The design work is complete. You have a set of plans and a building permit in hand. The only thing that stands between you and the long anticipated remodel of your home is the need to find a qualified contractor. Someone you can trust with one of the largest purchases you may ever make after your initial home purchase. In this article I’ll outline what I feel is the best method for ensuring success when you hire a contractor for your remodel project.
In California, the state that my remodeling company is based in, the Contractors State License Board (CSLB) of the Department of Consumer Affairs is the agency that licenses and regulates contractors. Their website is an excellent reference for information regarding good practices and the status of contractors. You can look up a contractor by name or license number on the CSLB website. It will show if they have a bond and workers compensation for their employees. These are required. If there has been disciplinary action, that will also be documented. If your project will take place outside of California check with your local state government to see if an equivalent agency exists. At the very least check with the Better Business Bureau in your area to see if there are any complaints against the contractor you would like to hire.
There are some other qualifications that are important. How long has your contractor been in business? How long will they remain in business? It’s in your interest for your contractor to remain solvent throughout the course of your project and for many years to come. Many contractors have failed mid-project leaving the owner with a dismantled home and the challenge to find a new contractor to take over. If something fails after the job is finished you’ll want your contractor to be available to fix it. If there’s an accident or failure during or after the project it may be important that your contractor has liability insurance to cover it. Liability insurance is voluntarily and carried by qualified contractors.
Regarding the conventional wisdom to “Get at least three bids” I only endorse this when you need a discreet home repair such as a new roof, a paint job or some doors and windows installed. In this case the scope of work is clear and it’s relatively simple for various specialty contractors to provide apples-to-apples bids. If your project involves a number of trades and a higher level of complexity, it may be in your interest to consider a different approach than seeking a number of “free estimates.” In the residential remodel market there is no standard for approaching this situation and the expectations of owners, architects, and contractors vary widely. Please allow me to explain my approach.
An example worth considering is a public works, competitive bid scenario. It’s a formal process. The plans and specifications are complete. The bids must be formatted in a standardized form. This allows for an apples-to-apples comparison between bids. The opportunity to bid is open to all qualified bidders. This assures quality for the customer and a level playing field for the contractors. It’s required that ultimately the bid must be awarded and that it must be awarded to the lowest bidder. When the bid is awarded it’s required that that the information be made public. However, the residential remodel market lacks these requirements and typically uses less formal bidding scenarios. Coupled with the frequent problem of incomplete plans and specifications this can lead competing contractors to submit bids that vary widely in their format. This will make an accurate comparison of their bids difficult, sometimes impossible.
Obviously, the work to create bids is time consuming and expensive. If there is no direct compensation for this expense then it becomes an overhead expense. Overhead expenses are recovered through the contractor’s invoices to their customers, which are based on their rates. The higher their overhead, the higher their rates. The more expenses they absorb by offering “free estimates”, the higher their rates must be for recovery. The result is that the contractor’s actual customers subsidize all of this bidding, including bidding for the contractor’s prospective customers who never hire them. An alternative that I prefer is to ask each customer to pay for at least a portion of the expense of their cost planning. Applying this approach allows my company to remain price competitive while offering the highest level of product and service. I encourage owners to interview a number of contractors, check their references, and then hire the most qualified.
It is to your advantage to retain your contractor as early in the process as possible. They can help you and your architect with technical and pricing information that inform your aesthetic, budgeting, and scheduling decisions. A further discussion of this approach can be found in “The Well Built House” by Jim Locke and on our blog, “Trade Secrets”, see the link below. I realize that this approach lacks the “advantage” of directly comparing the price of the project between contractors. I think it’s a stronger advantage to work with someone you’ve vetted, that you trust, who’s on your team from start to finish, and who can contribute a unique value to the design development as well as the construction process. And there’s nothing to prevent you from pressing your contractor to give you the best deal possible.
Copyright 2010 by Jerry James
