Building contractors – a guide to working with them

A building contractor is typically considered a business that coordinates and manages the works and contracts large portions of the project to subcontractors to complete the specialist packages.  The Collins Dictionary definition of a building contractor as:

“an individual or company that contracts for the construction of houses, etc.”

Law Insider further expands on this by defining a building contractor as a company:

“…whose services are limited to construction of commercial buildings and single-dwelling or multiple-dwelling residential buildings, which commercial or residential buildings do not exceed three stories in height, and accessory use structures in connection therewith or a contractor whose services are limited to remodelling, repair, or improvement of any size building if the services do not affect the structural members of the building.”

Construction is an industry characterised by high levels of fragmentation.  In 2013, Arcadis completed a study highlighting that a ‘typical’ project – in the £20 to £25 million range – involved the building (or principal) contractor managing upward of 70 subcontractors, of which a large proportion are small – £50,000 or less.  The subcontract sizes for a regional project may be smaller – £10,000 or less.

So, what makes a good building contractor?

Good communication up and down the supply chain is critical for any project’s success.  With so many stakeholders in a project, all must be informed on progress, problems and any issues that arise.

I firmly believe that how a building contractor or subcontractor interacts during the tender process will indicate their approach throughout the project, so focus on this at the tender stage. Are they communicative?  Do they raise concerns about the documentation, logistics or other practical matters?  If they do, does it lead to a better outcome for the project overall?

If the building contractor is adding value to the project from the start, it is highly likely they will do the same during construction.

Any building contractor or subcontractor’s reputation is directly proportionate to the quality of the work they have delivered in their portfolio.  All reputable building contractors will have multiple means to get references.  The best way to find out how good their reputation is to ask previous clients about them and to complete a thorough pre-qualification process.

Pre-qualification process of building contractor

A pre-qualification process aims to assist selection by eliminating prospective contracting businesses until only the most suitable contractors remain to be considered.  The evaluation process should reflect what is most important to you as the Client.

It is always a good idea to start with financial background checks to establish the financial stability and viability of the business.  These need to be approached with care as financial information is frequently outdated.  Any recent events affecting a business’s financial security may not be reflected in the available financial reports.

As well as looking at the portfolio of jobs a business has carried out, it is essential to interrogate the building contractor’s capability and track record in carrying out the type of development planned to ensure that it has the necessary skill sets and experience to deliver the work in prospect.  For example, a contractor capable of constructing two-storey load-bearing masonry houses may not be an appropriate choice for producing reinforced concrete framed medium-rise apartment buildings, irrespective of whether both are residential developments.

Another related aspect often overlooked is capacity.  I think this is critical.

Will the building contractor or subcontractor have the appropriate resources available to service your project?  This is especially relevant where the project in prospect is particularly specialised.  It might be better to postpone the start of a project to secure the right building contractor for delivering it rather than engaging one who is available but unsuited to provide its particular specialist requirements.

The location of the project and the head or regional office of the contractor under consideration for selection are relevant factors.  A site remote from a contractor’s base is likely to suffer from a higher churn of site-based personnel and inadequate attention from office-based management, both of which are likely to affect the delivery of the project.

I also advocate for references and recommend they be requested and taken up.  As well as dealing with projects undertaken recently, the references should include all aspects of dealing with the particular company, including aftersales and commercial performance.

Each contractor will be required to provide details of its insurance, claims history, health and safety procedures, and arrangements for health and safety management.  This is where I would say it is appropriate to use a standard questionnaire format,

These are the background checks on the business to gauge its overall suitability to carry out your project.  I would then look for a project-specific response on how the project will be managed, including CVs and an organogram, a logistics plan and methodology and an indicative programme.  Whether it is feasible to do this in every case depends upon the project procurement route and the degree to which the project has been defined at the time the pre-qualification exercise is being undertaken.

What are the good and bad signals from a contractor?

Suppose the pre-qualification process has been carefully prepared.  In that case, the ‘bad’ signals should be apparent from the responses that are given or even from the information that is not provided (e.g. no referees provided, or references only available from projects completed over five years ago; no accounts submitted or over-due; no project experience in the particular sector).

Equally, the opposite will be apparent from the ‘good’ building contractor or subcontractor.

I don’t ever think that people set out to do a lousy job, but many contractors might struggle to do a job that they haven’t got the experience to deliver.  The pre-qualification process aims to sieve information and ensure that the selected building contractor is best-suited to carry out the project with the best chance of successfully delivering it.

How do you best review bids from building contractors?

The process to be followed may be different from one project to another since it should concentrate on the important things to your particular project situation.

What is critical to you as the Client is to understand your requirements regarding time, quality and cost and how those three balance against one another, as it is almost impossible to have a good quality, quickly delivered and cheap project.

This balancing act is often referred to as the “Scope Triangle”.  Typically, one of the factors is fixed, and the other will vary in inverse proportion.  For example, time is often fixed, and the quality of the end product will depend on the cost or resources available.

So, for you as a client, whether a property developer procuring a main contractor or a main contractor procuring subcontractors, how you review bids needs to consider how you value time, quality and cost.

If you understand this and have completed a thorough pre-qualification process, you will be able to understand the following:

a) Which building contractors are most appropriate for your scheme, and;

b) Which building contractor best delivers the works, considering how you value the time, quality and cost?

Photo by Eric Wang on Unsplash

About Paul Heming

Paul was a Quantity Surveyor who gained 10 years experience of managing £200 million worth of flagship UK projects, including 20 Fenchurch Street and Battersea Power Station. In 2015, Paul founded C-Link with the intention of sharing his expertise of managing major projects with the SME market.