Construction Contracts

Should I retain a builder on a guaranteed maximum price basis, or a cost-plus?

This is a personal decision. A guaranteed maximum price provides some predictability as to cost, but the Owner still needs to be vigilant in overseeing the project, as the builder can easily increase the cost based on unanticipated charges and "change orders". Also, a smart builder providing a guaranteed maximum price would build in a price cushion, whereas a cost-plus contract would conceivably result in the lowest possible price. Perhaps the best combination is a cost-plus with a target budget. In Telluride, with the often high cost of labor and fluctuating price of materials, it may be difficult to find a good builder willing to provide a guaranteed maximum price.

Should I use an Owner's Representative?

Yes. Unless you are experienced in construction, it is money well spent to retain an Owner's Representative experienced in overseeing construction projects. This individual acts as an interface with the builder, and an advocate for the Owner.

Should I use Lien Waivers?

Yes. However, the application and impact lien waivers is frequently misunderstood. Often a contractor or subcontractor will sign a lien waiver merely as a receipt for payment of a specific amount. This is a misapplication of the purpose of the document. In other cases, a contractor will sign a lien waiver with a date certain, despite the fact he is owed funds for "retainage". This can cut off rights to that retainage.

Should I have a firm completion date, with a penalty clause?

Yes. However, the standard contract contains many "outs" against any penalty. This firm has developed a supplement to the AIA contracts containing additional provisions which clarify issues that could otherwise lead to disputes.