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Owners Supplying Their Own Materials

by Michael Stone

A few months ago my wife gave me a simple project: replace the pedestal sink in our guest bathroom with a bathroom cabinet and built-in sink she saw at a big-box store. The original pedestal sink had been installed by a hack before we bought our home and looked awful, and she wanted storage space in the bathroom. It should have been a simple push-pull project.

We bought the unit, hauled it upstairs, and she left me to my work. "You'll be done in about an hour, right?"

If I'd been hired to do this job, using the materials furnished by the homeowner, we'd probably be in court right now. There were problems that I didn't see as the homeowner that I discovered as the contractor.

There were plumbing pipes coming up from the floor rather than out of the wall. That meant cutting the base of the cabinet so it would fit over the pipes. It also meant sacrificing the ability to return the cabinet and sink combo in case we ran into any other problems.

The photo on the box showed a faucet, and since it was advertised as complete we assumed the faucet was included. It wasn't. Fortunately the faucet on the old sink was in good shape so I reused it, which saved me both a trip back to the store for a new faucet, and the expense of a new faucet.

Once the faucet and cabinet were in place, I discovered the supply lines were too short because the cabinet was taller than the pedestal sink. That meant a trip to the store for new supply lines. I also discovered the existing drain line was cracked requiring additional parts to secure.

At least my contractor side remembered to buy caulking and knew what type to buy.

Homeowners don't realize the problems that can occur when doing the simplest of projects. When things go wrong, like they did on my project, both the homeowner and the contractor lose. For the homeowner, the money they save is eaten up by having to pay for the additional labor the contractor incurred. The contractor might have a hard time collecting pay for the extra hours incurred because the homeowner is unhappy, and they run the risk of damaging materials that someone else purchased (like cutting the base of a cabinet to accommodate plumbing pipes).

We get questions from both homeowners and contractors about clients furnishing their own materials. Contractors want to know if they should get involved with an owner who wants to do that. Owners want to know why the contractor wants to charge a markup on the materials.

Owners believe that they'll save money if they buy their own materials and just hire a contractor to install them. We wrote an article on this topic for our newsletter way back in September 2003, along with legal language for contractors to use in their contract when working with customer-supplied materials. We're going to reprint an edited version of that article here because the only significant change since then is that even more owners want to purchase their own materials.

It starts when your prospective client says, "We'll furnish the bathroom fixtures," as you sit down to talk. The day before you heard, "My friend is a lumber broker, he'll get me the materials you need to frame our home." Every contractor has heard some version of "I'll furnish the materials."

If you've been involved with a job like this, you know that they sometimes turn out okay. But all too often, they don't.

Realize this is an attempt to save money. They believe that if they furnish the materials for their job, they'll save big bucks. They've shopped around and are convinced they know exactly what they want and where to get it. They found the store or warehouse with the best prices, and they know exactly where and how they want it installed.

They've heard (or they know!) that contractors are pirates. They figure if they supply the materials, they won't have to worry about you tacking overhead and profit on those materials.

It's also fueled by suppliers who encourage owners to buy their own materials. They would rather make the sale to the customer standing in front of them than hope the contractor will come back to buy from them.

That's why homeowners want to purchase their own materials. Now let's look at what they expect from you, their contractor. They'll furnish the materials and you'll not only install them, but you'll also guarantee them. They expect you to install them in a good and workmanlike manner, regardless of the kind or quality of the materials supplied. Additionally, if their materials don't fit or look right, you'll tear them out at your expense and put in new materials the owner will furnish as soon as they can get them to the job site. You'll just shut down the job while you wait.

If, during the tearout of the owner's materials, you damage something, you'll be expected to fix or replace the damaged item at your expense. Sometimes you'll be expected to give a credit off the final bill because of the aggravation you caused the owner. Or worse, they'll decide you can't be trusted so they order you off the job and hire a "competent" contractor to finish it. You'll be expected to pay the difference.

Don't laugh at these scenarios. I've been down this road, and I've heard every one of those items during my coaching calls. Potential clients need to be educated on what their responsibilities will be when they furnish their own materials.

If there are any problems with the materials they purchased, they'll be responsible for not only replacing those materials, but also any surrounding or attached parts that might have been damaged or destroyed. Additionally, they will pay more than twice for the labor; they'll pay for the first install, for the removal of the first install, then for the second install.

They assume all risk for materials. If you provide both the labor and the materials for the job and guarantee it as you should or as required by your state laws, any expense for repair or replacement is yours. But if they furnish the parts or materials, you won't guarantee the materials, and that will be outlined in your contract.

They need to know the time that will be involved in getting all the parts together. Make sure you explain this clearly, because some owners actually think that "supplying all the materials" means telling you where they bought the materials. It's up to you to get the parts, bring them to the job site, haul them upstairs or around any tight corners without damaging anything, and then install them. If any assemblies are missing parts or are damaged, you'll return them to the store and get a replacement assembly at your own time and expense.

