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Types of Building Contractors

 

There are several ways in which builders may contract your home remodeling or renovation project. You can use either a:

  • General Contractor – individual builder or builder under a corporate entity
  • Building Construction Company
  • Building Management Company

 

General Contractors

General Contractors assume responsibility for the entire project. They manage:

  • The building permit process
  • The construction work
  • The materials requirements ordering and delivery
  • The subcontractors

The owners role is generally limited to overseeing the quality of the work produced at a high level and that it is in accordance to their expectation of the design specification. In addition, it is the owners responsibility to secure finance and pay the contractor according to the agreed schedule.

As the owner is not involved in the day to day operations, stress levels are minimal, however great they may be.

A General Contractor will charge 15%-20% on top of the cost of the project as their project management fee.

A general contractor may contract as an individual or through a corporate entity. These options have significance if any litigation results from the project. As an individual, you will have direct access to personal assets of the builder. As a corporation, your remedy will be against the company, which may act as a protection foil against claims on the builder unless you can prove fraud. Ensure your contract with any company entity includes personal guarantees of the individual builder.

 

A Construction Company

A builder may contract his services through a construction company. These companies offer financing, construction support, and may have preferential material purchasing options.

They generally larger than local building companies and are sometimes national brand companies with large customer bases. Local offices provide on site supervision and contract management.

There are two different types of construction companies.

  1. A building construction company
  2. A construction management company

Building Construction Company

These companies generally have their own teams of builders and trades people. These vary in size significantly, and with larger projects, will be incorporated solely for a single piece of work. Be very careful as to your rights to arbitration and litigation, as this type of structure can act as a powerful shield against shoddy building practices, as we are finding in the New Zealand Leaky House scandal.

Construction Management Company

Construction management companies only act as project managers for the engagement of building contractors, subcontractors, materials planning, supply and delivery. They are not generally on site during construction, but do manage the quality checks and regulatory sign off. The on-site construction management is left to the overseeing builder.

Their fees range from several thousand dollars to tens of thousands.

 

Making The Best Choice

Hiring a qualified General Contractor is the easiest option, but also the most expensive. With the rising cost of housing, it is not always possible to pay a GC 20% of the total project costs. A GC is also a more one on one relationship, and if things go sour, it can be extremely stressful and difficult getting them to complete the project.

You are also limited to either a single builder or a small team of builders to get your project completed.

A larger building construction company has a large team of in-house builders and other contracting builders. This provides for less risk if unforeseen circumstances or disputes interrupt your remodeling or renovation project.

A lot depends upon how much involvement you want with the building process and contractors. If you like to play things close, then the more personalised relationship of a General Contractor or small Construction Company is the right choice for you.

If you are like me, and just want to concentrate on my own work and let them deal with the whole project, subject to my evening walk around to check on progress and anything that seems wrong, then a larger professional Building Construction company is for you.

If you want to adopt an in-between approach, then using a Construction Management company, or alternatively an independent Project Manager is the answer.

Most construction management companies offer a number of types of relationships to suit your preferences and needs. Some even provide remodeling and renovation finance. This allows you to gain the assistance you want, but keep control the process. Personally, I find them a little too remote for my needs and sometimes just seem to add just an additional layer in the process, and additional layer of fees.

By taking a bit of extra time up front in choosing the right contractor, and using a good contractor screening process, you can avoid the downside and get the end result you want with minimal stress.

The key to making your decision as to which combination to use is analyzing your particular needs and comparing them to the strengths and weaknesses of each entity.

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More Building Project Management

Benefits Using A Designer As Project Manager

Choosing A Building Contractor

Contractor Screening Tips

Types of Building Contracts

 

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