Contract documents

March 11, 2022

Finding a Contractor

You have worked with your architect during development of the design and construction documents.  Now, you are ready to find a contractor. Your architect may be able to recommend a contractor. You can also ask for referrals from people you know who used a contractor for a similar type of project. A neighborhood listserv can also be a good place to ask for recommendations. If you are developing a commercial space, you might be able to obtain referrals from business associates. You might also want to look up potential contractors on state or local jurisdiction web sites that provide licensing and other information.

It is a good practice to select several potential contractors and obtain bids. Assistance with the bidding process may be included in the scope of your architect’s services (For more information about architect’s services, see the previous article in this series, “Working with an Architect”).   You will want to compare bids for items such as cost and schedule, as well as consider things such as the contractor’s experience and whether you think you would feel comfortable working with the contractor.

There are various methods of compensation that contractors use but, for a residential or small commercial project, a construction contract will typically be a fixed sum; in other words, the contractor will give you a total amount to be charged for the construction work, such as $50,000.

A contractor will often include allowances in the bid. Allowances are amounts for items that are not specifically determined at the time of entering the contract, but that are included in the contract sum. For example, a contract for a kitchen remodel may include an allowance of $5000.00 for countertop materials. This means that the total contract sum includes that $5000.00. If you chose a material that does not cost as much, the difference would be deducted from the total cost at the end of the project. Conversely, if you chose a material that costs more than the allowed amount, you would be billed for the difference. Accordingly, you want to review the allowances and make sure they are realistic so that you won’t find yourself exceeding the allowed amounts and paying more than you expect at the end of the project. In order to do this, you will need an idea of what types of materials you will want to choose and their cost, such as granite vs. laminate countertops.

When you are reviewing a contractor’s bid, be sure that you understand all of the provisions and terminology. Do not hesitate to ask questions. It is important that you understand what is being proposed. Construction contracts involve a lot of items that you are probably not familiar with if you are new to such projects.

Owner Information

You will need to provide your contractor with information about your budget and expected construction milestone dates (eg commencement and completion); your representative, (the person who will make decisions that the contractor can rely on); and any special project requirements. You may need to provide surveys. For a residential construction project, you will need to provide information about any restrictive covenants, easements, and Homeowners Association requirements. If you provide inaccurate or incomplete information, or if you make changes to items like your program or budget, the contractor may be entitled to changes to the contract sum or time.

Contractor’ Scope of Work

The contractor’s scope of work includes providing the construction and services required by the contract documents, which are the owner/contractor agreement, the construction documents, and associated specifications. This typically includes labor, materials, and equipment. These items will be included in the contract price. The contractor will obtain building permits and other required permits. The contractor will also retain any subcontractors that are needed for the work and will pay them out of the contract price. However, the owner may be responsible for some items such as testing for asbestos and lead. The architect or contractor should advise you if the project will need that type of testing and your responsibility to arrange and pay for the testing.

Payments

Your owner/contractor agreement should include a payment schedule. This might be monthly payments based on an application for payment submitted by the contractor (and reviewed by the architect if included in the architect’s scope of services) or might be based on construction milestones, such as a certain amount due at contract signing, after framing is complete, etc. The contract should state when the owner’s payment is due after receipt of the contractor’s invoice. If the owner’s payment is late beyond a certain point, the contractor might have the  right to stop construction until payment is received.

It is important to be aware that the construction process often necessitates changes that cannot be known in advance, such as differing site conditions or unforeseen hazards. The contractor may be entitled to a change to the contract sum or price for completion of work that  cannot be determined in advance, and that is not included in the contract sum. The same might hold true if the owner decides to make change to the work during the course of the construction. In addition, it is possible that materials might become unavailable due to forces outside of the contractor’s control. The contractor might have to request substitutions for those materials, and associated changes in cost, to continue the project without delay.

Contractor’s Performance Standards

The contractor’s work is judged in accordance with the requirements of the contract documents, as well as compliance with applicable law and codes. The Contractor typically warrants to the Owner and Architect that materials and equipment furnished under the contract will be new and of good quality; that the work will be free from defects; and that the work will conform to the requirements of the contract documents.

The contract should require that the contractor will correct work that does not conform with the requirements of the contract documents, at the contractor’s expense.

The contractor is also responsible for determining the sequence and method to use to complete the work, and for job site safety and cleanup. The owner should comply with any safety protocols established by the contractor.

Conclusion

Undertaking a construction project is exciting, but it can be challenging. Choosing your architect and contractor carefully, providing them with the information they need from you, making sure you understand the provisions of your agreements, and maintaining positive working relationships will all contribute to a smooth process and a successful project.

The remaining articles in this series will discuss some of the items already mentioned, but in greater detail, such as schedule, changes in the work, and rejection and correction of work.  We will also look at other items that are important to consider, including termination, dispute resolution, and insurance and bonds.

Susan Van Bell, Esq. was Senior Director of Content for AIA Contract Documents for over ten years. She is currently a consultant.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.