Evaluating GC's contract

[Mat Zalk]

Hi all, I am a new investor in the Denver metro area and am doing a bit of work for a home that I bought a few months back (demolition of a back area of the house and its subsequent reconstruction). I've found a general contractor and he's written up a contract for some work that needs to be done. It looks a bit amateurish and I was hoping to get a professional (or experienced) opinion about it, potentially including : 1) the elements that should definitely be in the contract 2) the elements that should definite NOT be in the contract 3) dealing with extensions, delays, scope changes, and materials price increases. If there is anyone that can help a newbee in this field it would be greatly appreciated. Happy to share the content of the contract. Thanks!!

[Shaun Palmer]

@Diane Kruse@Mat Zalk

I have been working in the industry for many years as a contractor and as an owner's representative. I can tell you that the devil is in the details. I have seen many contractors and owners getting into disputes because small items were missed. I think that @Mike Frost had some good points for a high level review of contracts but remember that it is your investment...not the contractors. Be precise on what you want.

I can tell you from experience that the more time you spend on design, the more influence you will have on construction costs (especially change orders) and the less time you will spend on construction.  

My advice is as follows:

• Scope of work
  • Identify areas where you think particular detail need to be focused on.  
  • Perform a walk thru with you contractor and be precise (don't just say I want carpet in this room).  Say you want XX# pad with a renters grade carpet with an all in material costs of $XXX.
• Discuss where you want to be on price up front and ask the contractor for options.  Get them involved on how to be more competitive on pricing.  They will be able to help you.
• Final walk thru 
  • Discuss what your expectations are for the outcome.  What do you want it to look like when you are complete with the project.  Don't just assume that they are giving you a perfect product in the end and never say "this is only a rental." If you say this (which I have heard other investors say), you have set the expectation that it is of low quality and this is the type of construction methods you will receive from your contractor.
• Change Orders
  • Here is the big one. 
  • Identify any area where you think could be a potential problem. ASK your contractor there opinions of where there might be some unknowns in the project.  
  • Discuss the process for handling these changes.
    • Discuss the approval process
    • Ask your contractor for alternative options.
    • Discuss how the contract is to be amended and when he is ok to proceed with the fix. 
    • What paperwork is needed (a verbal is not enough)
• Schedule
  • Nobody ever asks for a detailed schedule. They only ask for the price and the contractor says "it will take a few weeks".  
  • If you ask for a detailed schedule with the bid, daily schedule or at a minimum weekly depending on the size of the project, then you can review this with the bid numbers as well since it is just as important.  This will create accountability on everyone's part. How you handle tardiness is your decision.
  • Remember the sooner you get it rented, the sooner you have income coming in the door.  

I hope this helps