Considerations When Selecting Prime Contractors and Subcontractors

Originally published as an Op-Ed by the Oregon Daily Journal of Commerce on November 17, 2022.

Selection of a contractor should be done carefully. There are many good contractors, but not all are the right fit for your project. Most owner-contractor relationships are long-term engagements that require good communication, patience, and trust. This is equally true whether the project is commercial or residential. Frustration over cost, schedule, business or domestic interruptions, and legal disputes can be mitigated by taking time to make a well-informed choice. Here is a checklist to help selection of the right contractor. Contractors should also apply the criteria below when choosing subcontractors.

Price and schedule

After first developing a clear and complete scope of work, solicit several proposals from construction firms that are known for handling projects that are a similar type and size. It may be surprising how much price and schedule terms can vary. Avoid open-ended contracts that do not specify a maximum price or a certain date for completion. While less common for small-scope projects, contractors are usually willing to stand behind their completion date by agreeing to pay daily liquidated damages for a late finish. Contractors should also supply a construction schedule. For large projects, the construction schedule should be very detailed and many pages long. Even for residential projects and smaller commercial ones, a simple schedule showing milestone dates for major accomplishments (e.g., delivery dates of key items and completion dates for each major stage of work) is very helpful to keep track of progress. However, if the scope of work is not well-defined, or if design is still under way, most contractors will not commit to a schedule or price; if they do, the schedule will likely be too long or the price too high to offset the risk of the many unknowns. Continue to refine the scope until the contractor is willing to make proper commitments.

Team

Be sure to meet and interview the team that will be directly responsible for performing the work. Understand that the person who “sells” the contractor’s services may not be involved later. Because the team is critical to the relationship and to good performance, ask each team member specifically about their own experience on this type of project (rather than the company’s experience). Ensure that the contract requires your approval of any substitution of team members. Ask team members how often they plan to be on-site. Ask if they anticipate any significant family leave or vacations during the project. Finally, ask for their personal philosophy about how to resolve differences that may arise on the job between you and the contractor, and between the contractor and its subcontractors.

Resources

There are several important questions to ask about the contractor’s resources:

• How many other projects will the contractor be handling at the same time it is working on yours? Is that typical? Does it have sufficient resources to stay on time and budget if it takes on other projects during the same period?
• Does it employ full-time workers, or will it be looking to supplement through manpower supply companies? Ask the contractor to describe the background checks it performs to ensure that high-quality, experienced labor is retained.
• What problems does it anticipate with timely delivery of materials and equipment? Are these items impacted by supply chain problems currently?
• Ask the contractor to identify its primary vendors. Ask if any of these vendors anticipate long lead times for specific items; if so, what are the delivery windows for these items?

These are important questions that need to be explored before deciding to hire a contractor. Among other things, the answers to these questions will reveal how well prepared the contractor is for your project.

Experience and reputation

Look carefully into the contractor’s background before soliciting a proposal, or at least before retaining its services. For residential projects and light commercial ones, check with the Oregon Construction Contractors Board for claims history and proof of licensure, bonding, and insurance. Internet searches and online reviews are also helpful but not always reliable. Use multiple sources when performing these background checks.

References

Good contractors should have no problem providing at least five good references. While just about any contractor can provide one or two references, the ideal list should have names and numbers for parties tied to the contractor’s five most recent projects. Develop a list of questions ahead of time and call at least three of the five.

Dispute history

Disputes happen. A contractor’s involvement in a dispute should not disqualify it from your project. The contractor may not have been at fault; the owner may have been unreasonable; or uncontrollable circumstances may have caused the dispute. However, if disputes appear to be frequent, or if research reveals that the contractor was not reasonable in attempting to avoid and quickly resolve disputes, you may want to select a different contractor. It is more important to find a contractor that stays out of trouble than one that has glitzy marketing materials and a professional sales force.

Time invested in selecting a contractor or subcontractors through the practices outlined above should save significant time (and frustration) during your project.