Homeowners and HOAs periodically face major construction contracts for renovation or repairs, particularly following a disaster. Here are some tips to help homeowners and HOAs needing a contractor.
What's the job? Contractors are often asked to prepare the necessary “scope of work,” describing the work needing to be done, and “specifications,” the specific techniques and materials to be used. If multiple bidders are involved, they should all follow a consistent scope and specifications. It’s harder to ascertain the best bid when contractors propose different scopes of work using varying materials.
Consultants. Qualified consultants can help develop a scope of work and specifications, advise on the type of contract arrangement, evaluate bids, and advise regarding contractor requests for extra money. Such consultants typically charge by the hour and act as the customer’s advocate during the repair project. Individual homeowners often cannot afford this, but most HOAs would benefit greatly from such help.
What kind of contract? There are options in addition to the common fixed-price bid. Contractors might be hired on a “cost-plus” basis, where the contractor’s out of pocket costs are marked up by an agreed percentage. Another type of arrangement is “time and materials,” where contractors charge agreed hourly rates for labor and are reimbursed for the cost of the materials (with or without markup). If repairs are funded by insurance, consider asking the contractor to agree to accept what the insurance approves.
Lowest bid? Renovation or remodel projects involve risks of substantial hidden conditions, which can drive up the bid price because of the unknown factor of potential difficulties. Sometimes a “cost-plus” arrangement might prove better for both sides, since the contractor is not locked into a fixed price and so would not need to add extra to their bid for protection against possible complications.
Payment schedule. Contractors often propose payment schedules based upon “percentage of completion”, but how do customers know if the quoted percentages are fair or accurate? Seek more definite payment signposts than percentage of completion.
Test project. In large HOA projects involving repetitive work such as decks or balconies, paying the contractor on a cost-plus basis for the first location may enable a solid fixed unit price for the other locations.
Licenses – mandatory. Disqualify contractors without the right license for the job, or if their license number doesn’t match their business name. Check licenses at cslb.ca.gov.
Financing. If the project is to be funded by a bank loan or special assessment, be careful about signing a repair contract before the money is in hand.
Project budget. Consider other project costs in addition to the contractor and include a contingency line item in your budget. Contractors can charge extra for surprises that they couldn’t see when they were bidding.
Quality control. The cost of an inspector to spot check the contractor’s work may save money and headaches in the long run. City building inspections are typically spot inspections and do not guarantee the work is good.
Other planning considerations. What will be the hours of work allowed? Is a place needed for storage of materials? How will HOA residents be advised of work starting on their building or street?
“Measure twice… and cut once,” is the old construction saying. Good advance planning is always better than undoing mistakes. Don’t rush.
