How To Hire A Contractor
By Jimmy Fell, Condo Owner Magazine, Volume 19, Issue 2
It’s never as easy as it sounds…the hiring of a contractor. The majority of condominium and homeowner associations that have experienced a successful restoration project basically started out by hiring a contractor. Unfortunately the same can be said for those who have experienced an unsuccessful project. For obvious reasons, the latter of the two and the recollection of an unsuccessful project tends to stand out more. However, the good news is there are mechanisms and protocols available that can help guide a board of directors or owner through the process of hiring a contractor.
Identify Reputable Contractors
For several years now, the American Institute of Architects, (AIA) has published the AIA Document A305, titled “Contractors Qualification Statement.” This document includes a notarized statement by the principal of a firm that all information offered is “true and sufficiently complete so as not to be misleading.” Within the document itself, there are over fifty questions concerning the organization, licensing, experience, finances, and references. Many architects and engineering firms typically use this document to prequalify contractors and sub-contractors prior to issuing an invitation to bid projects. However, AIA Documents can only be purchased through the AIA website, and there is a minimal fee associated with any document purchased from AIA.
Unfortunately, not many entities outside of architects and engineers use the AIA document to qualify contractors. In today’s instant information society, people often gravitate to the Internet to research information on contractors. Although the internet contains a voluminous amount of information (some of it obviously valid), it can also contain misrepresented information. Furthermore, some websites require annual fees to actually be allowed to read firsthand testimonials or gain access to a list of contractors with reviews in your area. For this reason, research on contractors should actually commence with more customary and industry recognized practices. It is also helpful to have the contractor provide a list of similar projects they have previously completed within the past three to five years. Once these projects are identified, it is helpful to actually visit the property, discuss the project with references provided and observe the completed work yourself (where possible).
Once a list of qualified contractors is developed to bid the project, the next important task is to create a specific scope of work (although this can also be performed prior to identifying the bidders). In other words, define for the contractors what the work involves, where it will take place, the preferred products to be used and include quantified items, where applicable. When the overall scope of work and product selections are left up to the contractors to determine, the bids that are received often lead to a wide range of costs with dissimilar materials and variations in the contractor/material warranties.
The contractors should also be required to provide unit costs for various items of work that are quantified. This provides an idea of the costs ahead of time should any quantities go over (or under). Contractors should be asked to indicate the number of calendar days it will take them to complete the work. For projects of significant size or dollar value, it is always advisable to solicit the services of a design professional for this purpose. However and for smaller projects, it is still just as important to create a scope of work so that all the contractors are bidding “apples-to-apples.”
Use Specialty Contractors When Possible
Keep this in mind as well; try to use specialty contractors when the need arises. Just like doctors who practice medicine and specialize in various medical fields, there are also contractors who specialize in various types of construction and restoration. For over 20 years now, the construction industry has come to recognize these specialty contractors. There are national and international associations managed by professional leaders in the industry that provide resources and continuing education for contractors and other professionals. Be sure to ask the contractor to list any professional industry associations they may belong to when they submit their bid.
Another factor that is paramount in the hiring process is to ensure the contractors invited to bid the work are properly licensed and insured within the state, county and city to perform the task at hand. It is important to understand, the requirements to perform work as a contractor can vary from state to state. Therefore, it is advisable to require the contractor to provide their state contractor licensing number and copy of all their credentials within any bid that is submitted. The fact is, legitimate contractors do not have a problem including this type of information. If a contractor insists this is not necessary, there is likely a good reason they are not providing the information, and there is a better reason not to accept their bid.
Acquire Multiple Bids
When procuring bids for a project in the private sector, it is also advisable to try to procure three to five separate bids, depending on the type and size of the project. This will typically allow the owner an opportunity to create a competitive bidding atmosphere. From a contractor’s standpoint and as it relates to privately held bid work (compared to public bidding process), most contractors do not prefer bidding work where more than five contractors are involved. From a contractor’s perspective, the fewer bidders invited, the better the odds they have at winning that bid. Although arguments are sometimes brought up, the more contractors you invite to bid a project, the more competitive the bidding process will be.
However, this type of methodology does not exactly hold true when it comes to restoration work on occupied buildings. The rationale is rather logical. Besides obviously increasing their odds of winning, contractors also believe they can be more competitive against a select number of qualified bidders due to the fact “the playing field is more level.” When a large number of contractors are invited to bid a restoration project, typically there is one bid returned that is usually around 20 percent less than the next lowest bid and around 30 percent lower than the average of all the bids. Although a low bid is what most people might say they are looking for on a project, when one bid comes in 20 percent lower than the next lowest bid and 30 percent lower than the average, it should raise certain concerns. One should ask, how can one contractor be that much lower if they are bidding the same scope of work and materials or did they estimate the necessary manpower to do the job or will their bonding company issue a bond if they are that low or did they simply forget something in their bid? Now the owner must spend time investigating this situation, and this can cause delays in the start of a project.
Lower Isn’t Always Better
It is important to remember that the lowest bid is not always the best bid. Another factor that should be taken into account when analyzing bids, is the actual projected start and completion dates the contractor provides. If the lowest bidding contractor currently has ample work on the books, are they going to be able to start and finish when they say they can. If they cannot, it might be to the owners advantage to hire the next bidder, so that the project can be completed before spring break or the summer rental season. It is advisable to interview the contractor(s) prior to executing a contract. Try not to do this over the phone either. Meet the contractor in person at the project site, review their previously completed work and prepare a list of questions ahead of time.
Signed, Sealed and Delivered
Once the decision is made on whom to hire, a contract will need to be signed. Some of the best contracts in the industry are produced by the AIA (AIA Contracts). However, if the contract is not an AIA contract, it should still include several of the terms and general conditions enumerated within an AIA Contract. Regardless of which contract used, it should be reviewed by an attorney prior to executing the agreement. Furthermore, and when including information within a contract, be specific as to what the total contract amount is, when payments are due and define the retainage. Most contractors will require some type of fair mobilization fee (which should not be in addition to the total contract sum), the owner should include a retainage, which is typically 10 percent on all payments and stipulate when the retainage fee will be paid back to the contractor.
In closing, the best way to address any major construction project is to hire a design professional to develop construction documents that includes plans and specifications, contract administration and quality assurance inspections. However, if the hiring of a contractor is to be performed independently by an owner or board, these best practices should be employed: Qualify the Contractors, Check on References, Define the Scope of Work, Use Specialty Contractors, Use Licensed Contractors, Limit the Number of Qualified Bidders, Interview Contractors, and Attorney Review of the Contract. Finally, stay involved in the project once it begins and try to have one point of contact with the contractor. Be sure to keep communications open at all times and provide monthly updates to the owners. Transparency by all parties involved will help alleviate possible misconceptions or problems in the end.
Jimmy Fell, Principal Partner with Building Engineering-Consultants, Inc. (BE-CI), has been involved in the building envelope industry since 1988. BE-CI is an engineering and constructions consulting firm that specializes in construction systems and materials that make up the weather protection of the building outer envelope. Visit www.be-ci.com for more information.