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What to do about those horrible bad no good contractors?

  • 1.  What to do about those horrible bad no good contractors?

    Posted 05-05-2019 14:54
    About once every year or two we end up with a (client with a..) contractor who is horrible, no good, bad. I mean, the type of contractors who don't do the work, screw everything up, abscond with the money, won't complete the job, etc.

    These projects are always:
    1) Residential
    2) Client hires an unvetted contractor
    3) The low bid
    4) Sometimes the owner even knows it's a unrealistically low bid, but hires them anyway "to get a deal".
    5) The owner overpays the contractor before the work is done

    How does all of this happen? Client gets seduced by a low price, doesn't discuss contractor selection with us (we are doing limited services) and/or hires a contractor quickly without discussing w/us, etc. Contractor manages to get significant $ out of the owner before the work is complete, either by getting a large retainer, or overbilling early in the job, or sometimes the client pays 100% up front (don't even get me started on that one...).

    Contractor will start the work, and then disappear off the job. The work is probably of poor quality, and certainly not complete.

    Here in RI, if the contractor starts the work, then disappears, they haven't stolen the money, they just haven't finished yet. It's an amazing legal loophole that keeps these guys out of jail. Our state board (of contractor registration) is amazingly toothless. It takes a very large number of projects going south for a contractor to lose their registration - and usually they'll just get their wife, girlfriend, buddy, etc, to get a new registration, and they'll continue on their way. The lawyers have pretty much thrown up their hands in disgust - if the client doesn't have the $ (which they usually don't after the contractor's stolen their money..), the lawyer won't go after it...and even if the client has the money, the lawyer recommends that the client cut their losses and move on with another contractor.

    How do you deal with this? I've had this issue 3 or 4 times now (luckily, hundreds of successful jobs though..), and it's extremely difficult for everyone. I even suffered through one of my own projects with a "reputable" contractor who almost disappeared. (I'm  now a registered contractor myself, so I can do my own work...).

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    David Sisson AIA
    Architect
    David Sisson
    Providence RI
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  • 2.  RE: What to do about those horrible bad no good contractors?

    Posted 05-06-2019 17:57
    David,
    The main issue is overpaying the contractor. I suggest you look at the laws for residential contractors in California at cslb.ca.gov.  These include legal requirements such as:

    1) The contractor is entitled to ask for $1000 or 10% of the contract price, whichever is LESS, as an upfront deposit.
    2) At no time other than the initial deposit above, is the contractor allowed to ask for (or actually receive) more money than the value of work actually performed, including labor and materials.

    If the contractor is completely underfunded (a red flag in itself), the Owner can pay for delivered materials directly, although there are risks involved in this, of course. Or can arrange to pay the contractor more frequently, such as weekly. If a contractor can't fund a job for a week, that is another red flag. The scary thing is when your client's money is being used to pay off the last project that went in the whole. You can do things like intermediate lien releases, to make sure subs and material suppliers are getting paid, before releasing additional money.

    There are a number of other requirements, too, contained in the CA Contractors License Law, but the above is a good start. I realize that this isn't going to be law in RI, but you can use CA's laws as good practice. A contractor who wants a third down, say, is definitely putting your client's money at risk. The contractor should be getting loans from a bank, not your clients.

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    Richard Morrison, AIA
    Architect-Interior Designer
    Redwood City, CA
    www.richardmorrison.com
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  • 3.  RE: What to do about those horrible bad no good contractors?

    Posted 05-07-2019 17:34
    In CA you can also go after a contractor's license for abandonment of a project.  Our license board is happy to fine, censure, and revoke licenses of contractor's who break the law and don't properly follow their contracts.

    If it gets this far, things are pretty FUBAR.  I think it is advisable for architect to have frank conversations with homeowners at the outset of a project.  Find out where their heads are at with respect to pricing, quality and construction.  Sometimes the problem begins with the client.  Sometimes it is a project the architect would be smart to say no to.

