How to deal with non performing GC’s and subs?

Question

What’s up guys? So, I decided to use a GC for my second project and it has been a struggle. I would like to know how you guys deal with non performing GC’s? We’re currently 4 weeks behind schedule because of the electrician not showing up to get the job done correctly and we didn’t pass the inspection and now we’re waiting again for another inspection. The city of Chicago is behind on inspections which they should’ve known and planned accordingly. With that being said we can’t close any walls and decided to work on the exterior but that’s even a struggle the GC will tell us “we’ll start on that tomorrow” but tomorrow shows up 3 days later. How do you guys (I.e. experienced investors) deal with subpar contractors?

Tom Shallcross · Answer

@Shawn Gardner - You may need to move on based on some of the other items you mentioned. However, failing a Chicago city inspection on the first go-around is not one of them. There is a true lack of consistency from the city and we can do 10 jobs the same way and it'll pass the first 9 times, but not the 10th (especially on roughs). Each inspector is different, many are good, but some are not and each has their own interpretation of the code.

Like others have said the city delays aren't on the GC. We've scheduled inspections weeks in advance just to have the inspector no-show. No recourse for us, only option is to reschedule and sit there and pay another 3 weeks of holding costs.

Going back to the original question, you own the project, the payment schedule, and ultimately the actions of everyone involved in the project. When issues like this arise, you need to get super hands on and take matters in to your own hands to hold all parties accountable, or find new accountable parties.

Matthew Paul · Answer

So you want to blame the delays on the GC , but the City of Chicago is behind on inspections ?  That is your problem right there . The GC has NO control over Government , ( probably union employees too ) . How do you plan accordingly when you are dealing with a Government agency and all the Covid crap ?   Every trade is short handed , from the supply houses , truck drivers , laborers , etc .  Being 4 weeks behind isnt bad .

Prior to Covid things ran smoothly , I had inspections in a day or 2 . Working on an addition, had the footers dug and called them in , it was a week for an inspection , it rained on day 4 and there was some cave in and mud , we had it hand dug out , it then rained the day the inspector showed up and failed , had to dig again and waited 3 more days for inspection , had to shore upsides with plywood and bring in 5 tons of stone ( per inspector ) . Concrete delivery was 3 day wait . Block layer was scheduled for a week before so now we have to wait on him , he is on another job . Framer had to be rescheduled  along with all the other trades .  Customer isnt happy , the extra costs to do the footer was an additional charge ( as per contract ) And the finish date extended ( as per contract ) .   ALL BECAUSE OF OF INSPECTIONS .    The ONE part of contracting the GC cant control .

Jonathan Klemm · Answer

@Shawn Gardner - First off you are not alone - Managing general contractors, subcontractors, materials, vendors is a full-time job.

I tell every one of your clients that the project is going to take longer and cost more than I tell them no matter what.  The problem typically ends up being communication which is what we pride ourselves on.  Construction and renovation are never going to go perfect, it is the nature of the unknown - but communicating what's going on seems to be difficult for most GCs.

I would be very aware of the payments you've made and be sure not to overpay - that is really your only leverage.  I have heard of half at least a dozen contractors getting overpaid and then ghosting their clients just this year.

At this point, you just need to get done so I'd be calling daily and trying to get subcontractor information to keep pushing the work myself.  In the beginning, you could make some incentive bonuses or other ways to push the work.

Sue Hough · Answer

@Tom Shallcross is correct.  Obtaining permit inspection from the city of Chicago is never predictable and your GC is not going to be able to predict the outcome any better.  Earlier this year I waited 7 weeks for an HVAC inspection only to be failed for a minor infraction and waited another 5 weeks for re-inspection.  If you are going to work in Chicago you will need to allow for these types of unfortunate events.  There is no way around it.

Also, I am sure you are aware we have a serious labor shortage, the trades are no exception.  As a GC myself in Chicago, this is very problematic at this time, even the best planned GC’s are struggling.  To be four weeks behind with a permit re-inspection is not out of the norm.

Good luck

Grigory Pekarsky · Answer

There are many reasons why an employee might not be performing up to your standards and it can take time for them get back on track or even worse, they never recover from their performance slump at all. When this happens, instead of continuing down this path of frustration and waiting for things to change, try these techniques for dealing with non-performing GC’s and subs:

First, make sure there is no miscommunication on your end. For example, if you're dealing with a GC and they tell you that something isn't complete and it's due the next day, follow up to make sure that they understand what needs to be done and when. Sometimes this will clear things right up and lead to the work getting done in time for their sub-trade to meet their deadline. If possible, try asking another sub what happened because sometimes it’s not really the GC’s fault at all or maybe it was just an honest mistake that can easily be fixed by simply clarifying expectations.

If you have tried all of these methods but nothing seems to work out in terms of communication between yourself and your contractor, maybe the most effective solution is fire them.  In the long run, if you feel as though your contractor is trying to mislead or deceive you from the beginning, this will never change. Failed communication leads to failed work and once that occurs, it’s just a matter of time before they have to come back and redo everything. Sometimes this means more invoices and longer project times so definitely avoid these kinds of contractors at all costs.

Crystal Smith · Answer

Many, not all, of our contracts with GCs have a provision that allow us to take specific work away from a GC. For example in the case of an electrician not showing up we may exercise that provision of the contract and subcontract that work to another electrician. If the contractor was provided any upfront $ for that electrician we would take it out of his next draw. If we find that the contractor is failing on all fronts we will fire the contractor but.... We will fire the contractor after ensuring we have lien waivers in place & signed from the contractor and all the subs.  In the beginning of our career we made the mistake of firing a contractor and the next thing we know there's a mechanic lien on the property. So make sure you're protected before you fire.

Regarding not passing inspection- That can be a crap shoot. Sometimes you get a guy who's having a bad day. We had a situation with a porch that did not pass inspection. The contractor built the porch exactly to the architects drawings. The architect came down, inspected the work and said "leave it like it is" . We naturally had to approve doing this. The contractor called the the inspector for a re-inspection & it passed. We concluded the guy was having a bad day.

Regarding the city of Chicago being behind on inspections- We hire an expeditor for permits and inspections. Many of these guys are city workers with an inside tracks. It doesn't alway work, but there have been times it has saved us a couple of weeks. I agree with you that times for inspections should be considered in a schedule but these are unusual times. How we use to handle inspection is to call for the inspection one to 1 to 2 weeks before a part of a job was to be completed per the schedule.  We've doubled that time during the pandemic

Cameron Tope · Answer

Hey Shawn,

As the guys stated above, you have to take control of your business - and the biggest form of control is payments. Ensure you're not paying for work that hasn't been done and voice your concerns about timelines and how the GC expects to make that up to you.

Be there as frequently as you can but as @Bob Okenwa said, at some point you may need to take full control and fire the GC.

Bob Okenwa · Answer

Fire them immediately. Never throw good money after bad contractors. Falling behind schedule happens, but lies are an intolerable offense. Take control of your business and move on from those who fail to perform/hold up their end of the bargain.

How to deal with non performing GC’s and subs?

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