Choosing the Best General Contractor for Your Commercial Project
In my thirty five years as a construction professional, I have heard and seen it all when it comes to selecting a commercial general contractor. Some of it funny enough for reality television (we’ll save those stories for another day).
Take a look at a hypothetical project using $50mm for the development budget on an apartment project in Seattle, exclusive of land. Take 35% from that for the soft costs, sales tax, etc. and you will have your hard construction costs; approximately $32mm allocated for construction. Not an inconsequential number.
From a scheduling standpoint, you will spend a year plus on pre-construction, followed by a year on permitting, and then another 18-24 months for on-site construction. Totaling somewhere between three to five years working with a general contractor, so they had better be someone you can trust with your full confidence.
The following are NOT good reasons for selecting a contractor:
- Your brother in law built a four unit apartment 10 years ago.
- The next door neighbor built a retail building once.
- The guy at the gym is a contractor and they have someone who needs a project to fit into their schedule.
Selection of your general contractor should happen something like this:
- Match the project with general contractors that build projects similar to your in program, size, and construction type. In Seattle you can easily come up with a strong list of candidates.
- Do your due diligence to narrow the list to three to five candidates that you will interview. Assuming you have seen their work around town, make some calls to the project owners and find out how things are really going.
- Prior to the interview, give the general contractors an outline of your expectations and questions. During the interview, pay attention to whether or not they follow your outline. Some will and some won’t. Treat their response as part of the selection process. If they ignore your expectations and questions, how do you think the next three to five years will go?
The interviews are complete. Now what?
- After all is said and done, you are really selecting two people who will be key to the ultimate success of your project: the project manager and the site superintendent. The company is important, but you are really hiring these two people to complement your existing team.
- How do you feel? What is your gut telling you?
- Check their references, work history, and performance on previous projects for each finalist. Interviews can be deceiving as everyone is on their best behavior in the interview.
Now it’s time to make your final choice. Everyone has a great computer system for estimating and job costing so this is not relevant to the selection process. And don’t make your choice based on their fee and general conditions. The fees for each contractor are typically within a narrow range and you can often review and negotiate the fee and general conditions.
I am mystified when repeat work becomes available and owners change contractors for any reason other than failure on the first venture. I have seen the level of success grow when quality teams are used on repeat projects. Everyone benefits going forward together as the working relationship irons out the kinks, especially the owner.
Remember, you are spending $32mm and your team will be spending three to five years together. Hopefully, following the above steps will help ensure your partnership and projects are successful.