This week I’m going to cover a boatload of contract issues that can and should be written into every contract. These are issues that can put a real dent in both your profitability and your time.
The first one is the importance of specifying a point of contact, one contact person.
This is especially important if an architect or engineer is involved in the project, but it is helpful to have in any situation with more than one owner (as in husband and wife). Trying to deal with multiple voices can put you in a no-win situation. The husband says one thing; the wife says another, and guess what, their architect has another opinion. When you are dealing with only one person it makes the whole communication issue much easier, simpler and clearer.
When you’re on a sales call, you get a feel for the personalities involved and that helps you decide how rigid you’ll need to be on this. When you’re dealing with a husband/wife team and both of them are Type A lawyers, you’ll want one contact person and change orders on even the smallest of changes, signed by both parties.
Speaking of change work orders, your procedure also needs to be spelled out in the contract. For example, it needs to clearly state that change work orders are getting paid up front (details on change work orders here). I can’t tell you how many times I’ve seen contractors wait until the job was done, then present the owner with their laundry list of changes on the job and why the owner gets upset. When you do this, not only are you upsetting your client, but you stand an excellent chance of not getting paid for those changes. Write it out and get paid for the change before you do anything.
Have an agreement in place with your subs and suppliers on change work orders. Any and all changes on a job should go through the G.C. on the job, period. That includes any discussion on pricing of work to be done, prices of materials, schedule changes, extra work, deleted work, etc, etc. You should be sure to have a complete and thorough discussion of this issue before any sub starts to work for you and it should be monitored on every job. There is nothing that will put a GC in hot water with the owner quicker than a subcontractor or supplier who decides to talk to an owner about job changes, pricing or schedules without the GC present.
And make sure that whenever a change is made to a job, the contract completion date is adjusted as well, and the new date is noted on the change work order. If the change will take one day, then the completion date should be extended two days. If the change will take 4 days, the completion date should be extended eight days. It’s always best to under promise and over deliver.
Punch lists should also be spelled out in the contract and that procedure followed exactly. You want to limit the owner to one punch list, created at one time. This stops the game playing and the excuses to not pay you for your work. We’ve all seen the blue pieces of tape on the walls, ceilings, cabinets, etc. that magically appeared the day you arrive to pick up your last check. This procedure is well outlined on pages 143 and 144 (Chapter 7) of Markup and Profit Revisited.
Selections need to be made but if you are going to get involved in that process you should be paid. Too many contractors waste endless hours chasing selections with the owner. These are hours out of your day that could be spent selling another job to another customer. You want a well-thought out selection list that you can give to a client. It should include a list of what’s needed, along with the showrooms where they can see the products in person. Make it easy for your customer to go shopping.
If your client wants you to pickup and deliver samples to them, I believe that’s a service you should also be paid for. Let them know that you’ll be happy to round up samples and bring them by. Your hourly rate is $XX and you charge .53 cents per mile. This should be in your contract.
Years ago we used to have a sample box that we carried in our cars. We had plastic laminate samples on a chain, a small box of hard surface samples, a paint fan, maybe some cabinet door samples and a picture book of before and after pics of jobs we’d built. Today there are a lot more products to choose from and trying to get them together for your customer will require a lot of your time. Get paid.
One more item this week and that is clients who want to supply materials for their job. I discourage this most of the time, but there are situations where it’s better to let it happen. However, you need to include language in your contract that covers this issue from top to bottom. You won’t guarantee any materials that the owner supplies, and that includes your labor to install that material. That means if they purchased a used dishwasher that doesn’t work after it’s installed, they will need to pay for your time to remove it and to install the new one.
There will also be a fee if they want you to pick up and deliver materials they’ve purchased to the jobsite. If you don’t tell them there’s a fee for this service, they might assume you’re going to do it out of the goodness of your heart.
And you’ll want to specify that someone representing the owner must be present when you unpack the materials they purchased, especially if it includes any glass or breakable objects. If no one can be there when you unpack the materials, they waive the right for any claim of bent, cracked, broken, scratched products against you.
These issues are profit eaters. If you’ve never built a project for a homeowner, you’d probably think I’m being overly cautious. But if you’ve been in this business for more than a few years, you’ll know exactly why I believe these things need to be included in every contract.