Choosing a builder and building contract

Earlier this week whilst I was taking a schedule of condition, I was asked “How do I choose a contractor?” We also ended up discussing best practice for minimising risk and helping to get a project finished on time and on budget. It made me think others would probably need to know the answers to this, so, here are our top tips for choosing a contractor and setting up a small residential building project.

Finding a contractor

Recommendation, ask around and see who else has had work done locally. Make sure that the work you are comparing is similar to yours.

Take references, most reasonable contractors will be happy to provide them. Ask about costs and variations, quality of work and whether they kept to their programme. Importantly, go and have a look at their previous work.

Ask if they are busy – good contractors are usually always busy (even in a recession). If the contractor can start on Monday, then be alert.

Ask how many direct employees they have and what elements of work they will subcontract. It’s quite usual to subcontract electrics, plumbing, plastering etc. but unusual for most basic building trades to be subcontracted.

Once you a have a short list of 3 or 4 builders, ask them to price your project. They will need to be provided with a reasonable set of drawings and a schedule of work. This is important because you are clear what you want built and the contractor is clear what he has to build.

Compare the quotes you receive and don’t be afraid to ask for more information. It’s likely that you will get quotes pretty close together. If one is much cheaper be alert – anything more than 15% under is cause for questioning. You may get a quote much higher than the others. Don’t worry – sometimes a contractor prices high if they don’t want the work.

Make your selection and then set up your contract

Agree a formal written contract. In the contract set out exactly what the work is, how much you will pay the builder and how long the builder has to complete the work. Don’t ever be tempted not to formalise the contract, a formal contract will protect both you and the builder. If the builder doesn’t want to sign one, then we recommend avoiding them.

You should also agree when any stage payments will be made. There is no hard and fast rule, but every two or four weeks may be OK. You might wish to agree a retention against any defective work 2.5% is typical for six or 12 months.

Never, and we mean never, pay any money up front. If a contractor has cash flow problems then be alert. Always pay for completed works. If you agree to purchase components, such as bathrooms, make sure you buy them and take delivery. If the builder asks for money up front, offer to put it in an escrow account.

Allow yourself a contingency (10 or 15% is probably OK) for unforeseen items. Make sure you do not over pay the contractor at the beginning of the project. If the builder doesn’t have enough money to finish a job then he probably won’t.

Remember every time you ask the builder to do something that isn’t on the drawing of schedule, you are likely to be charged for it as an ‘extra’. Try and agree any additional charges before they do the work. If you ask the contractor to do a lot of extra work then the programme will be affected and you will have to agree extra time for the holder to finish.

It is usually your responsibility to get planning consent, agree party wall awards, get necessary licences to build over drains etc. The builder will probably deal with the building inspector. Check this to be sure though.

We know all this sounds a faff and hassle, but trust us, it’s nowhere near as much hassle as you could have – a half-finished building, a builder who has been paid too much, a final bill that is spiralling, surveyor racking up fees valuing work and assessing quality and lawyers threatening to sue everybody, not to mention a builder dumping a skip on your drive and leaving!

If you are going to do your own project management, do not underestimate the amount of time and stress that it involves, document everything!

You could of course ask a surveyor or architect to act as a contract/project manager and administrator, they will probably be able to prepare the drawings and schedules of works as well as deal with statutory consents. They will take responsibility for managing variations, extras and costs, check on quality and programme and agree what should be paid for what and when.

Get in touch if you need project management for your work.

(Originally published by Steve Way, 21 January 2013)