Enforcing Contracts via Late Penalties

[Ashan D]

From what I've read, it seems the #1 problem with contractors is not getting the work done when they said they would. Well what if penalties were built into the contract, so that for every day work is not completed past the deadline, a 3-5% reduction in pay will be enforced. Obviously this would only work with projects that can reasonably be estimated for time requirements (I think most would be)

Is this a ridiculous stipulation, or could it be worked into an agreement and provide better performance?

[J Scott]

Originally posted by Bob McIntosh:

have any of you guys used incentives to finish earlier? I have read a few things that suggest using this method but what have those of you out there seen?

Yes, the sooner they finish, the sooner they can move on to my next rehab and make some more money...

Might sound like I'm joking, but I'm very serious. My contractors know that if they aren't available to start on another one of my projects when it's ready to start (even if they're currently working on one of my projects), I'll find someone else.

So, their goal is to finish quickly so that they can move on to the next without "missing" any of my houses.

I also give my contractors a bonus after each house I sell...the more I make in profit and the more quickly they sell, the bigger the bonuses. While I don't stipulate this in any contracts, my contractors know that there is a reasonable chance they'll get a bonus at the end of the project if it finishes quickly and high-quality.