Are You Renovation Ready? Part 2: Hiring A Contractor

By Don Epp, SARC Facility Planner

Why You Need a Contractor

In the last article, we left the renovation project with a sound budget, accurate drawings, and a detailed plan. All we need now is a contractor to do the work; finding the right contractor will make all the difference in your renovation project. In this article, we will explore some ways of selecting and hiring a contractor.

For large projects that require tendering, it is best to use a professional consultant (architect or engineer) to manage that process. Large projects generally require Architects or Engineers and involve several sub-trades.  A professional consultant will manage the tendering process and ensure all legal details are followed.  The most qualified contractor is recommended for hire by the consultant. Legal and financial risks of an unfair or incomplete tender are transferred to the consultant. The cost of hiring a professional consultant to manage the tendering process by far outweighs the potential risk to organizations who decide to tender large projects on their own.  

Selecting and hiring the right contractor for small and medium-sized projects can be done by following a number of steps to reduce the risk of a poor renovation project. Word of mouth is a great way to find a contractor that has the right skills for your project.  Asking friends, colleagues, or other organizations about a suitable contractor gives you a first-hand account of the quality of their skills and performance. If you’re new to the community, however, local lumberyards or the Town office can also be a reliable source.

Estimates

Smaller renovations projects, like rejuvenating a bathroom or installing new kitchen cabinets, that involve one contractor can be done without professional support. Invite a contractor to view the site, discuss your renovation plans, and offer an estimate. This can count as a first step in the interview process, but don’t forget to ask for references! It is crucial that the contractor get all the information about the renovation project so they can give you an accurate estimate(s). It’s a good idea to get at least three estimates from contractors so that you can make the best choice for your home or organization.

The Estimate can become part of the contract and should have the following information included:

• Name and contact information of the contractor, where the work is being done, and the current date.
• Details of what work is to be done. This should match the scope of work you prepared earlier. It is important that all of the work you want done is included. It is also important for the contractor to list duties that they won’t do.
• Total cost of the project, along with an itemized list or budget of the significant details, terms of payment, inclusion of taxes, and amount of down payment.
• Work Schedule should indicate when work could start and approximately how long the renovation would take.

Contract

Review your estimates and make sure that all the details are included in all the estimates. It is easier to compare estimates when all the details are included. Check references from past customers of the contractor. The contractor with the lowest estimate may not always be the best contractor to hire. You need to have enough confidence and trust in the contractor to hire. A reputable contractor will offer quality, good customer service, and respect warranty claims that may arise in the future.

A written, detailed contract between you, the owner, and the contractor is essential to any renovation project. Once you feel that the contract is thorough and contains all necessary information, it’s time for both parties to sign.

There are many types of construction contracts, each suited for a specific type of construction project. For example, “Cost-Plus” contracts are good for some renovation projects where there are many unknowns and a contractor can’t give a firm price. The contractor is paid for their expenses plus an agreed amount for profit. A “time and material” contract is where the contractor is paid an hourly fee plus cost of materials. The most common construction contract is the “Fixed-Price” contract where a pre-determined fee is paid to the contractor to do the agreed upon work. SARC’s Facility Planner can help you determine which contact will best fit your renovation needs and where to obtain a good construction contract template.

Fixed-price construction contracts have information generally found on the Estimate, along with the following basic information:

• Names, addresses, contact information of contractor and owner, along with the current date and signatures
• A detailed list of all the work the contractor is expected to do  (the scope of work and drawings)
• The total value of the contract, along with details about:
  • collecting taxes,
  • when payments are due (usually after a milestone or at a regular interval),
  • details about who pays the sub-contractors,
  • changes to the contract amount after the work has begun (change orders)

The contract also confirms the contractor’s basic business requirement such as:

• Proper certification to perform the work on your building
• Adequate liability insurance (you may want to check your own insurance too)
• Proof of enrollment in the Worker’s Compensation Program
• Agreeing to the builders’ lien holdback (10% of the total contract price and payable to the contractor 40 days after the project is complete)  
• Has a business license and a GST number
• Ensuring that all sub-contractors working on the project will meet these business requirements
• All current building codes will be followed and required permits will be obtained.
• Warranty on workmanship (usually one year) and including all manufacturer’s warranty information

There is a certain amount of risk if some of these details are omitted.  Other areas of risk involve payment. The general rule is not to pay for work that is not completed nor should you pay for material that isn’t on site. In most cases, it’s also discouraged to pay a down payment. There are some exceptions or example, if your contractor is supplying costly special order items, like windows or cabinets, then you may need to pay for some of the cost upfront.

Good communication and clear expectations of roles and responsibilities outlined in the contract will ensure that your contractor will complete your renovation to your satisfaction.

The next article will continue with some “housekeeping” tips to add to the contract as you learn how to manage the construction process.