WHEN SHOULD I PAY A CONTRACTOR?
General contractors get paid by taking a percentage of the overall cost of the completed project. Some will charge a flat fee, but in most cases, a general contractor will charge between 10 and 20 percent of the total cost of the job. This 10-20% is factored in all payments to the tradesmen. This is not an additional cost per the total cost of the project. The complete budget should include the cost of all materials, permits and subcontractors.
I am of the belief that the contractor should only get paid a percentage of the job completed.
For example:
Framing budget $5,000 10% (represent the portion of the job completed)
Framing completed Payment – $500
This pay method should be followed for all tradesmen. There is an exception. General Contractors (GC) may require smaller deposits. This is called, “putting a stake in the deal”. General contractors ask for this fee to schedule your job. Further, depending on their respective workload, the “stake” or schedule may not work with your project timelines. Understanding scheduling and “staking” a job is relevant to your schedule. So, pay attention to documents your signing.
Once under contractor with your GC or subcontractors, your schedule has been agreed upon by all trades. Should your sub or general contractor not perform, you can withhold payments based on non-performance. Your contract should outline the time frames desired to meet your schedule. Most contracts contain penalties for every day the contractor fails to complete a job later than outlined.
WHO NEEDS TO KNOW MY BUDGET? – No one, unless you assign a project manager. I use this method for every project. Develop (2) budgets. One budget to manage the job/project, material. The other budget to manage labor cost. This will keep you focused on the desired outcome of the project. Keep track of cost overruns and change orders.
DOCUMENTS FROM CONTRACTORS – W9’S, INSURANCE AND LICENSES – You must receive a copy of W9 tax forms from every tradesman. This document will act as your tax verification for monies paid for task on your project. At the end of the year, send these documents to your accountant.
Insurances, protects your property. Should any tradesman, perform a task substandard, the insurance document gives you an opportunity to sue for damages due to contracting error. Additionally, insurance will protect you from contractor lawsuits. Each contractor should have a General Liability (GL) policy. This policy will cover not only damages. It covers the contractors’ business should someone get injured on your project.
Licenses – this item is self-explanatory. As the client you must make sure you receive a copy of the contractors’ license. This license must be current in your jurisdiction. If a contractor does not have a valid license, you must not hire said contractor.
CONTRACTS – Only sign a contract once all the terms of the agreement are understood by both parties. Attached to every contract must be a scope of work. The scope of work outlines the task for each contractor.
What questions should I ask my contractor as you walk the site with tradesmen? This will ensure everyone knows what they are required to do to complete their task. The most common are:
1.Can you read architectural plans?
2. Do you understand the scope of work as written?
3. How long will it take to perform your specific task?
4. When can you start? This helps determine workflow.
5. Are there any suggestions or modifications to your scope?
WHAT CONSTRUCTION JOBS REQUIRE PERMITS AND WHY? – Most construction jobs require permits, however, please check with your local jurisdiction. Permits are required when the project requires the movement (due to design) of load barring walls. Load barring walls are the walls which keep the floors and roof erect.
WHO SHOULD PULL DEMO PERMITS? – All license General contractors (GC) and tradesmen Mechanical, Electrical and Plumbing (M.E.P.) require permits. As owner of the property, the GC should pull their building permits. This is determined if the project requires the movement or reconfiguration of interior bearing walls.
- Bearing walls are interior walls which carry the load or weight of the roof or upper floors. The general contractor should understand which walls are carrying the load as they bid on your project.
- If for any reason, the contractor or subcontractor does not pull a permit. You run the risk of getting your job shut down. Simply put, the city or housing department will issue a “Stop Order”.
REVIEW ARCHITECTURAL PLANS – The first time you open a set of architectural plans, you will probably instantly be lost and confused. If you are managing your company’s real estate project, but don’t have any real training in architecture, reading these plans can extremely difficult.
To save time, determine what you are trying to accomplish. Be organized and diligent when reading plans. Start in upper left corner and work your way across the page, so as not to miss any details.
- Read the cover sheet. This contains important project information: project name, architect contact information, project information and the date. It might also include a drawing of the finished product.
- There are often reference points that are used between professionals and sets of drawings. These can come in many forms: room numbers, a grid system, structural references, etc. Review the plan index which provides a list of all plan sheets.
Start with the Site or Plot plan. This provides an overhead view of the property and details about the boundaries and orientation of the building. There will also be a symbol legend; it will depict the symbols used to indicate windows, doors, elevation, etc.
Many symbols contain numbers within them which refer to the section and the page number of the plans. Reviewing the symbol legend will help when looking at the actual plans, so that you recognize what the symbols are referring to. You may also want to review the list of abbreviations, many of which are standard in the industry, but some may be specific to the architect. This will also help later when you are reading design notes.
Once you move into reading the actual architectural sheets, it’s important to know that architectural plans are labeled with an A (A 001 or A1-X, A2-X, etc.). The architectural plans are where you will see where your office is, where the bathrooms are in relation to bedrooms, etc. They will also provide measurements, elevations, locations of walls, windows, bathrooms, etc.
Plans are broken into many parts; make sure to look at the plan number (and North arrow) to help orient yourself. Always read the notes on a page! Some design details are easier to communicate via text, so notes are included on the drawing or sometimes as additional pages.
There are many additional plans that supplement architectural plans: ceiling, roof framing, finish schedule (paint colors for each wall, flooring type and color, ceiling height, type, and color), door/window schedule, and many more.
WHEN WILL I NEED AN ARCHITECT?
You will need an architect, or other licensed design professional when you are building a new construction, altering, moving, enlarging, replacing, repairing, or maintaining a building. Even if you just want to move into an existing building with little to no alterations, you may need an architect.
In many cases the architect may develop an itemized budget for your project. The budget will not include items outside their respect skill set. Keep in mind to ask for assistance from the architect. The budget will consider the following:
- Location of project – weather trends for building materials
- Material cost – this may depend on exterior and interior request and functionality.
- Environmental cost – soil samples, new roads, curb and gutter and easements and setbacks
- City and municipal cost – permits
HOW MUCH MATERIAL SHOULD I BUY AND WHO SHOULD BUY THE MATERIAL?
- This is a very sticky area for most owners. Material on site tends to get damaged if not used over time. In many instances the owners will spend additional money to replace the damaged material. So, whenever possible, only buy what you need for a specific task. Should you have a relationship with your labor crew. They may buy the material and request reimbursement as they submit receipts.
- Never, buy material for the mechanical, electrical, or plumbing (M.E.P.) trades. This is disaster waiting to happen. Try to keep your project simple. Keep in mind “WHY” you chose your contracting team. Play your role as designer, bank, and owner. Many times, owners become overwhelmed with micromanaging the project. Counting every cent and lose sight of the bigger project.