A commercial building contractor is an important decision to make for your project. Hiring the wrong contractor can lead to significant headaches, including delays, cost overruns, and poor artistry. Taking the time upfront to vet potential contractors thoroughly will pay off enormously in the long run.
Hiring an unqualified or inexperienced contractor can have severe consequences. Shoddy artistry will likely require repairs, costing you additional time and money. Delays from contractors who can’t manage the project efficiently can stall your business operations. Cost overruns from inaccurate estimates or change orders can blow your budget, forcing you to scale back on the project scope or quality.
You want to avoid contractors who cut corners or lack the expertise to handle a specialized commercial project. Complex electrical, HVAC and plumbing systems require contractors who know commercial building codes and standards inside and out. If you are looking for a contractor to work on a similar project, they should have an established track record of success.
Doing your due diligence in selecting the right commercial contractor gives you the best chance of completing your project on time, on budget, and up to your standards. The last thing you want is to be stuck with shoddy work, unexpected costs or an unfinished building. Your business depends on having high-quality facilities, so choose your contractor wisely.
Check References and Reputation
When hiring a commercial building contractor, it’s essential to thoroughly check their references and reputation. Here are some tips:
- Request references from companies who have completed similar commercial projects to your own. You should contact the references and ask them detailed questions about their experiences. Were they satisfied with the contractor’s work and professionalism? What was the project’s status in terms of its completion and budget? Having hired the contractor once, would they hire him again?
- Google and Yelp are good places to find online reviews. Read through the reviews carefully, noting any trends or red flags. Keep an eye on how the contractor handles negative reviews. A few negative reviews are expected but look for patterns of severe issues like incomplete work or lack of communication.
- Obtain information about any formal complaints against the contractor through organizations such as the Better Business Bureau. Though the BBB isn’t foolproof, multiple complaints can indicate problems.
- Search public records to see if the contractor has been involved in lawsuits, liens, or licensing disciplinary actions. Lawsuits themselves don’t necessarily indicate issues but can warrant further investigation.
- Network with business owners who have had commercial construction done. Ask who they used and whether they were satisfied. Word-of-mouth references can provide valuable insights.
Thoroughly checking references helps verify the contractor’s reputation. While no contractor is perfect, one with a strong reputation for professionalism, high-quality work, good communication, and the ability to stay within budget is more likely to be a good fit for your project.
Verify Licensing and Insurance
When hiring a commercial building contractor, verifying they have valid licenses and insurance is essential. This protects you from potential issues down the road.
- Confirm Valid Licenses: The contractor should have a valid general contractor’s license for commercial projects in your state. This proves they are legally allowed to operate and oversee building projects. Verify the license is current and covers the type of work needed.
- Check Liability Insurance: Workers’ compensation and general liability insurance are necessary for every contractor. An employer’s general liability policy covers property damage and workplace injuries. Workers’ comp covers injuries to the contractor’s employees. You should carry at least $1 million in general liability insurance.
- Get Proof of Coverage: Don’t just take their word for it. You should request a copy of your current insurance certificate and verify your policy details. Make sure you are named as an additional insured on the policies. There should be no exclusions that would leave you vulnerable.
Following these steps protects you from the risks of hiring an uninsured or unlicensed contractor. Only work with properly licensed and insured professionals to avoid headaches.
Assess Experience with Similar Projects
The contractor’s experience with projects similar to yours is an essential factor when hiring a commercial building contractor. Here are some tips:
- Review their portfolio of past commercial projects. Look for examples of buildings comparable to what you want to construct. Seek contractors who have built structures in the same category, such as offices, retail stores, warehouses, etc. Their portfolio should showcase their expertise in that type of commercial construction.
- Ask how many years they’ve been in business.
- If you are looking for a contractor, ensure they have been operating for at least five years. Their skills and processes in all aspects of commercial construction will have been refined over time. Newer contractors may still learn or lack the track record to prove themselves. An established contractor is a safer bet for getting your project done right.
- Inquire about their experience with buildings of similar size/scope. Size matters when it comes to commercial construction. A contractor mainly builds small shops may not have experience managing large-scale projects. Ask about the scale of past buildings they’ve worked on.
- Seek out contractors who are familiar with your type of business. For example, healthcare and restaurant buildings have unique requirements. Find a contractor who understands the ins and outs of constructing your commercial space. Their familiarity will lead to a smoother build.
Doing your due diligence on a contractor’s commercial experience will help ensure you choose someone qualified to successfully bring your vision to life. Their track record on comparable projects says a lot about their capabilities.
