Construction FAQ’s
How do I choose a general contractor?
Selecting your contractor is critical in the overall success of your project. The most important part of contractor selection is DOING YOUR HOMEWORK. Selecting the wrong contractor can have significant financial and emotional consequences. All contractors in Washington State must be registered, licensed, and bonded with Labor and Industries, BUT THIS ALONE WILL NOT PROTECT YOU. The link below to Washington L and I will guide you in your selection process.
What is a Contractors Bond?
A contractor license bond is a legally binding contract that protects your clients and the public and is usually required to obtain a contractor license. It gives your clients and the public the ability to place a claim for financial compensation if you don’t fulfill the terms of your bond. This is different from Construction Bonds which are required specifically for public projects.
Washington State Contractor Bonds are posted in the amount of $12,000 and MAY NOT be enough to cover financial lost.
What is Retainage?
Retainage is a portion of the agreed upon contract price deliberately withheld until the work is substantially complete to assure that contractor or subcontractor will satisfy its obligations and complete a construction project. Retainage can be negotiated with your Contractor and usually falls between 5% - 10% of the contractors work and withheld on each invoice. Standard residential contracts DO NOT have retainage included, YOU MUST ASK for retainage prior to signing your contract if you would like to use this option.
What type of contract should I use?
A construction contract is an agreement between two or more parties to perform construction on a project according to certain terms and conditions. These contracts are comprised of general and special conditions. They address topics such as scope of work, payments, schedule, and quality to address each party’s rights and obligations. There are many types of construction contracts available in the industry, but here are two types with which all professionals should be familiar. Fixed Lump Sum and Time and Materials.
What is a Fixed Lump Sum / Stipulated Sum Contract? (Recommended)
A stipulated sum contract, also called a lump sum or fixed price contract, is the most basic form of agreement between a contractor and owner. This contract should be used if the scope and schedule of the project are appropriately defined to allow the contractor to fully estimate project costs.
A stipulated sum contract requires that the contractor agree to be responsible for the proper job execution at a set price. The owner has essentially assigned the risk of project costs to the contractor, who can be expected to ask for a higher markup to anticipate unforeseen problems.
If the actual costs of labor and materials are higher than estimated, the contractor’s profit will be reduced. If the actual costs are lower, the contractor’s profit increases. Either way, the cost to the owner is the same.
What is a Cost Plus / Time and Materials Contract?
Cost plus contracts are often used when the scope has not been clearly defined, such as when the project design is still being finalized and the owner wants to begin construction. An owner agrees to pay the cost of the work, including all trade subcontractor work, labor, materials, and equipment, plus an amount for contractor’s overhead and profit. Since the contractor is reimbursed only for actual costs, plus a fee for overhead and profit, if actual costs are lower than estimated, the owner gets to keep the savings. If the actual costs are higher than estimated, the owner must pay the additional amount, unless the cost is capped at a guaranteed maximum price. The advantage of a cost-plus contract is that the project will result in what was intended, even if costs run high. However, despite the lower amount of risk for the contractor, these contracts are harder to track, and more supervision is needed.
What should be included in a contract?
Name and address of both parties that have legal authority to enter into an agreement.
Detailed Scope of Work.
Amount and form of compensation.
Project Timeline.
Change Order provisions (see more on Change Orders below).
Dispute Resolution.
Minimum Insurance Requirements.
Retainage, if applicable.
Can I have an attorney review my contractors’ contract?
Yes. Contract review and legal consultation is highly recommended. Two contracts have been provided and are recommended for your use during construction.
Will my work be inspected by a third party?
Work being completed up the authority of a permit will be inspected for meeting minimum code requirements. Work being completed that does not require a permit will not be inspected by a third party unless you have specifically solicited the service of a third party. A third-party inspection can take place at any time and for any scope of work. If in doubt, get a second opinion.
What is a Change Order?
A written contract addendum signed by Owner and Contractor stating a change in the Original Contract. Change Orders can be issued for any form of Contract Revision, but some of the most common changes are (1) a change in the Work; (2) the amount of the adjustment in the Contract Sum, if any, and (3) the extent of the adjustment in the Contract Time, if any. Change Orders can also be issued to modify terms of the Original Contract.
Do I need to pay a deposit?
Deposits are generally not required for your Contractor to begin work and are discouraged. There may be circumstances where suppliers may need a deposit to order material, in which case we recommend issuing a Joint Check to your Contractor or paying the vendor directly.
What is a Joint Check?
A Joint Check is a check that is made payable to two parties. It’s advisable to issue a Joint Check if your Contractor has requested payment for a specific material order. A Joint Check would be made out to your Contractor AND Vendor for the vendor’s invoice. It’s recommended to get a copy of the Vendors invoice for verification prior to issuing payment. When in doubt, call the Vendor.
Are materials available?
The building industry is still dealing with supply chain limitations due to the COVID Pandemic. Many products such as windows, doors, appliances, ductwork, and cabinets are in short supply. Please check with your contractor on lead times and product availability. Some items are 3-6 months out and need to be ordered early to avoid complications during construction.
What are my Lien Rights?
Washington State Labor and Industries outlines your Rights as a Consumer. It's imperative to know your rights to avoid unnecessary financial hardship. The link below provides details information on your rights.
How do I protect myself if my contractor doesn’t pay their bills?
If a contractor doesn't pay for materials or supplies that you have paid them for you may be liable to pay a SECOND TIME. It's recommended that you require your contractor to provide notarized Lien Release forms from their vendors for each invoice you receive. Lien Release Forms help ensure your Contractor is keeping your account balance current with each vendor and minimizes the risk or paying twice. A link to the Washington State Labor and Industries Disclosure Statement is provided below.
Do I pay the contractor directly?
Contractor payments may be made directly by the consumer or distributed by your bank. It's highly recommended to discuss payment procedures with your insurance company, if applicable, and financial institution prior agreeing to payment terms in your contract. There are a variety of circumstances that can dictate how and when funds are distributed, you must understand the process to avoid costly complications.
Who determines if the Scope of Work is complete?
Your contract should outline the procedure in which it is determined that the Contractor has satisfactorily completed their obligations. A third party may be identified in your Contract to inspect the work upon completion if you choose to do so. Upon completion the Contractor should supply a Certificate of Final Completion that is signed by both parties. This should be outlined in your Contract language.
Can I have an independent company inspect my contractors work?
Yes. An independent inspection may be requested and paid for by the Client. Third-party inspections can be requested and conducted AT ANY TIME DURING THE PROCESS and does not require a provision in the Contract.
Can I dispute my contractors work?
Yes. Contract and Scope disputes are quite common and must be outlined in the Contract prior to signing. Dispute clauses should include a provision for "Continued Performance", meaning the Contractor is legally required to continue other services that are not in dispute.