The big problem with trying to get a contractor to accept that type of arrangement means you will usually run into 2 problems, the good contractors will tell you to go F yourself and the bad ones will agree to whatever you want because they are going to screw you anyways in a way that the last bit of money you owe them they will give up and walk away and not even be effected by your penalties.
No matter what you do a contractor that knows what he is doing and does accept your contract with penalties is going to pad the finish time by so much in order to protect himself, that your project will probably end up taking more time than normal.
If you are going to offer a penalty for not finishing on time are you going to offer a bonus for finishing ahead of time?
Yes a bonus is offered for finishing on time. By the same amount per day the the g.c is penalized, he will be paid the same amount per day times the number of days that he finished ahead of time. The contract is offered by Steve Cook and is excellent. I am just not sure what to offer as a bonus/penalty on a per day basis.
I agree with you Rehab about the penalty part of the contract.
I personally would not sign such a contract. I look at realistic time frames then I pad them, as you said.
Right now Im in the middle of a small commerical job where the owner wanted to be in by the end of the year.
The problem; the job was suppose to start in August, but due to delays on HIS part, we did not get started until November. We just had a week and half of bad wx which has thrown me two weeks behind. If it were not for the owners delay, I would have made the time table.
How would the owner feel if I back charge him for the money he is costing me by causing delays on future jobs I have had lined up for months in advanced.................always two sides to a coin.
usually these pen. are used by "big" companies like walmart that have big projects, big money and many future projects. the little guy usually can't enforce this type of agreement. because they don't have future projects to offer......km
Yes, it is so true NC-Yank. One of the biggest problems Shamund might run into is a contractor that knows what he is doing and agrees to his penalties, is not only going to pad the time, but he is going to put a clause in about responsibilities and what happens if the homeowner delays him because he has hired somebody to do something and it causes the contractors time table to go off, there are just so many variables that it will be tough.
But Shamund if you really want to do it just take the total job cost and the total time taken and use that to figure out a penalty.
$10,000 job to be done in 20 days = 10,000/20 = $500 a day bonus or penalty.
What will happen is the contractor will probably baulk at looking at a $500/day penalty or he will look at it as a great way to rape you, by padding the job time, where the 20 day job will really take 15 and he will walk away with $2500 more in bonus.
Keep in mind what you could be setting yourself up for - lets say the job is going along and it looks like he is running a bit behind, faced with a penalty system, do you think it might enter his mind to cut some corners?
When things go bad, this can all start to mirror the situation when people get involved with specific performance. Somebody doesn't honor a contract and you try to force them into honoring it. Would anybody in their right mind really want a contractor to be forced into finishing a job through specific performance?
That 10k job will most likely only net a profit (minus taxes & overhead) of no more than 2k........after about 4 days of delays the contractor is in the hole.
Shamund, I would advise you not to put in a penalty clause in the contract. You can always just fire the contractor and be done with it.
With that said, you may want to look at using Lien Release forms so that if you do fire the contractor then the subs / suppliers will have to go after him instead of you.
If you use good common sense then in all liklihood you wont find yourself in a mess.
A realistic liquidated damages charge might be $50/day. I've seen $100/day used for projects up to $100,000. Those were public projects. I haven't seen liquidated damages used in residential work.
Also, I can't imagine you can pay much of a substantial early completion bonus. A $50/day bonus is not likely to produce much hustle. Small contractors have their own pace and ways of doing things. I don't expect they're going to jump thru hoops for 150 bucks. Their clients are always in a hurry.
Also, if you try to charge a contractor a big "penalty" it's not going to hold up in court. Courts will uphold liquidated damage clauses if their reasonable.
The big problem with trying to get a contractor to accept that type of arrangement means you will usually run into 2 problems, the good contractors will tell you to go F yourself and the bad ones will agree to whatever you want because they are going to screw you anyways in a way that the last bit of money you owe them they will give up and walk away and not even be effected by your penalties.
No matter what you do a contractor that knows what he is doing and does accept your contract with penalties is going to pad the finish time by so much in order to protect himself, that your project will probably end up taking more time than normal.
If you are going to offer a penalty for not finishing on time are you going to offer a bonus for finishing ahead of time?
Yes a bonus is offered for finishing on time. By the same amount per day the the g.c is penalized, he will be paid the same amount per day times the number of days that he finished ahead of time. The contract is offered by Steve Cook and is excellent. I am just not sure what to offer as a bonus/penalty on a per day basis.
I agree with you Rehab about the penalty part of the contract.
I personally would not sign such a contract. I look at realistic time frames then I pad them, as you said.
Right now Im in the middle of a small commerical job where the owner wanted to be in by the end of the year.
The problem; the job was suppose to start in August, but due to delays on HIS part, we did not get started until November. We just had a week and half of bad wx which has thrown me two weeks behind. If it were not for the owners delay, I would have made the time table.
How would the owner feel if I back charge him for the money he is costing me by causing delays on future jobs I have had lined up for months in advanced.................always two sides to a coin.
NC
usually these pen. are used by "big" companies like walmart that have big projects, big money and many future projects. the little guy usually can't enforce this type of agreement. because they don't have future projects to offer......km
Yes, it is so true NC-Yank. One of the biggest problems Shamund might run into is a contractor that knows what he is doing and agrees to his penalties, is not only going to pad the time, but he is going to put a clause in about responsibilities and what happens if the homeowner delays him because he has hired somebody to do something and it causes the contractors time table to go off, there are just so many variables that it will be tough.
But Shamund if you really want to do it just take the total job cost and the total time taken and use that to figure out a penalty.
$10,000 job to be done in 20 days = 10,000/20 = $500 a day bonus or penalty.
What will happen is the contractor will probably baulk at looking at a $500/day penalty or he will look at it as a great way to rape you, by padding the job time, where the 20 day job will really take 15 and he will walk away with $2500 more in bonus.
Keep in mind what you could be setting yourself up for - lets say the job is going along and it looks like he is running a bit behind, faced with a penalty system, do you think it might enter his mind to cut some corners?
When things go bad, this can all start to mirror the situation when people get involved with specific performance. Somebody doesn't honor a contract and you try to force them into honoring it. Would anybody in their right mind really want a contractor to be forced into finishing a job through specific performance?
Rehab,
That 10k job will most likely only net a profit (minus taxes & overhead) of no more than 2k........after about 4 days of delays the contractor is in the hole.
Shamund, I would advise you not to put in a penalty clause in the contract. You can always just fire the contractor and be done with it.
With that said, you may want to look at using Lien Release forms so that if you do fire the contractor then the subs / suppliers will have to go after him instead of you.
If you use good common sense then in all liklihood you wont find yourself in a mess.
NC
A realistic liquidated damages charge might be $50/day. I've seen $100/day used for projects up to $100,000. Those were public projects. I haven't seen liquidated damages used in residential work.
Also, I can't imagine you can pay much of a substantial early completion bonus. A $50/day bonus is not likely to produce much hustle. Small contractors have their own pace and ways of doing things. I don't expect they're going to jump thru hoops for 150 bucks. Their clients are always in a hurry.
Also, if you try to charge a contractor a big "penalty" it's not going to hold up in court. Courts will uphold liquidated damage clauses if their reasonable.