Wrong! If they supply parts, that means they get those parts to the job site, ready for installation at least three working days prior to the time you will need them. If they aren't, they'll pay you for your time to get the parts.

If anything is wrong or missing with the parts, they'll pay you to repair or replace those parts with materials which you can use to get the job complete.

They need to know that while buying the parts or materials might save them a little money, in the long run those parts or materials could cost them double the amount or more.

I don't recommend allowing the customer to furnish materials for their job, because almost always it ends up costing the customer more and puts you at high risk of a job dispute. But if they insist on supplying materials, then be sure at least that the language from the legal section below is included in every contract (after review and approval by your attorney). Make sure you charge for everything you do to complete the job. If you gave fair warning, you should have no hesitation in charging for your service. Frankly, even with this language, there are still areas where problems can occur. We can't write enough disclaimers to cover the myriad of things that go wrong.

Should the contractor charge a markup on customer-supplied materials along with their labor and other expenses? If they do, they'll need to take responsibility for those materials as if they'd purchased them themselves. But keep in mind that typical ranges for remodeling are at least 50-70% over cost. In my opinion, a 20% markup on customer-supplied materials is pretty cheap and isn't enough to cover the risk. The markup should be more in line with your normal markup on a project.

One last thing. Make sure your employees know that a change work order must be written and signed every time there is a change on any job. If you don't have changes documented and signed on the spot, you risk not get paid for that change. And make sure that any change orders made are included in the next progress payment for the job.

The only way I'd consider taking on a job where the customer supplies their own material is with legal language in my contract similar to what's outlined below to spell out who is responsible for what.

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Owner warrants that all materials supplied by Owner will be of new and standard quality, free of defects and may be installed or applied according to the RESIDENTIAL CONSTRUCTION PERFORMANCE GUIDELINES, (Latest edition) as published by the NAHB and in a time frame consistent with normal installations for these materials.

Owner agrees to have all materials on the job site at least {NUMBER} working days prior to installation date by {CONTRACTOR} or sub or specialty contractors. {CONTRACTOR} will give Owner at least {NUMBER} working days notice of installation date.

All unused materials furnished by Owner shall remain the property of Owner, and all materials delivered to the job address shall be safely stored by Owner.

If Owner fails to have the necessary materials on the job site as outlined above, Owner agrees that {CONTRACTOR} may purchase those materials, and Owner will reimburse {CONTRACTOR} the cost of the materials plus {NUMBER}% and travel time to and from the job site to the place of purchase at the rate of ${SPECIFY RATE} per man hour and {NUMBER} cents per mile for vehicle used to pickup the necessary materials at the next progress payment or final payment whichever comes first.

Owner understands and agrees to be present or have a representative present when any materials supplied by Owner for use on this job are unpacked by {CONTRACTOR}. Owner or representative will inspect those materials for completeness of the order and for damage or for any other defects. If Owner is not present when these materials are unpacked, Owner waives any and all claims against {CONTRACTOR} for any damaged or missing materials and will hold {CONTRACTOR} harmless against any claims for damaged or missing materials by the Owner or the Owner's representative.

Owner understands and agrees that damage done to any of {CONTRACTOR}'s or subcontractors' tools or equipment as a result of any foreign object within those materials supplied by the Owner, such as nails, bolts, screws or other metal or very hard objects, regardless of the reason, will be the Owner's responsibility to replace (NOT REPAIR) that damaged tool or piece of equipment. Replacement of the tool or equipment will be within 24 hours of the time of damage.

Owner further understands and agrees that {CONTRACTOR}'s only guarantee regarding the materials to be supplied by the Owner is they will be installed consistent with the RESIDENTIAL CONSTRUCTION PERFORMANCE GUIDELINES, (Latest edition), as published by the NAHB. No other guarantees of any kind are expressed, implied or included in this contract.

Owner understands and agrees that as the supplier of materials, Owner assumes full responsibility and liability for assuring that the products meet all applicable codes and ordinances.

Any resultant damage to any other part of the structure in contact with or adjacent to the materials supplied by Owner and installed by {CONTRACTOR}, because of failure of those materials supplied by the Owner, are the Owner's sole responsibility for repair or replacement. {CONTRACTOR}'s liability will be for the labor only if it is determined by a neutral third party that the Owner's materials were installed incorrectly by the {CONTRACTOR} thus causing the damage to the structure.

Disclaimer:
Nothing in this article or on our website is intended to be, or may be construed as, legal advice. I am not an attorney. You must consult an attorney before using any suggested language or any other information contained in this article or on our website to determine if it conforms to your state laws or your particular situation.

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