We recently got a call from a young man with a remodeling company on the East side of our country. An architect was providing him with a great opportunity and he wanted my opinion.
The job was/is in the $100,000 range. The architect had written a 12 or 13 page contract, using an AIA form, proposing a Cost Plus agreement, complete with a payment schedule of two (2) payments to the contractor. The contractor would submit a pay request midway through the job and again at the end. The architect would review the job and send a confirmation letter on to the homeowner advising them to pay.
I asked the young businessman if he was a licensed lender. He said he wasn’t. My next question was if he was willing to lend money to the owner. He wasn’t, of course. But he would be financing the job if he used the architect’s payment schedule.
He said, “This architect has a great reputation.” I said from whom? Owners? No contractor in his or her right mind would have anything to do with an architect with that agreement. Who wins here?
This young man will do well. He realized where I was going with all this and told me he would return their plans and say, “Thank you, we can’t help.” I know he will walk away gracefully, with tact, and burn no bridges. (He could try to restructure the contract, but I’m not too confident it would be successful.)
You must be vigilant in protecting your business. If an agreement isn’t WIN-WIN, then walk away.