Let’s begin by reviewing the standard rules of remodeling. What are they? When I ask this during seminars, I let about 15 seconds pass and no one says a thing. Look, it’s a trick question. There are no standard rules of remodeling. That’s one of the reasons that the remodeling industry has some of the problems it has. It’s one of the reasons that consumers are never really sure what they are going to get. But there’s one person who steps in to choreograph this dance that we call remodeling. That person is called the “general contractor.”
You’re the coach
A good GC is like a coach. He organizes the players (employees, subcontractors and suppliers) so they play as a team, and if they play as a team, they have a chance to win (make money!). When they don’t play as a team, the team loses, and if they lose too many times, the coach can lose his or her job. (Just how many jobs can you lose money on?) The coach asks that the players on the team to work together to run plays (show up on time and do what they’ve been asked to do). If one player on that team ignores the coach’s direction and does it his or her own way (doesn’t show up on schedule or get the work done in a timely fashion), what does a good coach do? He pulls that person out of the game, sits him/her down on the end of the bench and says, “you either play my way or you don’t play at all.”
How does a general contractor create order out of chaos — rules in a world without any set rules? For the homeowners they do it through good plans and specifications. Clear plans and specifications eliminate confusion, cost overruns and misunderstanding. Basically, good plans and specifications are how the contractor and homeowner agree on what is going to be built. A good GC also provides a schedule to show how long it will take to complete their project.
In addition to that, you also have a set of plans for your employees. You have a set of agreements concerning hours of employment, compensation, company benefits, company codes of conduct and the procedures they are going to follow to produce what is on the plans and specs.
So, we’ve addressed homeowners and employees. The third question is how are you coaching your subcontractors? Are you working with them in the same way that you’re working with your employees and homeowners? What are the agreements that you make with your subcontractors? Have you provided a clear set of expectations that they agree to before the job begins? This is the job of the general contractor. What are the agreements that you make with your trade contractors? Do you have a clear set of expectations that they can agree to?
Good subcontractors want the same clear specifications that you provide to homeowners and employees. When you make your expectations clear, there is no room for misunderstanding and confusion. If you are not doing so already, create a subcontractor agreement that lists your company trade contractor policies. This agreement should be used with all the trade contractors you are working with. Here are 16 sample policies that should be included in any good trade contractor agreement.
1. Professional dress
Homeowners are opening their home to you, and they expect that the workers you invite into their home will be dressed in appropriate business attire — no shorts or tank tops. You are running a business, so the people that complete your work should represent that professionalism
2. Professional behavior
As with professional dress, anyone representing you on-site should act as a competent professional, and be capable and efficient at what he or she does. Their language and actions should be that of a professional craftsperson. What behavior would you expect from people working in your own home?
3. Bid requirements
In every estimate, tell the trade contractor exactly what you want to receive as part of his or her bid. Specify to the extent that you can, exactly what you want to receive. If you don’t ask for it, you may not get it. To assist them in completing a good estimate, your bid request may include the following:
- An estimate request form
- Work drawings
- Material selection sheets
With any good trade contractor, you will refer work to them, and will expect to see some job leads come from them. This benefits both parties. If one of your clients calls the trade contractor to work with them directly, define your company policy (or create one) on how you want them working directly with your clients. You don’t want to burn bridges with a good sub because you didn’t tell them how to respond.
5. Change orders
As the general contractor, you must approve all changes from the original estimate. With any change to the original scope of work, the trade contractor should submit a written change order, and if time is of the essence, the trade contractor can get a verbal approval before doing any work, but this must followed by a written change order. No prices should be given directly to the client.
6. License and insurance
You should have a copy of a current certificate of insurance, showing worker’s compensation, liability, and auto or truck coverage. You should have this in your files before any work is started, or before you issue any payment for services rendered.
7. Job safety
You need to monitor the trade contractor’s safety activities. Are they in compliance with applicable federal, state and local safety rules and regulations? Make a point to review what the trade contractor will be doing to maintain jobsite safety, not just for his or her employees, but for yours also.