    For residential alterations I have a frank discussion with homeowners at the beginning about how they plan to secure the services of a contractor.  I argue that for small projects competitive bidding of general contractors doesn't work well.  To do a good bid requires time and expense, if there are too many contractors going after too small a profit, the good contractors will say no thanks.  I also tell them that if they want to competitively bid the project I have to spend more time making my documents, which are pretty specific to begin with, really specific and to get an apples to apples comparison of bids, I have to specify the form of the contract.  I also point out that they will not know the price of the project until the documents are completely finished, and if it is too expensive we have to go back and make time consuming changes at their expense.  The alternative of a negotiated bid corrects most of these problems.  Price is known approximately early on, and specifically when drawings are done.  They also have spent some time with the contractor and have the basis of a relationship.  Construction doesn't begin in an atmosphere of distrust.

    The beginning sets the tone.


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    Donald Wardlaw AIA
    More Than Construction, Inc.
    Oakland CA
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  • 4.  RE: What to do about those horrible bad no good contractors?

    Posted 05-07-2019 17:54
    I agree with Donald. In residential construction, there is an attitude of "we can do that later." We can pick finishes and fixtures later. We can research contractor references later. Let's get a permit and bids now.

    This attitude is ticking time bomb.

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    Richard Morrison, AIA
    Architect-Interior Designer
    Redwood City, CA
    www.richardmorrison.com
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  • 5.  RE: What to do about those horrible bad no good contractors?

    Posted 05-06-2019 18:30
    To head off this kind of problem you could recommend to your clients that they require the contractor to provide a payment and performance bond. Put the requirement in the Instructions to Bidders so the contractor knows to include it in his bid.  Of course this doesn't help with current situations which have already gone bad.

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    Robert Larsen AIA
    Principal
    Robert R. Larsen, A.I.A.
    Denver CO
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  • 6.  RE: What to do about those horrible bad no good contractors?

    Posted 05-06-2019 19:10
    David.
    Unfortunately there is very little you can do. If they are focused on the bottom line there is going to be very little you can do to change their minds .

    You can warn your client. You can suggest to them that they bid out the project to 2-3 contractors or suggest they get a construction manager and sub-contract the work out.

     if you suspect there is a problem brewing, ask the contractor for references and letters of recommendations from their previous clients.

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    Peter Morse AIA
    Firm Owner/Architect
    Peter L. Morse & Associates Architects
    Rochester NY
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  • 7.  RE: What to do about those horrible bad no good contractors?

    Posted 05-08-2019 19:30

    I solved it by getting a GC license, a stable of reliable subs and building the work ourselves. ;-)

    Admittedly, not a solution for most. It has, however, broadened my relationships with GCs whom I can feel comfortable recommending.

    If they choose another, I insist on CA services of at some sort and explain why.

    If, after rejecting us, our recommended GCs, and our CA services the client goes and chooses to pursue the work alone with a low bid loser, we're free and clear; our drawings carry solid references to any GC to contact us for any clarification, and our contract does the same with the Client.

    At some point, we need to let go of trying to control the uncontrollable.



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    Michael Poloukhine AIA
    Owner
    ReSquare Architecture + Construction
    Los Angeles CA
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  • 8.  RE: What to do about those horrible bad no good contractors?

    Posted 05-08-2019 19:52
    David,
    I have a suggestion - Spend some time adding a few General Administration drawings to your drawing set - spell out the responsibilities of the contractor - We've even added information from several AIA seminars and guidelines- and make the language in your drawings binding - once you stamp a set of drawings they become legal documents and if you spell out all the responsibilities of the General Contractor and even methods of payment if required - you can even state what penalties can be incurred - Our drawings state if a contractor switches a material without our awareness - we make said contractor make a donation to a charity of the clients choice -once had a GC make a $5,000.00 donation to a Make a wish foundation and once the contractor starts a job he assumes all the responsibility spelled out in our drawing set. This has helped many of our clients and a few Contractors as well.

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    Gary Lepore AIA
    Principal
    LDL Studio, Inc.
    Providence RI
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  • 9.  RE: What to do about those horrible bad no good contractors?

    Posted 05-08-2019 20:17
    I suggest the best way to keep everyone honest is for the Contractor to submit the bills to client,  Then the client writes a check for each sub and supplier and the contractor distributes therm.  That way the owner has proof that they've paid.  It's no different than banks on big jobs.   If the Contractor walks, the client doesn't loose other than time and aggravation.  .

    I tell clients to walk away if a contractor asks for a third down on signing the contract, a third when it's 50 percent completed and a third when substantially complete.


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    Peter Carlsen AIA
    Carlsen & Frank Architects
    Saint Paul MN
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