Get Detailed Bids from Multiple Contractors
At least three contractors should submit detailed bids when hiring a commercial contractor. Accepting the first bid you receive is not a good idea. Take time to compare bids on scope, costs, and timelines thoroughly.
Scope
Ensure all bids wholly and accurately cover the full scope of work required. Review bid specifications, materials, and inclusions/exclusions. Ask contractors to explain or revise their bid scope if anything needs to be clarified or added.
Costs
Compare bottom line costs as well as pricing for individual bid items. Make sure you understand why bids differ in cost. Ask contractors to explain pricing for labor, materials, equipment, subcontractors, overhead, profit margin, etc. Watch for unbalanced bids with very high prices on some items and very low on others.
Timelines
Compare estimated project timelines. Ask contractors how they developed time estimates and what factors could delay the schedule. Try to gauge how realistic and achievable the proposed timelines are. Understand penalties for missing deadlines.
Making an informed decision using accurate data is possible if you receive multiple detailed bids. It may not be the best value overall or meet your needs if you automatically choose the lowest bid. Take time to thoroughly analyze and compare bid specifics before selecting a commercial contractor.
Check Financial Stability
You should review the financial stability of commercial contractors before hiring them to ensure they have the resources to complete your project. For an idea of the company’s financial standing, ask to see recent balance sheets and income statements.
Look for signs of consistent profitability and positive cash flow over the past few years. Make sure they have adequate working capital and can handle the debt. If there have been losses or changes in financial status, the contractor should be able to explain them.
Request a bondability letter from the contractor’s surety company. This helps confirm their ability to be bonded for your project based on financial strength. Bonding capacity is usually tied to a company’s net worth, providing insight into its finances.
A financially stable contractor is important because you want assurance they will have the staying power to see your project through to completion. If their finances are strong, they may be able to pay subcontractors and suppliers or even go out of business entirely. Protect yourself by thoroughly vetting their financials.
Get Everything in Writing
A signed contract protects both the client and the contractor. The document should clearly state the scope of the work, the timeframe, the payment schedule, and any other terms associated with the project.
Some key things to get in writing:
- Exact scope of work – Be as detailed as possible to avoid miscommunications later. Spell out materials being used, specifications, allowances, etc.
- Timeline – Agree on start and end dates, milestones, and penalties for delays.
- Payment schedule – Specify down payment, progress payments, retainage percentage, and final payment. Never pay in total upfront.
- Change order process – Establish how changes or additions will be handled and priced. Get all change orders approved in writing.
- Permits – Specify who is responsible for obtaining necessary permits and licenses.
- Insurance – Require liability insurance and workers’ compensation coverage. Ask for certificates naming you as additional insured.
- Warranties – Guarantees for artistry and materials should be spelled out. More extended warranty periods demonstrate confidence in quality.
- Cleanup – Expect the site to be left clean daily and a final cleanup when work is complete.
- Dispute resolution – An arbitration clause can save time and legal fees if disputes arise.
Having a solid contract avoids confusion and holds the contractor accountable. Never rely solely on verbal agreements – always get it in writing first. A little time spent here can prevent significant headaches later on.
Agree on Payment Schedule
When hiring a commercial building contractor, agreeing on a payment schedule tied to milestones and completion of work is essential. Don’t provide large upfront payments. The typical payment schedule involves:
- 10% down payment to secure the contractor and get materials.
- 10-15% paid upon completion of site preparation.
- 30% paid upon completion of foundation and framing.
- 30% paid upon completion of mechanical, electrical, and plumbing systems.
- A 10% retention payment is made after passing inspection and completing punch list items.
Direct payments are tied to completion percentages or specific milestones. Many states have prompt pay laws requiring payment within certain days of completed work. Get lien waivers from subcontractors to protect yourself if they aren’t paid. Withholding retainage ensures the contractor completes the punch list and fixes any issues before final payment.
Verify Bonds are in Place
When hiring a commercial contractor, verifying they have the proper bonds in place is crucial. This helps reduce risk for the project owner.
Performance and payment bonds are the two main types of bonds to check. In the event of a contractor’s failure to complete the project as specified in the contract, a performance bond protects the owner. It provides funds to hire a new contractor to finish the work.
The payment bond ensures that the contractor will pay subcontractors and suppliers of materials. Payment bonds guarantee that subcontractors and suppliers will be paid if the contractor fails to pay.
Now that you’ve got the knowledge to hire the perfect commercial building contractor, don’t waste time winging the budget. Head over to our commercial estimating services page to get a clear and accurate picture of your project’s costs. This will empower you to negotiate with confidence and ensure your project stays on track financially. Check out our commercial estimating services today!