Thursday, April 9, 2009

Iron Clad Contracts: Better for Everyone

Ok, so have you ever heard of a friend or a friend of a friend tell their daunting tale of being taken to the bank by some contractor who did some work on their house and then came back and asked for more money. Or did the contractor not perform the work to their satisfaction and they had to settle?

I got so tired of hearing these stories. It seems that 90% of all the construction projects end with unsatisfied clients and frustrated contractors. Ya that's right, the contractors are frustrated too. Even though it may seem in these situations that the contractor is at fault, the blame sits with both sides. The problem...undefined responsibility and accountability.

In any business venture between partners you better bet there is an iron clad contract. The contract defines who is responsible for overseeing certain actions, and who is accountable if something goes wrong. And who makes what money.

Why would you go into a project of any scale without having a contract, or clear understanding of what is expected and who will make sure it happens. Having a contract will help everyone sleep peaceful at night and allow the job to turn out right. Here are three points that should be addressed when putting together any construction contract:

  1. Define who the deal is between. Clearly define the relationship between client and contractor. Whomever is defined as the client will be responsible to sign off on all decisions, and the contractor will be responsible to oversee the implementation of those decisions.
  2. Define the Scope of Work. What work is actually being done? During a sales pitch a contractor can make is seem like he is giving you the whole world. Well if he is, then have it in writing before the job starts. That way there is no confusion between the warm and cozy sales pitch and the actual work that he performs.
  3. Define payment method and payment schedule. Don't make the mistake of not defining how payment is handled. You don't want the contractor coming to you at the end of the job bringing a huge change order to the table leaving you opened mouthed and speechless. Nor do you want the contractor demanding final payment when the job is not 100% complete to your satisfaction.
DO NOT go into any construction project without a well constructed contract. If you do you are just asking for headaches and bad karma. While working in construction for the past ten years I have consistently used contracts. Some have been good and some have been......well lets just say costly. When they have been costly, it was due to a lack of consideration for the details. Remember success is all in the details.