#365 - THE BEST WAY TO HIRE A CONTRACTOR: Pre-Construction and Other Methods
SUMMARY
This week David and Marina of FAME Architecture & Design discuss four different ways and times clients can hire a contractor: Negotiated Agreement, Competitive Bidding, Design Build, and Pre-Construction. The two cover the benefits and negatives of each, their preferred method, the processes involved, the role of the architect throughout, controlling project costs, and more. Enjoy!
TIMESTAMPS
(00:00) Introduction.
(00:54) Negotiated Agreement and the importance of detailed contractor proposals.
“Transparency when it comes to construction costs and the contractor's proposal is essential. I've never worked with a good contractor, or even a decent one, who did not provide full transparency demonstrating where the client's money is going. A contractor's fee is often a percentage of the materials and labor costs (the raw cost to build the house) and their proposal should have a detailed breakdown of how much is being spent on the wood, the foundations, the concrete, the labor, etc. As a client, if you don't get that, it’s a major red flag. [… If] the number is low at the beginning [you don’t know if] it’s not including a bunch of things.” (03:00)
A lot of what the architecture, design, and construction process is about, and how to achieve success with it, is being thorough and detailed and spending a certain amount of time and money upfront to plan for the future—to save time and money later on. (04:57)
(07:03) Competitive Bidding process and problems. Interviewing contractors.
“It really makes no sense that you would work closely with an architect for a full year and spend tens of thousands, maybe even hundreds of thousands of dollars on them to design this idealistic perfect dream home, not have any idea how much it's going cost, and then send it out to contractors to find out. There's a 99.99% chance that those numbers are going come back significantly too high”. (17:17)
“Let's say the bids come back and they're all high. There's a good chance that to accurately bring the number down, you have to reduce the scope and not just bid it out to more people. You don't really have much choice, but to redesign. So now you are spending more money on the architect to redesign things to meet your actual budget. That's very wasteful and you're just spending more time and money.” (14:40)
“It's very important for you [the client] to get along with a contractor because you're going to interact with them for very stressful things for the next few years. It's equally important that the architect and contractor get along with each other because those are the professionals who have to work with each other. The interviews are an opportunity for us to test the relationship in that way.” (13:42)
(25:43) Design-Build.
“There are significant downsides to design-build. First, the vast majority of design-build companies are contractors who have some very low-level designers in the office who are not licensed architects. Also, a lot of times there’s a lack of transparency with cost and pricing. Because everything's lumped into one bucket, you just get one number. [This can be] attractive for clients, but actually if they showed you the details, oftentimes the design fee is lower than it [needs to] be". (26:30)
(29:26) Pre-Construction. Obtaining construction cost estimates, collaborating, and using allowances.
“Two of the advantages of Pre-Construction services are that you get a contractor on board from the beginning of the project to provide you estimates at key points of the design. This way we can make sure that the design is not too far off from the budget. Second, the contractor can give constructability feedback. They will provide input regarding specifications, where to get things, or the assembly of complex things.” (30:14)
“Pre-Construction services are sometimes a fixed fee, hourly, a monthly retainer, or a percentage of the construction cost. The cost of Pre-Con is relatively small compared to the total cost of the project. It goes back to the larger philosophy of spending a little bit of money and time now to secure the future. That's what we're doing with Pre-Construction. In some cases, contractors will eat the pre-construction fee if they are awarded the job.” (33:15)
“During the very first phone call I have with a new client, I will use a construction cost per square foot as a way to gauge very roughly the feasibility of whatever it is that they're trying to do. Any contractor and any architect will tell you that the cost per square foot way of understanding things is a terrible way to estimate because it’s very broad, but if we're just having an initial conversation without drawings and I don't know the site, it’s very useful. If someone says to me, “I have a steep hillside property with trees in LA or in the Bay Area where things are expensive, I want this exquisite home, and my budget is this amount.” I’ll run numbers to see if it’s possible for not for what they’re trying to achieve.” (36:36)