8. Job schedule
The agreed-upon work schedule is the utmost priority. If the schedule cannot be met, the production manager and customer should be notified immediately.
Keeping the jobsite clean is the responsibility of the trade contractor. All trash generated by the trade contractor should be removed from the jobsite on a daily basis. Dust and floor protection should be incorporated in all affected areas before work begins.
10. Jobsite materials
The acceptance and unloading of trade contractor materials, along with their shortage, protection, insurance, and all other risk of loss is the responsibility of the trade contractor.
11. Jobsite rules
All on-site personnel should use only designated bathrooms, telephone and storage areas. No one should use the homeowner’s tools, equipment or trash containers without permission of the general contractor. Protection of the homeowner’s property is one of the biggest priorities for everyone working on-site.
12. Payment schedule
You need to define what your payment schedule will be. Ideally this is in writing, and is tied to progress payments that are made from the homeowner to you as the job proceeds. Do you want a written invoice? Should the trade contractor document what work has been completed if there is more than one payment? If inspections are required, are payments due upon a completed inspection and customer approval? Do you want a purchase order number and job number included on the invoice? Remember to tie all payments to trade contractors back into the licensing and insurance requirement reviewed in No. 6.
13. Requirement of federal ID number or social security number
No payments should be made without the federal ID or social security number, whichever applies, of the trade contractor doing work for you.
14. Subcontractor warranties
Let the trade contractor know that all labor and materials are to be fully guaranteed for one year after substantial completion. Any manufacturer’s warranties that exceed this one-year period are to be provided to the customer for their use. Any other defects (labor or materials) can be settled on a job-by-job basis.
15. Relationship of parties and subcontractor status
Get this in writing! The relationship between you and the trade contractor is that of a business and independent contractor. The trade contractor is not an employee or agent of your company, or of any company affiliated with your company. The trade contractor has no authority to act for, or represent your company in any manner, whatsoever.
16. Contract documents that will make up their job package
Your contract with the trade contractor should include the project proposal, date of the plans, and project specifications.
You want to make sure that the trade contractor’s agreement includes all labor, materials and all necessary equipment to complete the project unless otherwise noted
When remodelers first read this, there can be an overwhelming feeling. This looks like a lot, and if you have not been using a written trade contractor agreement, it is a lot. If you have not been using an agreement like this and are introducing it for the first time, don’t send this in the mail and ask someone to sign it. Remember, your trade contractors are a vital part of your company, so don’t scare them away. Set some time aside when you can review this with each of your primary trade contractors. Buy them a breakfast or lunch and take the time to review this point by point.
Good trade contractors won’t have a problem with this agreement. Good contractors appreciate this type of documentation because it protects them as well as you. Good contractors like this level of specificity. Your breakfast or lunch meeting can also address more than what you need from them. You can also use this time to ask them what they would like to see from you. Let them tell you if you have any business practices that they don’t like. Look, they deal with a number of general contractors, and if they have suggestions that can make your business stronger, take advantage of the experience they have to share with you.
If you have a trade contractor that objects to signing an agreement like this, find out what their objection is. The only issue I see with clear documentation is that it holds people accountable, so if one of your trade contractors has an issue with this, it may be time to find another. This agreement demands good business practices, and not every trade contractor can fulfill those demands. Use this type of agreement to find the good ones. After reviewing this agreement, you will be asking each to sign on the dotted line. In signing your company trade contractor agreement, the trade contractor agrees to abide by these policies on every job that follows.
I’ve included these points to illustrate a very simple point. The more clear and concise your agreements are, the less chance there is for confusion and misunderstanding. By putting policies on paper in the form of an agreement, and having each trade contractor sign the agreement, you can have very clear guidelines that lets everyone know what is expected and when. This is a good game plan. These game plans are the foundation of any successful remodeling business.