Tuesday, June 30, 2015

THE DESIGN/BUILD CONTRACT

Design/Build contractors are really running two businesses at once: there is the design portion of a project, and then there is the actual construction.  Design/Build contractors should therefore have two different contracts for these phases of the job for the following reasons:
  1. Design does not fall under the Massachusetts Home Improvement Contractor Statute, M.G.L. c.142A which governs home renovation projects in Massachusetts. There are strict requirements for which clauses have to be included in these contracts and any violation is a per se, automatic violation of the Consumer Protection Statute, M.G.L. c.93A, which can give consumers up to double or triple damages, attorney’s fees, interest and costs.  For that reason, contractors do not want the design portion of these projects to be subject to these laws.
  2. The contractor must make clear to the homeowner that there is a separate fee for the design, and that the fee is nonrefundable. I have seen too many cases where a homeowner decides to proceed with another contractor and then asks for all of his money back. 
  3. It must be made clear to the homeowner that the design is for the contractor’s use only. One of the advantages of design/build is that the design does not require the degree of specificity that would allow for it to be used by an outside contractor.  The contractor can make modifications as the project progresses.  This provides the homeowner with savings by bundling the design and build services.  However, if the design/build process is not made clear, there is a higher risk that the homeowner will attempt to take the design/build contractor’s design to other contractors.  
  4. The contractor should decide who owns the design once it is paid for. If the homeowner is given the design then the homeowner should have to sign an indemnification clause that would protect, defend and pay back the contractor if he is sued for the use of the design by someone else.
  5. The contractor may decide to include mediation and/or arbitration clauses in the design contract that would result in a settlement of any dispute regarding the design phase. This would be binding, and would not fall under the state Home Improvement Contractor Arbitration Program.
  6. The contractor may also want to include a clause that allows him to end the work at the design phase “for convenience” if the relationship is not going well.
It is the contractor’s job to educate the consumer about the advantages unique qualities of design/build.  The customer should know who is doing the design and the type of qualifications being offered.  They should understand that it is the intent of the parties to engage in every phase of the construction together. 
Most consumers are not familiar with design/build.  It is important to have comprehensive contracts to protect you if unexpected issues occur.

Tuesday, June 23, 2015

Why Contractors Should Strive for Excellence

I have many clients who tell me that they've never been sued. If a problem develops, they work with their clients and try to resolve it. Working as a contractor who does new construction or remodeling has never been harder. Clients turn to the internet and believe they know how to do it faster, better and less expensively. They are savvy consumers who monitor time spent on the job and costs of materials.  Sometimes they work at home and keep close tabs on the work. The pressure on contractors is enormous, and in some cases, can make them discouraged and less motivated to do their best. Despite working in a stressful profession, contractors should always strive to do their best; even if the owner is very, very difficult.

The reason for this is simple. A contractor or construction company's reputation can make or break his business. I have had clients receive bad reviews on known websites and seen them severely damage their financial condition. Unfair as it may seem, once a bad review is posted, it is extremely difficult, if not impossible to remove. We all seem to remember the bad reviews even if there are numerous good ones.
Marketing literature says getting a new client is hard. It is much easier to get new business from an old client, so it is important to keep the relationship on good terms. In addition, most established businesses get their work through word-of-mouth. In that respect, you are only as good as your last job. References are everything.
On that note, the other day I heard a story that amazed me. As part of my practice, I coach my clients on how to deal with difficult clients. Some have had the door slammed in their faces, the locks changed, received nasty emails or been wrongfully terminated. One client was having repeated issues with a job, but he handled every insult with class and respect. He never challenged the owner head on, followed through with his promises and asked for payment nicely. Meanwhile, he never knew what was coming next.
Imagine his surprise when he overheard the owner telling a friend what a great job his company had done! After all his trouble, this same client was giving him an excellent review and the opportunity for future referrals. So, the next time you want to throw up your arms and walk off the job, keep this in mind. It is really worth it to always strive for excellence.


Saturday, June 13, 2015

The Pros and Cons of Design/Build

It seems as though more and more contractors are branding themselves as design/build these days.  The process is attractive for both homeowners and contractors.  Rather than seeking the services of an architect, the homeowner only needs to engage one professional for the design and execution of a renovation project.  The contractor has a great marketing tool.  He can advertise as a “one-stop” shop that provides both the design and construction as part of a seamless, efficient process that will result in a less expensive, successful project.
What I have found in practice is that design/build has both advantages and traps for the unwary contractor and consumer.  The pros for the contractor are many:
  1. Earning a fee for both the design and the construction aspects of home improvement projects.
  2. Working with a design that has the necessary components for the construction phase. No unclear specifications that handicap the builder.
  3. Dealing with known in-house or independent contractors who have a preexisting relationship with the contractor. Fewer conflicts with unfamiliar design professionals.
  4. Longer-term projects and the ability to provide a greater variety of services to the customer.
  5. The ability to provide a lower bid for a job, since the specifications will not require as much detail as modifications can be made onsite.
  6. An additional creative outlet for the contractor
  7. More “bang for the buck” on one’s website since photos will reflect both design and construction ability.
That said, numerous clients have run into issues with design/build that can be prevented.  The most common problem is when client(s) wants to terminate the relationship before the construction phase, take the design and have it executed by someone else or want to stop the project altogether.  In addition, clients frequently don’t understand the process and request numerous revisions or designs beyond their budget.  Finally, I have seen numerous instances where clients do not understand the pricing and payment schedule associated with the project.
All of these issues can be prevented with a proper design/build contract.  This will be the topic for my next blog post.