After you completed the list of your potential contractors, next is to select your top picks.
Again, we will be assuming that your project is a common mid-cost residence probably ranging from 2M to 6M pesos. Cases might be different on higher or lower cost projects. I am also assuming that projects worth 6M up already is worth hiring a Construction Manager and he is the one handling or assisting the OWNER in dealing with the contractors.
According to what you found out on your initial gathering of infos, give more points to contractors with a good office and warehouse, has proper business documents, and has client references. Narrow down your pick into top 3-5.
Schedule a meeting with these contractors. It is recommended that you are the one who goes to their office since contractors might not accept your invitation if they feel that they have a very little chance of getting the project. They actually know if a Client is just soliciting information from them. Also, another advantage is, you can see and feel how the contractor treats his client and he will also feel that you are serious in considering him thus making him give you further information you need. This will probably be your second visit to their office.
Things to ask on your initial meeting with a contractor:
1. How many on-going projects they have. Actually, the lesser on-going projects they have, the more advantageous to you. Simply because, you don't share attention with too many projects. Chances are, your project will have the most out of the contractor's resources. Although, contractors tend to adjust as the number of their simultaneous projects increases.
2. Ask for reference project. If your project is a 2-storey residential with floor area of more or less 300sqm, ask the contractor of specific finished project with the same description as yours. If he is in construction industry for several years, he should have gotten similar project as yours before. This is to prove that he already has the experience and the expertise perfectly fit for your project.
3. Ask for basic contract terms and conditions. Some items that you should clarify are the following:
a. Down payment. For these type of project, down payment usually range from 20-30%. Also, it is important to request a Guarantee Bond equivalent to the down payment. This is in case something goes wrong and the contractor abandoned the project before it even started, you can claim back your down payment from the insurance company. Just make sure that the insurance company is reputable.
b. Construction and Surety Bond. Aside from the Guarantee Bond, it is important also to have these so that you will be assured at any point during the construction period.
c. Duration of Construction. This is for you to know how long they can finish your project. Also, this will help you manage your cash flow.
d. Mode of Payment. The best mode of payment for contractors would be through Progress Billing with pro-rated down payment and retention.(We will discuss this further on my next articles)
e. Excluded items. Although you are probably dealing with a General Contractor, there are still items that you will prefer to be excluded in the contract. This is because these items are owner-preference dependent. And/or for you to save on overhead charges if included in the contract.
4. Before you meet with them, prepare a set of blueprints and a copy of the Material Specifications prepared by your architect/designer. You will be giving each contractor a copy of these to be their basis of the estimates/quotation you will be asking them. If possible, give them also a standard bid form. You can ask your architect/designer or CM to make this. This is for apple to apple comparison of bids.
Expect that they will be asking further question upon reviewing the plans. If you can not answer their questions, or the questions are too technical for you, you will have to forward these to your architect/designer. Even if only one contractor asked a question give your answers also to the other contractors. This is to keep them aligned and maintain a good cost comparison. In the architect's office, these are called bid bulletins.
Estimates usually takes a week or two to finish. If you are not in a rush, you can set the deadline of submission of bids 2 weeks after transmitting the bid documents to them.
For these types of project, a Closed Bid is usually the way to go. This means that they will be submitting their bids with their best price in an enclosed envelope and it is up to the client to decide on whom the project will be awarded.
Tuesday, September 30, 2014
Thursday, September 25, 2014
Project Fails
Before we proceed on my recommendations on how to select and deal with contractors, let's discuss first some common mistakes committed by each parties that often times result to project fail. These mistakes are considerations in order to fully understand the ways in dealing with contractors.
Mostly in a client's perspective, the project fails because of the contractor. But usually, it is not the contractor that should always take the blame.
CONTRACTOR'S FAULT
1. Underestimate. If discovered before signing of contract, the contractor will probably withdraw unless otherwise, the OWNER agreed to correct the estimates and adjust the contract cost. Options are to have a higher cost or make some downgrading. If found out during construction this will have an impact to both the Contractor and the OWNER. The contractor might not finish the project, leaving the OWNER in a compromising stage.
2. Cheating. We all have the impression that all contractors tend to cheat, from material quality, overpricing, overbilling, etc. But there are still many contractors that would not risk their reputation in exchange for small additional income thru cheating.
Skipping procedure or shortcut of works is also cheating. But take note that not all shortcut works are considered cheating. There are some that are just mere construction techniques and technically acceptable.
3. Incompetence and Negligence. This results to poor quality and workmanship. Either produced by low-skilled workers or poor supervision, monitoring and checking of the foreman and/or the project engineer. Project engineer's poor comprehension of the plans and miscoordination can terribly ruin the project. Due to negligence, the contractor might also overshoot. The estimates are fair enough, but due to wrong execution and repetition of works, the allotted budget is reached before finishing an item. This results to frustrating losses.
