Messages and Online Forum Q&A

Re: Contracts

From: info@builderswebsource.com
Category: Other/Misc
Remote Name: 63.198.181.43
Date: 18 Jun 2001
Time: 12:14 AM

Comments

In practice, penalties are difficult to enforce because there are so many reasons that delays can occur -- often due to the homeowner himself! Things beyond the contractor's control, such as bad weather, delay in arrival of certain components, unplanned changes and onsite conditions varying from the expected, can all play a role in delaying a project.

Unless the contract already includes it, it's a good practice to include a 5-10% holdback clause in your agreement. That is, each payment is 5-10% less than the target payment. The balance is held until the end, providing an incentive for the contractor to complete the job including lien removals and punch list items. Many will balk at this, since this may be their whole profit depending on how tightly they bid the job. But it can be used effectively in some cases.

An even more effective approach that works very well is to offer an incentive to complete the job by a certain time frame. Even a few percent is sometimes enough to motivate the contractor to give you the full attention you deserve. Two recent projects that had to be completed by a certain date were done on time -- and both used a bonus to provide added incentives. On the other hand, the vast majority of projects I've seen are routinely late. It's the nature of the beast, unfortunately. It seems that many contractors are not good planners...or they juggle too many jobs in parallel to maximize efficiency of their resources...and the homeowner often suffers as a result. But by far and away the largest source of delays is the homeowner changing his or her mind about what they want. Even a 1-day delay can upset the entire sequence of events, causing many more days of delay as a result. That's why most contractors charge a stiff penalty for change orders...because what seems like a simple change, may have a ripple effect on the entire project.

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