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GC master agreements3/5
we are a small 2 man shop that mainly does high end custom work. We outsource doors and drawers and finishing. We have worked for some larger builders and each have their "master agreements". Ive just received one from a new to us builder. It's 13 pages long.
They want a uniform agreement with all their subs, it probably voids the prior master agreement.
Focus on the key issues
In commercial work we are generally bound to the contract between the owner and GC even though we don't always see it.
The only time the fine print matters is when things go south on a job or warranty.
There is risk to terms of contracts, your price needs to account for the risk, ie a 2 year warranty instead of a 1 year warranty.
Thanks Alan. That helps. What are liquidated damages?
Liquidated damages are a preset fee if you are late on the job.
This is from a job we bid the other day
9. Compensable delays and liquidated damages are pre-established for the amounts of $1,597 and $2,000 per day, respectively.
You should stay away from jobs with damages. You shouldn't see them in homes but if you do you really need to document every delay and send a cost impact to work OT.
Damages can create an adversarial relationship and we prefer to work as part of a team, its hard to be part of a team if some of the members fall behind and cause you to be late.
Wow, thanks so much Alan. I haven’t posted in a while but now I remember what a valuable asset this site has been over the years. I really appreciate it
Most if not all delays are caused far in advance of site ready for Cabinetry, If you are in a LD contract Document everything with an email or some defensible form.
We photo conditions on every site visit.
The contractor wanted to know why our price went up so much and I told him give us more than 3 days to install the project or plan on me being late and paying LD.
I gave them an 40k deduct if they adjusted the schedule prior to awarding the contract. In the end, all the trim went away because they were over budget. The trim was all clear VG fir.
Sometimes we just need to plan on having to pay LD at time of bid.
Awesome Alan! Well done
Why is LD not a two way street?
In the late 70's and early 80's I was building office buildings.
The owner of the development company structured contracts for 10 month completion dates from when we had a permit we were penalized after 10 months and rewarded if we completed in 9 months or less with each month being more money (less interest, building ready to rent).
He split the bonuses between all employees and some subs.
The structure was
One year I was responsible directly for two buildings so I got the PM and project PM bonus, and the PM bonus on 5 other buildings. I had some good years and everybody was motivated to get projects done. We worked hard and I worked a lot of weekends but I was well paid.
I needed to shovel snow off the roof one Sunday and one of the women in the office got me about 10 HS seniors that were friends of here son to shovel snow off the roof. It was done in two hours.
We did job last year where we received an additive change order for a fair sum of money and I called and asked the PM what was going on and he was rewarding the subs that helped get the project done on-time because they made more than they expected.
All we can do in LD projects is assess the schedule and be prepared to document everything (higher PM cost), change order everything that takes time away without compensation. That's why we stay away from those jobs, you basically need to fight the GC or owner or ARCH or other subs for every delay.
My experience is similiar with the LD, the last one had endless complications because of GC incompetence that we finished at 3:00 am and made the schedule only to have the store owner declare bankruptcy.
We won't sign contracts with the no pay if the GC doesn't get paid clauses. Yes we lose some jobs because of that but we have no control over who the GC choses to do business with. If you feel you have to do it, make sure you get paid for the risk factor. I've had GCs agree to eliminate that clause from our agreements. Ask. Watch out for developers that form a new corporation for each project, big red flag, high risk. Been there and got burned.
There are two other clauses that make up the do not sign the contract maxim. (not that I remember what they are)
Contractors operate on a 4% to 20% margin, they can string out their subs for a long time before they are forced into bankruptcy.
Be careful who you do business with
Pay -if paid is or wasn't enforcable in California.
As a sub you should ask then to provide the complimntary piece of what they ask you to provide if required, 100% payment bond.
Tell them you are fine to take the risk as long as thier bonding company guarantees payment.
We did a public works job in 2009 where the GC went belly up before the end of the job, we filed a claim with the bond company and were paid in about 15 days.
Pay - if paid