Should I Be My Own General Contractor?
Since we work with so many owner builders, we thought it might be helpful to share some expertise about the job of general contracting. In this article we’ll define some of the realities that you can expect if you’re considering being an owner/builder.
Let’s look at what a good General Contractor (GC), does and what you should be prepared to take responsibility for if you decide to be your own GC.
Build and manage a budget. This critical step should begin during the early phases of design. A spreadsheet is the best tool for tracking and monitoring your budget. A good budget includes the hard numbers generated by bids from sub-contractors and suppliers, plus some contingency for unexpected costs. It’s necessary to have a percentage of expected costs set aside to cover unexpected costs. Unexpected costs can result from: weather, change in construction schedules, change in subcontractor schedules, missing or unclear information in the design, errors, omissions, oversights, unavailable supplies, your change in tastes, breakdowns in communication between any and all parties, etc.
Select, hire, and manage subcontractors. A good GC usually works with a consistent group of sub-contractors and will bring to the table an already established relationship with that group of subs.
If you decide to be your own GC, you will not have the advantage of established relationships with subcontractors. After taking the time to sort through and select subcontractors, you may be less than impressed by one of your choices. It’s not the end of the world. If you’ve budgeted time and money realistically, you’ll be prepared to deal with a few surprises. Good GCs are constantly working with some new subcontractors, and don’t have a perfect group at any point.
We recommend a selection process for subcontractors where lowest price is not the primary qualifier, and is balanced with other considerations that are also important. Good subs communicate well and expect to document their relationship with you. They know how to write and bid a specific scope of work, and are willing to define what it is they expect from you and what you can expect from them throughout the process. Communication and documentation are everyone’s ally in this contracting process, and good sub-contractors know that and are willing and able to provide clear communication and documentation. You will be attempting to have a relationship with a group of people you probably won’t know, and all the potential pitfalls of relationships are here and can happen. The list includes: Poor communication , unspoken expectations, stress over financial matters, etc.
Manage the paperwork with subs and the bank, organize monthly payments from wherever the money’s coming from to wherever it’s going to. In the early stages, this will mean producing, sending out, reviewing, and signing contracts and purchase orders with subs and suppliers. Some will offer their contracts to you, some will request that you produce the paperwork. Either system can work, just don’t get involved without some written agreement in place. Even the simplest of written agreements will be a tenfold improvement over a verbal or implied agreement. After work begins, payments will need to be made according the the schedule agreed to in your contract. We use contract loosely here to refer to any form of written agreement between you and your suppliers or subcontractors. We recommend setting up agreements so that payments are monthly. This makes the job of accounts payable easier to do and easier to keep track of. You can always make exceptions if you’re willing to, and probably will at least once a month. Minimizing mid monthly payments is the goal. If you’re financing your project through a bank, they will already understand and probably insist on once a month billings. Many banks will require site inspections before authorizing payments.
Your job as GC will be managing a web of people and expertise. If you have good organizational and communication skills or experience managing teams of people in other fields, you’ll probably do fine, and occasionally better than people who do this for a living. If you have trouble speaking your mind, are unfamiliar with spreadsheets, tend to avoid confrontation, or in general are not very organized, this process may not be for you. Again, this is about managing relationships. A lot of them.
The most challenging part of being an owner/builder may be dealing with correcting things that have gone wrong. Things “going wrong” can usually be pointed to one of the causes listed below.
The scope of work was incomplete or inaccurate.
The scope of work was complete and accurate, but it was misunderstood.
The scope of work was complete and accurate, but the subcontractor is trying to cheat by substituting different work or different materials. (I think this is actually very rare. Especially if you’ve used a decent screening process.)
The scope of work was complete and accurate, but you are trying to cheat by asking for more work or more materials. (This is also very, very rare.)
If you’ve established a good, open relationship with your subcontractors, the path to correcting any of the above situations need not be difficult or painful. It will require creating some clear communication that was missing previously, and agreeing to a solution. Good initial communication that includes clear proposals and scopes of work will fix most problems before they have a chance to happen, but when they do you will have to practice being diplomatic but firm. Accept responsibility for gaps in the spec or contract language that are yours, and work with people to correct things that are not what you want, regardless of the origin of the error. When in doubt, be willing to have conversations that you might under other circumstances consider rude. The chance of hurting someone’s feelings are rare, and frankly, irrelevant.
If there are things that you would like to change from the original scope of work, don’t be afraid to ask. This is your house, your vision, your investment, and you should finish the project satisfied with what you’ve created.
If you decide to take the plunge and act as your own GC, remember that all of us at Frameworks are here to help. We’re used to providing both moral and technical support, and really do look forward to helping you realize your project vision however we can.
Happy Building and Good Luck!