Seattle General Contracting Projects
ByWhat are the options for contracting with a building contractor?
When embarking on a construction project with Seattle general contractors you will be entering into a contract. Typically all Seattle builders have their own contract documents for you to sign before the work begins. Contract agreements are important for both parties. The contract document provides the framework for the working relationship between the two parties (owner and general contractor). There are many different ways to structure a contract. Three of the most common are “time and materials”, “time and materials with a guaranteed maximum” and fixed bid.
A “time and materials”(T&M) contract is usually structured in the following way: The owner and the Seattle builder agree on a general scope of work. They agree on labor rates and a general contractor fee or mark up. When invoices are generated for work completed, craftsmen’s hours are billed at the agreed to rates, materials and sub contractors invoices are passed on with the agreed to general contractor fee or mark up. T&M contracts offer flexibility to the owner in that they only pay for work that is done. If the owner deletes a portion of work, that work will never get invoiced and the money budgeted for that work is instantly saved and can be spent elsewhere in the project. If the owner adds to the scope of work the Seattle general contractor can implement the change without going through a formal change order process that can often lead to delays. T&M contracts are also very transparent because the client see’s all the material suppliers and sub contractors invoices and can easily track the project costs. In order to avoid the objection of “less efficiency = more money to the general contactor” there needs to be a basic level of trust between the owner and the Seattle builder.
A “time and materials with a guaranteed maximum” contract is similar to the T&M but includes a maximum value for the scope of work. If the budgeted cost for the project exceeds the guaranteed max then the Seattle general contractor is responsible for the overage. Conversely if the project is completed for less than the guaranteed max there is typically language in the contract for
the Seattle general contractor and owner to share in the savings. To use this type of contract the scope of work needs to be well defined. Since there is a guaranteed maximum cost for the project that applies to a certain scope of work changes in the scope effect that maximum cost. While the T&M with a guaranteed max contract still offers the benefit of transparency they require more detailed project documents to clearly define the scope and are more cumbersome to administer with changes in scope.
A fixed bid or lump sum contract is where the Seattle general contactor agrees to do a project at a lump sum price. For this kind of contract it is most important to have a clearly defined scope of work. With a poorly defined scope of work there is the possibility of change orders to cover work not anticipated that will drive the cost of the project up. In my opinion fixed bid contracts are only reasonable on new construction or very simple remodel/renovation projects.
Participating in a contract when hiring general building contractors in Seattle or anywhere is an important part of the construction process. Both parties should understand the terms and be prepared to be bound by them. The contract exists to help lessen the ambiguities that might otherwise exist without it. The T&M contracts above are usually a good fit for remodeling, addition and renovation projects where the fixed bid contract usually works well for straight forward simple projects or new construction. A handshake is a nice gesture but a contract is necessary to define the terms of the project for the Seattle builder and the owner.
Kyle Keever, writes about and engages in general contracting in Seattle, Wa. Learn more about Keever and Associates at our General Contractors, WA blog.