Finding a Contractor
Originally written for New Concepts Management Newsletter
Other than attorneys, contractors do not have a very good reputation for customer service. This reputation is mostly caused by the public’s buying habits. Price is the easiest factor to compare, and too often this is where the decision is made. When hiring a contractor to work on your association or your home, there are several areas that are consistently forgotten.
You are purchasing both a product (the materials) and a service (the service and installation of the materials).
Buyers gather the bids and then decide based on the easiest factors to compare. By far the easiest factor to compare is the price. Everything else is more complex and involves time and effort, so the decision often comes down strictly to price. The associations choose the lowest price bidder and then are frustrated by the scheduling, professionalism and lack of customer service that they receive. The funny thing is that they blame the contractor for this and pretend that they didn’t get what they paid for. Too often they will then go and award the next contract to the lowest bidder and the cycle continues. Contractors are not stupid, they will do the behaviors that get rewarded, which often means eliminating service expenses in order to come in with the lowest price.
The next easiest component to compare is the “What”, the materials. I find that after the price, a disproportionate amount of attention is also focused on “what” materials are being installed. The materials generally run 10-30% of a project depending on the type of project. The service expenses almost always make up the majority. Far too little attention is focused on “why” those particular materials are being chosen, “how” it is being installed, by “whom”, and “when.” Improper installation can also void any value received from the new materials, so really the service should be the most important factor when choosing any contractor. Unfortunately, the service is the hardest component to quantify.
The next question is how do you evaluate the contractors to determine which will give you the best service. I will define service as the “who, when and how questions”. Who is going to schedule, deliver, supervise, install, clean up and then warrant. How are the materials going to be installed? How will the communication to be handled? How experienced is the company? How do I know they will be around in 5 years? How do I know that what to believe??
Based on 19 years in the business, having bid on 10,000 projects and completed nearly 7000 of them, I have learned a few ways to make better decisions when hiring contractors.
First, do not rely on advertising to select your potential contractor. I do not care what their advertising says. I have learned the hard way that “If it sounds too good to be true, it is.” Therefore there is nothing a contractor can put in a flyer or a yellow pages ad that will convince me to trust them. Let me repeat, there is nothing you can put in a brochure that will outweigh one unscreened referral from a person who has used that contractor before. We have a standing joke in our office that whatever a company names itself, is what they are lacking. Quality Roofing, has terrible quality, Integrity Construction is planning to rob you and Affordable Kitchen and Bath is actually expensive. (note: company names are made up and not based on actual experience or knowledge)
Second, I only use contractors who are referred to me by someone else who has actually used their services. I will call references, but I won’t interview a contractor unless I have been referred to him first. Only my friends and business associates can cause me to believe what a contractor says about himself. If you don’t know anyone who has hired that type of contractor, you need to go to find someone who has. I especially look for what my unscreened resources will say about a contractor compared to what he says about himself. If they match, I will gladly pay more for his services. Your property manager, other homeowner associations, MMHA and CAI-MN are all good sources for finding a trustworthy contractor who has experience in dealing with associations. The best referrals are from professionals who hire that trade on a frequent basis. They won’t use a contractor repeatedly who doesn’t perform well. The professional purchaser also doesn’t expect perfection, but does demand value.
The third factor I look for is specialization. I want someone who is an expert in exactly what I need done. I do not want to hire a remodeler for a painting job, or a roofer for a kitchen remodel. Homeowner associations have particular challenges and issues that are different from working directly with one homeowner. If there are people who specialize in your particular need, that is where I would start looking. It is very unlikely that a non-specialist could achieve the similar results that a specialist could. In most trades there are enough specialists so that their pricing is also the most competitive. Frequently, if you hire a general, he will then subcontract a specialist to do the work. It is better to just hire the specialist directly.
The fourth factor I look for is stability. We recently competed against another contractor that offered a 20 year warranty in order to get a project. The company had not paid their past couple months paint bill and operated out of the owner’s home. He had also changed his company name three times in the past 7 years. No wonder it was easy to offer a 20 year warranty. Ask for supplier references or call the suppliers directly. Make sure to ask how long he has been purchasing materials under that company name and how timely are his payments.
When hiring a contractor, we are not typically considering spending a couple hundred dollars. The dollar signs are much larger. I want a contractor who has been around for years and will be around for years. Longevity weeds out the fly by night, started up yesterday contractors. Longevity also means that they must be doing something right. Pricing is one of the things they need to do right. The only thing worse than paying too much for a project is paying too little for a project. Despite popular myths, nobody has ever received great workmanship on a project without paying for it.
One of the significant factors in determining price is overhead. Some companies have lots of overhead, others have almost none. Ask yourself before looking for contractors, how much overhead do you expect and desire. Would you hire a contractor who operates out of his truck? What if his price was lowest? Or do you expect to hire a larger size contractor who is more established with an office and employees? Size, usually means longevity and stability. Do not confuse advertising and marketing with size and stability. Many companies sell hard in order to compensate for a lack of repeat business or desperation. If you want to make sure, ask for a bank reference which will reveal if this company is going to be around in 12 months. If they have no cash, they are often willing to say and do anything in order to stay afloat for the next week. This does not work in your favor.
A bank reference will also reveal if the contractor is actually a shell corporation for another corporation. I once was trying to get paid from a roofing contractor and found out that the local roofing company that hired me had recently been purchased by a new corporation that had been set up only months before, which was owned by a company from Indiana. My client, the debtor, had zero assets in Minnesota. That subsidiary was closed once it had built up enough debt. The parent company has since opened a new company in MN. I heard they have great pricing and you should see their advertising it says they have great integrity and only happy customers!
Mark Schoenfelder, CAI Past President
Member of MMHA, IREM, BBB, BATC, Builders Club