The building lot has been purchased, the financing arranged and the house plans finalized. There’s only one thing left to do – hire a contractor. After dealing with real estate agents, bankers, lawyers and designers, hiring a contractor should be a relief. It may be if you manage to find the right one, but if you don’t, you could be in for a surprise!

Perhaps the first thing to realize about contractors is that they are not all alike. Similar to any kind of business, contracting has many who are quite competent, others who are mediocre, and ones you definitely want to avoid.

The construction business is diverse, and contractors tend to develop specialized areas of expertise. Before requesting quotes, identify those who are experienced in the type of project being undertaken. Avoid inexperienced contractors, as their prices may be unrealistically high or low, the quality of workmanship may be questionable, and the time required to complete the project may be excessive.

When requesting quotes from contractors, it is very important to ensure that all contractors are bidding on exactly the same thing. Have a detailed set of construction drawings prepared, and distribute copies to the prospective contractors for pricing.

Detailed drawings eliminate guesswork. Take gypsum board for example. Gypsum board is available in various types and thicknesses. It can be standard, fire-rated, water resistant, or exterior grade. It is available in thicknesses of 10 mm, 13 mm and 16 mm. If the type and thickness is not specified on the drawings, one contractor may bid using the cheapest, 10 mm standard, and another may bid using the average, 13 mm standard. This is one reason for the variations in contractors’ quotes when the types of materials are not clearly specified.

The lowest price is always the most tempting. You appear to be saving money. If the lowest price is received from the most experienced contractor, it is likely that he is also the most efficient and knows exactly what he is bidding on. If you receive the lowest price from the least experienced contractor, ensure that he fully appreciates the scope of work involved, and is not using semi-skilled labour, or substituting inferior materials.

The contractor with the lowest price runs the greatest risk of bankruptcy during the project, and is more likely to cut corners during construction. Always invite a minimum of three bids for comparison, and do not automatically accept the lowest price.

Avoid signing a “ready-made” contract provided by the contractor. In law, a contract is defined as an agreement between two parties, and the owner has just as much right to stipulate the conditions of the contract as the contractor. Contractors are more familiar with building contracts than owners, and it is essential that the owner insist on having their requirements specified in the agreement. Architects work with contractors and construction contracts on a day-to-day basis, and if you have doubts, consult an architect about the fine print.

A good test of a contractor is to ask about the written warranties provided to the owner. Check with previous customers to see if the contractor willingly completes warranty deficiencies within a reasonable time frame. Inquire about the financial status of the contractor. Can he provide bonding, liability insurance, and proof of good standing with the Workers’ Compensation Commission? Also, check with the Better Business Bureau for any past complaints.

Beware of word-of-mouth recommendations about contractors. Check things out for yourself. Only rely on someone’s recommendation if that person has used the contractor on a similar project.

Remember, contractors operate the same way as any other business – they try to make as much money as possible. There is absolutely nothing wrong with a contractor making a profit, as long as the customer is completely satisfied with the finished product.

BONDING

Bonds are used on construction projects to provide certain forms of security to the owner by the contractor. Three types of bonds are commonly used as follows:

BID BOND
A Bid Bond is used during bidding, also called the tendering stage. The bond is made out in favour of the owner, normally in the amount of ten percent of the contractor’s bid. The bid bond assures the owner that the contractor guarantees his price for a certain period, usually 30 or 60 days. If the contractor is awarded the construction contract by the owner, but fails to accept, the bonding company is obliged to pay the owner the difference between the lowest bid and the next highest bid.

PERFORMANCE BOND
A Performance Bond is required when a contractor enters into a contract with the owner. The bond is made out in favour of the owner, in the amount of 50 per cent of the contract price. The bond is used by the owner as security to have the project completed by the bonding company in the event that the contractor fails to fulfil his obligations under the contract. Performance bonds are often required to be valid for two years after the completion date to ensure correction of warranty deficiencies.

LABOUR AND MATERIALS BOND
A Labour and Materials Bond is required when a contractor enters into a contract with the owner. The bond is made out in favour of the owner, in the amount of 50 per cent of the contract price. This bond is used by the owner as security by the owner to ensure that all subcontractors and material suppliers are paid by the general contractor. In some areas it is called a Payment Bond.

The cost of bonds should be included in the Bid Price. For smaller projects, owners sometimes accept certified cheques in the amount of 10 per cent of the contract price for each of the above bonds. Upon satisfactory completion of the project, the owner refunds the amounts to the contractor.