think that you’ll find one.

As far as what is common to pay General Contractors, here is a general rule of thumb:

General contractors generally charge (in nice round numbers) about %10 for overhead, which often includes some project management time and %10 profit on expenses and overhead.  They often can charge between $50 and $100 per hour for project management, so when they include it in overhead, they do not include much time for it.

When they charge project management by the hour they should/could /can reduce their overhead cost slightly and are far much more willing to be attentive. For the most part, the whole reason you hire the GC is to oversee the project and the project quality. They are working for themselves, and if you let them they might give you the lowest quality work while telling you it’s the best.

Knowing this, I would work to negotiate the fees and plan to use a professional inspector as part of your ‘Owner Team’, as I talk about in my workbook, to make sure all the contractors are giving you what they contractually owe you. If you still need help feel free to give me a call.

Please ask your construction questions at: http://constructionconductor.com/contact/

© 2012, DHartman. All rights reserved.

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