Why Vetting Construction Contractors Can Be a Heavy Lift

Why Vetting Construction Contractors Can Be a Heavy Lift on vendorsmart.com

Property managers don’t have to be expert builders, but they do have to know how to hire them. Because when things go wrong on a big construction project, it reflects just as poorly on the property manager as the contractor they hired

One of the riskiest projects you can take on as a property manager or HOA board member is a major construction project. Happily, there are contractors for that.

The problem is that when you hire a contractor, or any other vendor, you are entering a symbiotic relationship. Their performance affects your performance. If a project goes south, your reputation is on the line every bit as much theirs.

It’s not that you have to be expert builders to do your job. You do, however, have to know how to hire them. And vetting contractors, particularly for large construction projects, requires a lot of expertise. So if you are new to the process, we offer the following tips.

Verify insurance coverage

The best way to mitigate risk is to verifying a contractor’s insurance coverage,according to The South Florida Cooperator, a publication that serves condo, HOA, and co-op communities. Proof of general liability, auto liability, and workers compensation coverage may be required by law, but it’s unwise to assume the contractor is in compliance. The Tinnelly Law Group notes that a vendor should be willing to identify you as “Additional Insured” in its insurance policies. Predictably, the firm advises against skipping a legal review of contracts to save on attorney expenses.

Buy a business credit report

While not available for all businesses, these are useful for vetting the financial stability of contractors and other vendors. For $40 to $120 you can buy a report that includes business credit scores, a summary of recent payment history, UCC filings, debts, bankruptcy filings, court judgments, tax lien filings and other information. Here is a sample of the Experian CreditScore ReportSM, which was available for $39.95 in February 2019.

Check safety records

Ask contractors for their Experience Modification Rate (EMR), which compares their workers’ compensation claims experience to other contractors of their size and type. Anything over 1.0 indicates they have a higher-than-average claims rate than their peers. You can also use OSHA’s Establishment Search tool to find high-level accident and injury data on some construction companies.

Write a throughout RFP

If you decide to issue a request for proposal (RFP) be forthcoming about what you know and don’t know about what the project will require. Clearly describe the scope of the project and your willingness to alter it or negotiate deadlines or other details. Think about what information you will need to make your decision and ask for it. Err on the side of being explicit.

Above all, allow enough time for contractors to prepare a quality proposal, and for you to conduct a thorough evaluation of their responses. If you are not sure what’s reasonable, call three contractors you think are qualified to do the job and ask them how much time they would need. If one says two weeks and the another says two months, ask the latter why they need so much time. Their answer may shed a new light on the other’s responses. Maybe they are more efficient or have more resources, or maybe they are just not as busy or as thorough.

Be systematic in your evaluation

As the RFPs come in, you’ll naturally want to rifle through each to find the bid page. That’s fine, but don’t abandon the evaluation process you came up with while preparing the RFP. Read through each proposal thoroughly and mark how they responded in your evaluation grid, or whatever tool you are using. Be careful not to overlook discrepancies in the narrative. Did one vendor spend a lot more time addressing noise abatement during the project than the others? Did another quote a much more expensive material? How much did the labor estimates vary and why?

While you want to use the same criteria to evaluate each proposal, it’s okay to go back to respondents and ask them to elaborate on specific aspects of their proposal. Take the time to establish an amiable relationship. Ask to visit a similar project they are working on to get a sense of how they manage a job site. Scratch that itch if you’ve got a question.

The company you keep

This tips above represent just a few of the steps you can take to protect property owners, tenants and your reputation when hiring a contractor for a major construction project. For more ideas, check out this list of 20 questions to ask construction contractors prepared by the Educational Community for Homeowners (ECHO).

Homeowners and tenants are going to blame you if things go awry with a large construction project and you don’t have the luxury of saying, “It’s not my fault.” The contractor you hire effectively becomes an extension of you so don’t short change the vetting process. Interested in accessing a list of prequalified and thoroughly vetted vendors for property management tasks? Check out the Vendorsmart vendor management platform and sign your next contract with confidence.