Over the years I have seen some good construction contracts and some terrible ones. Unfortunately, the terrible ones have resulted in someone paying the price.
In any contract, there are basically three concepts to negotiate and determine in terms acceptable to all parties involved. These are Price, Quality and Time. It is natural to focus in on the first concept of Price, however this leads to a lack of focus on the latter two, which will ultimately affect the long-term aspects of the contract – functionality, serviceability and enjoyment.
For home construction or improvement projects, negotiation for an equitable price is obvious. However the concept of quality has to be specified clearly so it can be measured and achieved. No matter how large or small the project, plans and specifications need to be laid out and understood by all parties. The more graphic description that can be done, the clearer the communicated quality can be followed. Dimensional plans, material lists and even pictures are ways to clarify the level of quality required.
Time is always the unknown. How long will it take? I heard one contractor state, “it will take as long as it will take to finish.” This was a safe reply but it was not a very responsible or professional response. Further to that, years ago a once friend said, “take the estimated time and double it.” His reasons were varied – sometimes the estimate did not allow for contingencies or potential problems but sometimes it was due to the mismanagement of time. Most contractors will not produce a Gantt chart to lay out the proposed schedule of work, showing the various tasks for the project and how much time is anticipated and when the task will occur. This type of chart will show potential problems and critical flow of tasks of the project (i.e. foundations before walls and then the roof followed by various other steps of the project).
However, recently there were cases where I have had to help clients who are far along in their project, way past the original schedule and way, way over budget. The cases were different in the sense of the type of project, price and site conditions. In one case, the client did a cost plus agreement and the second client did a fixed price contract. However, the similarities were what stood out. Both clients did a contract on a handshake with no paperwork to backup what was agreed upon. And in both cases, the client was absent during phases of the project but the clients’ payments were made in good faith.
When I was brought in to help, it was difficult to follow the status of the project due to a lack of paperwork to act as a map of the project. Further investigation showed the contractor had provided detailed receipts of the work completed, including the materials used and extra services contracted. But after adding up the bills and the amount of labor used, I had to ask why the total costs were so much more than the original estimate. The contractor used excuses for the poor site conditions and weather conditions. But the project was so far out of control in terms of cost and schedule, I had to look into the eyes of the one contractor and ask him if he was “unethical or incompetent.” Unfortunately, I believe the contractor had taken advantage of the client’s good trusting nature. I helped the client find a competent and ethical contractor who was able to finish the project with more quality for half the proposed time and less than half of the cost of the original contractor.
The other case was of a client who really had lost control of the project and was not making efforts to maintain control of the costs and schedule. There were workers appearing/disappearing and not finishing tasks on time, material lost due to theft, errors in construction and damage due to poor weather/storage. It was critical for the client to be on top of the billing and what was completed on the project. There were stages of the payments where it appeared the client had advanced the contractor too much for the work to complete.
In conclusion, take time to review the proposal, put everything down onto paper, have a second person review the proposal, get other proposals or bids and compare but most of all, do not simply use faith and a handshake to seal a deal. That makes it too easy for anything and very likely for everything to go wrong.