DESIGNER'S FAULT
1. Incomplete and Inaccurate Plans and Details. The saying "No Plans are perfect" is an excuse for this. But the basic details should be ensured included in the issued set of plans. The CM and the Contractor should also review the plans before starting construction.
2. Late Response to Detail Request. It is normal that in some point during the construction, the CM and Contractor might find out that there are missing details in the plans. They are then permitted to submit a RFI or request for information to the Architect to issue the required design detail. But sometimes the architect's reply is taking too long that the project cannot move forward.
CONSTRUCTION MANAGER'S FAULT
1. Negligence. We are assuming that CM is competent and duly qualified, but failed to conduct proper checking resulting to wrong execution, misalignment and inconsistency of actual with the plans. This may cause delay to the project, material wastage and additional expenses.
2. Corruption. Yes, there is corruption even in construction. Some freelance CMs receives extra cash from the contractor in exchange for approval, recommendation to owner and other favors.
OWNER'S FAULT
1. Late Decisions. During construction, the OWNER's main participation is to make decisions. As the project progresses, he begins to see the actual. And because of this, he may decide to change something because he realizes that its not what he wanted. This is normal. That's why we have construction revisions. But the problem is most of the time, it takes too long for the owner to decide on the revisions and makes delay on the project.
2. Late Payment. Late payment usually happens during construction. And its quite understandable but not being late for more than a month. Because of this, the contractor tends to slow down or even stop at all since he is underpaid.
3. Too much Questioning. We understand that OWNERS are spending hard earned money for their dream house so its normal for them to ask questions. But sometimes, due to this questioning, a lot of nonesense issues arises and affects either directly or indirectly the progress of the project.
What I've mentioned above are only the most common mistakes. There are still more but might depend on the case or situation.
Mostly in a client's perspective, the project fails because of the contractor. But usually, it is not the contractor that should always take the blame.
CONTRACTOR'S FAULT
1. Underestimate. If discovered before signing of contract, the contractor will probably withdraw unless otherwise, the OWNER agreed to correct the estimates and adjust the contract cost. Options are to have a higher cost or make some downgrading. If found out during construction this will have an impact to both the Contractor and the OWNER. The contractor might not finish the project, leaving the OWNER in a compromising stage.
2. Cheating. We all have the impression that all contractors tend to cheat, from material quality, overpricing, overbilling, etc. But there are still many contractors that would not risk their reputation in exchange for small additional income thru cheating.
Skipping procedure or shortcut of works is also cheating. But take note that not all shortcut works are considered cheating. There are some that are just mere construction techniques and technically acceptable.
3. Incompetence and Negligence. This results to poor quality and workmanship. Either produced by low-skilled workers or poor supervision, monitoring and checking of the foreman and/or the project engineer. Project engineer's poor comprehension of the plans and miscoordination can terribly ruin the project. Due to negligence, the contractor might also overshoot. The estimates are fair enough, but due to wrong execution and repetition of works, the allotted budget is reached before finishing an item. This results to frustrating losses.
DESIGNER'S FAULT
1. Incomplete and Inaccurate Plans and Details. The saying "No Plans are perfect" is an excuse for this. But the basic details should be ensured included in the issued set of plans. The CM and the Contractor should also review the plans before starting construction.
2. Late Response to Detail Request. It is normal that in some point during the construction, the CM and Contractor might find out that there are missing details in the plans. They are then permitted to submit a RFI or request for information to the Architect to issue the required design detail. But sometimes the architect's reply is taking too long that the project cannot move forward.
CONSTRUCTION MANAGER'S FAULT
1. Negligence. We are assuming that CM is competent and duly qualified, but failed to conduct proper checking resulting to wrong execution, misalignment and inconsistency of actual with the plans. This may cause delay to the project, material wastage and additional expenses.
2. Corruption. Yes, there is corruption even in construction. Some freelance CMs receives extra cash from the contractor in exchange for approval, recommendation to owner and other favors.
OWNER'S FAULT
1. Late Decisions. During construction, the OWNER's main participation is to make decisions. As the project progresses, he begins to see the actual. And because of this, he may decide to change something because he realizes that its not what he wanted. This is normal. That's why we have construction revisions. But the problem is most of the time, it takes too long for the owner to decide on the revisions and makes delay on the project.
2. Late Payment. Late payment usually happens during construction. And its quite understandable but not being late for more than a month. Because of this, the contractor tends to slow down or even stop at all since he is underpaid.
3. Too much Questioning. We understand that OWNERS are spending hard earned money for their dream house so its normal for them to ask questions. But sometimes, due to this questioning, a lot of nonesense issues arises and affects either directly or indirectly the progress of the project.
What I've mentioned above are only the most common mistakes. There are still more but might depend on the case or situation.
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