Contracts

[Becky M]

Hi,  We're about to renovate a 1960s four bed house that needs everything doing to it. When I say 'we' I mean we'll appoint one single contractor to do this.  I hope I've posted this in the right place but I'd welcome some guidance on:

 

1  When you go out to tender to builders is there anything in particular I should request from them (aside from cost to complete work, availability to start etc).  I'll be sending them the architects drawings, lighting schematic and schedule of works as produced by ourselves.

2 In terms of the contract that the chosen contractor is given, I want to ensure we have the right content within this.   I wondered about indemnity warranties and a penalty clause relating to the building work going over agreed completion date (as we'll be leaving in rented accommodation so would want any quoted completion date to be realistic and ideally stuck to -within reason).

3 Finally, should we take out insurance relating to anything going wrong with the contractor?   Or is this more for someone doing a self build? I'd never considered this before but spotted something on another thread which made me think about it.   

[Jeremy Harris]

Welcome.

 

When going out to tender you need a really tight specification and ideally want to aim to let a firm (not fixed) price contract, if you want near-zero risk of cost over-runs.  However, few builders will offer a firm price contract, and the best you may hope for on a renovation, where there are bound to be loads of variations and unknowns, may be a fixed price contract, and even that may be doubtful.  You need to bear in mind that the more risk the contractor is exposed to, through unknowns being uncovered, changes of spec during the work, etc, the higher the risk contingency that they will price in to their quotation.  You also need to be aware that a firm price contract is really a fixed price - the price quoted is the price you will pay (assuming no variations).  A fixed price contract is variable, in that the contractor can vary the final price (perhaps without telling you!) if things outwith their control cause their costs to increase.  If you're really confident of being able to oversee the work every day, then you can opt for a cost-plus contract.  This will almost always be cheaper IF, and it's a very BIG IF, you can control and manage things on a day to day basis.

 

You will be very lucky to get any builder to agree to a tight timescale with a penalty in the current economic climate.  There's a lot of work around, and good builders can pick and choose.  If time is tight, your better off trying to keep a very close (as in every day) eye on things and insist that your builder keeps you informed at least once a week of the current financial position.

 

You shouldn't need insurance to cover the builder, he should have his own liability insurance, but you MUST insure the property for risks not associated with builder negigence, and to cover your personal liability issues.  You can get renovation insurance, where you are not resident in the property, that will cover the rebuild costs in the event of a catastrophe, like a fire, major structural collapse etc.  If you get stuck I can point you towards a broker in the South West I used that were very flexible for this type of insurance.

[Becky M]

Hi JS Harris,

 

What a helpful response - Thank you !! I really appreciate your comments above.   

 

If you don't mind I do have a couple of follow up questions, I understand your ponts about builders having an abundance of work, i guess i want to protect us from having a project that just gone and one for ages, with a builder then dipping out for weeks on end as he's committed to another project.  We're not in a rush to have the work done but think (assuming no major curve balls happens during the project) that it would be approx 5 months work.  So how do we try and ensure things don't just drag on?  Or is that not possible to try and manage - unless you are on site every day, which with two full-time jobs and small children isn't always going to be possible.

 

The other question was, do we as the client need to specifiy whether we want a fixed price or a firm price contract at the time of tendering?  We hadn't heard of these different types.   

 

Please can we have the details of the broker so we can discuss renovation insurance please.

 

Many Thanks for your help,

 

Becky

[Grendel]

We're talking to 4 builders while detailed spec is being drawn up for our "self build"

I've come across tendered contracts previously, but some builders were talking about negotiated contracts and cost-plus contracts.

What does everyone else use?

Are tendered contracts on the way out?

Has anyone got advice on the pros and cons of different contracting methods?

thanks

Grendel