Learn Which Contractor is Right for Your Project

One of the first steps to managing a home renovation is to learn how to effectively assess contractors. Your goal is to match the size of your contractor’s business to the size of your construction project. A common homeowner mistake is hire the largest, most established contractor recommended in the neighborhood. Although an easy solution, it may not be the best for your home renovation. If the firm is too large, you may pay hefty project management and overhead fees and your contractor may prioritize other, larger jobs. A contractor that is too small may not have the experience or necessary trade connections to complete the job.
 
The small-sized contractors are great for smaller projects including a kitchen, bathroom, basement renovation or exterior finishing work. Smaller contractors calculate the estimate, work physically on-site and can source certified trades people on demand. The ideal estimate includes the contractors and tradesperson’s hourly rate plus material costs and purchase/delivery markups. Ask your potential contractor how long he has been working with the subs/certified trades people. Further, ensure that the subs are small - not subcontracting firms that charge management fees on top of the tradesperson’s hourly rate.
 
For additions to the construction of a custom home, consider the medium-sized contractors. These contractors are usually involved in more complex labour and material schedules and sometimes work on several projects at one time. They are project managers and may or may not work alongside trades people. On average, homeowners pay 25-30% project management fee on labour and contractor-purchased materials. This fee is a revenue stream that covers the contractor’s overhead and profit. Evaluate the projects your potential contractor has worked on in the past. Past projects are a good indication of the size of future projects that your contractor will be motivated to work on. Further, confirm your contractor’s pipeline of future projects to ensure your renovation will be the top priority.
 
The large-sized contractors buy multi-tracks of land for multi-home development. Any savings in materials ordered in quantity are more than offset in project management fees to cover the layers of management between the developer down the line to the on-site trades people. Overhead, particularly insurance and interest expense is high. Unless you are planning on buying into a subdivision, large developers are not for your custom construction project.
 
Defining contractors into three categories helps you to understand some of the dynamics of the construction industry and enables you to make better hiring decisions.


Susan Easson is the author of the Wise Renovator ©2006.