7 Questions to Ask Before Hiring a General Contractor
“Choosing a general contractor to spend the millions you’ve raised may be one of the most important decisions that you will make as a leader.”
Perhaps you’ve heard one of those nightmarish stories of the leader who mistakenly hired the wrong general contractor and ended up in a major pickle. Instead of creating momentum, the project produced an embarrassing, costly mess; ending late, over budget, and with shoddy construction.
As a leader, these haunting stories are the ones that keep you up late at night and on your knees.
Choosing a general contractor to spend the millions you’ve raised may be one of the most important decisions that you will make as a leader. There’s a lot on the line. And though there’s no foolproof way to flawlessly maneuver through the selection process, you can improve your chances of success by asking these seven key questions before hiring a General Contractor for your building project.
1. Is the contractor licensed and insured?
Sometimes it’s necessary to just state the obvious. So at the risk of insulting your intelligence, be sure to obtain proof of license and insurance from your contractor—no matter the size of the project.
Again, only work with contractors and subcontractors that are licensed and insured to do the job. Contractors who are unlicensed or uninsured put your organization and property at significant financial risk. So be sure to double-check that the licensed name matches the name that is on the contract and that the contractor’s license number is also listed on the contract. The insurance they carry should also be adequate for the size and risk of your project.
So, I repeat … only hire licensed and insured contractors.
2. What is the contractor’s communication protocol?
Unless you’re hiring the Amish for a barn raising, you’ll want a General Contractor to use the latest communication technology during your project. So, make sure to understand the contractor’s process to track revisions to the architectural drawings, official “requests for information” (also known as RFI’s), and changes to the architectural plans. You’ll also need to make sure that the architect is on board with this communication system. Some of the most cutting-edge firms use software where the plans, drawings, submittals, RFI’s, daily reports, and photos are all accessible on the iPad. This high-tech communication protocol allows the team to mark up the drawings, take pictures and send them directly to the architect (and others), real-time for quick responses.
3. What is the contractor’s “Contract Delivery Method?”
Nerd Alert. You might want to sit down to read this question. I’m about to get a little construction-style nerdy. But, understanding this fundamental question is crucial to choosing the right General Contractor. The three most prevalent construction contract delivery methods are:
- Lump-Sum or Fixed Price
- Cost Plus
- Guaranteed Max price (GMAX).
- Lump-Sum (or fixed price) is a delivery method where the contractor sets a fixed price for the project. This method is like buying a car at CarMax. The price is fixed, and there is no requirement to disclose a breakdown of costs. If the contractor completes the job for less than the fixed price, then he keeps any and all of the savings. The contractor is not required to show you any of his costs or pricing on the project and is entitled to change orders and other adjustments that may help pad his pocket.
- Cost Plus is a delivery method where the total project cost is determined by the cost of the work plus the contractor’s overhead and profit. This method is like paying a real estate agent when you purchase a house. You pay the cost of the work plus a percentage fee. The downside of this contract method is that the owner assumes all the risk for surprises along the way and there is little motivation for the contractor to save on costs. In fact, the contractor makes more money if the project goes over budget.
- Guaranteed Maximum Price (GMAX) is a delivery method where the contractor guarantees that the total project cost will not exceed a specific set amount. This method provides the peace of mind of the Lump Sum method with the transparency of the Cost Plus Method. With a GMAX, the contractor locks in the top range and allows the owner to see the actual project costs. If the price comes in less, there are project savings that are shared between the owner and the contractor. And if the total cost exceeds the GMAX, then the contractor eats the overage. A GMAX enjoys a shared risk of cost between the contractor and the owner. As a result, the GMAX contract is the most collaborative project delivery approach.
Nerd-alert is over. You can stand up now.
4. What does the contractor see as the most significant challenges with the project?
Occasionally, you should throw in a question that will actually give you valuable information about your project. Asking your contractor about potential challenges will not only reveal how much knowledge the contractor has of the project but will also inform you of potential project hurdles.
While you’re at it, you may want to find out how the contractor mitigates changes that may impact the project’s cost and schedule during the build. Changes come in a variety of forms; they can be owner changes, unknown or discoverable issues or drawing errors/omissions. Either way, there should be a clear plan to address each of these challenges.
5. What is the contractor’s schedule?
Spend some time discussing how the contractor prepares, follows, and updates the schedule. A mismanaged plan can cost time and a ton of money. Make sure that the contractor’s project superintendent develops, monitors, and updates the schedule with assistance and input from the project manager on a regular basis.
For the record, it’s important to know how the contractor determines the schedule duration. The most accurate type of construction schedule is a method called a “critical path schedule.” A critical path is the sequence of project activities that add up to the most extended overall duration. This strategy helps determines the shortest time possible to complete the project.
6. Does the contractor do “Clash Detection?”
Have you ever been to a major concert event and had general admission seating? With no assigned seats, the venue can quickly become a madhouse of wild concert-goers fighting each other for the best seat in the house. It’s always a much more peaceful experience when everyone knows which seat they have and how to get there.
Unless your contractor uses special “clash detection” modeling software before groundbreaking, your plumber’s pipe plan could clash and interfere with the HVAC’s vent plan. And before you know it, there’s an all-out catfight—subcontractors fighting for space with the same fury as a screaming preteen girl brawl for a spot to see the latest boy band.
So, make sure to ask if your contractor plans to conduct “clash detection in BIM (3D modeling)” with Architectural, Structural, Fire Sprinkler, Mechanical, Electrical, and Plumbing (MEP). This service locates areas of clashes in the computer model before it happens in the field. Field conflicts can be very costly to resolve and cause delays.
7. What is the plan if you disagree with the contractor?
When you start a building project, everybody hopes for butterflies and rainbows. So, it may feel strange to ask your contractor about how he plans to handle disagreements. Yet, this question is critical.
Truth is, there needs to be a step-by-step plan to resolve disagreements when disputes arise. Before the project begins, both parties should agree to sit down and reasonably solve conflicts together. There will likely be disagreements on change orders, extra work, schedule, expectations, and finishes. So, before the project even begins, you need a flow chart plan that serves as an agreed-upon path for resolving differences.
It is also recommended to name and appoint a neutral 3rd party (non-binding), to help resolve disputes real-time before formal mediation or arbitration.
Be uncompromising when asking and answering these seven questions as you take the first steps of your building project. If you are persistent, these tests will help you interview, evaluate and select a General Contractor that will help you fulfill the vision that God has embedded deep within your heart.