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Allowing For Contractor's Costs When Renovating

By: Chris Hogan MSc - Updated: 16 May 2012 | comments*Discuss
Property Renovation Renovate Homes

Contractor’s costs form a large proportion of the budget for any renovation project so it’s vital to keep control as the project progresses. It’s disheartening to watch property programs on TV when the punter admits that they do not know what the current spend is, or how far over budget they are at any one point.

Why Does This Happen?

There are generally three reasons for losing control of the spending. The first is that something has occurred that is out of anyone’s control and this has meant emergency action. The second is that the owner of the project is not talking to contractors regularly to find out whether they are on schedule in both time and money terms. The third is that they have asked for extra work to be done that was not covered in the original quote.

This of course assumes that you have followed the advice in our other articles, to barter with suppliers and contractors, get at least three quotes for every job and pick the right one. You should also do as much background work on contractors as possible, getting personal recommendations and checking their industry accreditations. Go for fixed price contracts if you possibly can, then the onus is on the contractor to do the job as quickly as possible.

Acts of God

The first problem outlined above is when something unavoidable happens, such as a flood hitting the area. In this case, you can only pay up and deal with it, and hope that the contingency fund that you set aside in your budget (you did do that, didn’t you?) will cover it. It’s worth pointing out that it is possible to get insurance policies that cover development, although they are aimed more at personal liability. But it might be worth finding out.

Note that discovering an extra cost, like, for example the roof being in a worse state than you thought, or rising damp in an area you were expecting to be able to leave alone, is not something that’s beyond anyone’s control. This simply means that you did not do your preparation correctly and skimped on the survey.

Keep Your Communication Channels Open

The second instance is much more common. Once a job is under way it’s human nature to let people get on with their jobs and trust them to deliver, and if we check up on people a lot it feels like we’re badgering them. But if you don’t keep up a dialogue with your contractors, then you not going to know whether they are on time and on budget or not.

This is particularly true if the contractors are relying on you or a project manager to get their supplies in on time. If a bricklayer can’t lay bricks because he doesn’t have any, then it’s reasonable for you to pay him for his time even if he’s not doing anything.

It makes sense to catch up with everyone working for you at least once a week. This doesn’t have to be belligerent, you just need to check that all is well and deal with the things that aren’t. Specifically you should check that everything is on budget, particularly with time and materials contracts. You should also make sure that every contractor knows what the other contractors are doing and that they know which work needs to be completed, by when, so that the next piece of work can begin without delay.

Extra, Extra, Read All About It

In doing this, you should be covering yourself for the third problem, when extra work is done. Now it’s reasonable on both sides, both client and contractor, that if extra work has been requested, then it needs to be paid for. The problem arises when the client asks for something new or different and the contractor assumes the client will be aware that this will result in an extra charge.

The contractor probably needs to point this out and give an extra quote for the additional work, otherwise what often happens is that at the end of the job the contractor presents a bill, which is more than the customer expects, and all hell breaks loose. At your regular meetings things like this should come out of the woodwork and can be dealt with then. It could be that the extra work has come about because one contractor has had to undo the work of another, but again, if you are talking to the contractors regularly, this shouldn’t happen.

Take Charge

The main thing to remember is that it’s your money being spent, and you have a right to check up on how it’s being spent. If you shy away from this then you will pay the price.

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