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How to Not Lose Money to Contractors - Construction Project Money Tips

Updated: Sep 11, 2021

Construction project money tips

When working with contractors, there are a number of stages to go through!

Let's start right from the start in looking for you to avoid losing money to contractors:

- Finding a good contractor.

If we choose the wrong contractor or a bad contractor from the start, how can we look to receive good service?

When hiring a contractor for residential, commercial construction, or renovation project, there are maybe many contractors from which to choose.

However, there is the risk of hiring someone who will

1) do a poor job

2) take much longer than expected;

3) both!

There are a few things you should do to try and avoid these contractors:

Before Hiring

1. Hire only known contractors.

You need some sort of assurance that this person or the firm is able to do what they say!

For this, you want to look for recommendations from people that you know and trust before you go looking for a contractor.

This may also take the form of checking for certain licenses or qualifications! Now with the internet, you may be able to search for other people's experiences with this contractor at the very least.

2. Conduct brief litigation research.

Many courts have online records or a way to check the litigation history of parties, including contractors, at the courthouse.

If the contractor you are considering hiring has been involved in a number of lawsuits, especially if multiple judgments have been rendered against them, it may be wise to think twice before hiring them.

3. Be on alert for red flags.

If a prospective contractor is not responsive before you even sign a contract, why should we expect better communication after signing a contract!

Similarly, if you don’t feel comfortable with the lack of information in their bid or contract, such as timeline estimates or project costs, do not sign anything until you are satisfied.

4. Go through the plan step by step

Have a very thorough contract on exactly what the contractor is being hired to do.

This means going through each section of their plan, make sure what they are charging you for is actually what you need!

For example, the contractor may assume you need help with clean up - when you have your own team!

Or they may estimate on the bigger side in cases where they don't know the exact requirements of the job.

Make sure you or a member of your team sit down and thoroughly go through the plan and later manage the work in relation to it.

This also includes making sure you are clear how you want invoicing to be done (make it one job per line!)

This way you may see exactly what you are being billed for and look to cut down on any trickery!

After Hiring

So you've already hired a contractor, here's what you should do!

- Document any issues.

Take pictures and videos of all of the problem areas and keep track of when they were taken.

Keep a written log of the photos and a timeline of the progress, or lack thereof.

If the contractor uses subpar materials, doesn’t fix a problem he caused, or claims he is finished, but the project looks unfinished, include it your documentation.

These may be very valuable materials should anything progress to arbitration or for stopping claims in their tracks!

- Proper Schedule Review

When schedules are submitted to you by contractor, these should absolutely be reviewed by an experienced professional or at least a computer program if you can afford these.

These programs are designed to sniff out any issues buried in a schedule and to show where the contractor might better use their resources to complete a project ahead of time and under budget.

The best of these is our Claim Cracker tech for Beginners or Schedule Cracker for experienced CPM Professionals.

Claim Cracker produces complete Expert-Standard Schedule Submittals with recommended actions.

This way, instead of just glancing lightly at or signing off blindly on schedule submittals, take a few minutes to put it through our system and produce you a report that might save you millions in delays or delay claims!

A penny of prevention may be worth a dollar (or many millions in reality) here.

How many increases in costs have come from delays?

Also, there are bad contractors who look to intentionally file bogus claims against their clients.

With these technologies, you should look to prevent this from the very start.

- Communicate in writing

Again, the more evidence, the better. Make copies of all letters you send to your contractor and their responses.

Print out email exchanges and text messages.

It is much easier to hold someone accountable when you have proof rather than engaging in a he-said/she-said type of argument!

- Contact the contractor’s bonding company.

If a contractor is bonded, it means that they have an agreement with the agent that issues the bond, that the contractor will perform the services according to the contract.

If they do not, then the property owner can contact the issuing agent and receive compensation.

- Hire a Consultant

Construction law cases can be complicated especially if they involve multiple parties, such as contractors, subcontractors, laborers, and suppliers. Hiring a consultant or attorney can help you understand the legal options that are available to you before you potentially breach the contract.

How to Avoid Losing Money to Contractors?

We hope that you never have to deal with losing money to contractors, but the above are some steps you should take.

It's better to take a paced approach to the project, than to rush in blind and be taken advantage of!

Thanks a lot and take care,


The Project Cracker Team



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