In my 22 years as a builder and consultant I have found that most contractors seldom revisit, re-evaluate, and take action to prevent job misunderstandings from occurring again on future projects. Once a job is over, everyone wants to move on, and any problem that occurred is often written off as an exceptional, one-in-a-million happenstance.
However, lessons from past projects can always be used to generate contract wording that will avoid similar problems in the future. Adding some clarifying wording to your standard project documents can save you money, time, miscommunication, and frustration. Qualifying what a client is and is not getting will save the farm every time.
That’s a lesson Jon and Jim learned the hard (and expensive) way. Their company, Custom Craft Homes, builds seven to ten projects a year, with all of their jobs contracted on a cost-plus basis. Their split management arrangement works well: Jon is in the field, handling all production supervision, and Jim runs the office, handling estimating and paperwork. Both are hands-on managers who understand the importance of delegating responsibilities to their seven employees.
Like other custom home building companies, Custom Craft’s work history included some minor disputes and disagreements with a few clients, but in the end everything had always resulted in a positive outcome. Then came a seemingly minor dispute with the Demlers over the final draw and their punch list procedures. The Demlers gave Jon and Jim a $35,000 lesson in the value of continually assessing, adjusting, and refining their management procedures and the wording in all of their project documents.
The Demler project comprised approximately 6,000 livable square feet plus a three-car garage. Every square inch of this house had been mulled over, reviewed, fine tuned, and, at last, finalized by the owners. The project encompassed a myriad of facts, figures, and customized details specified by each of the owners. In fact, the Custom Craft duo had never really experienced a tag team client like the Demlers. They were constantly on the job, talking to the subs, clarifying what they did and didn’t want, and “helping” the contractor run the job. Helping? We’ll get to that later!
After a 14-month construction process the project was deemed complete. The builder and owner conducted a walk-through that generated several small issues that needed to be resolved, and Custom Craft jumped on those items quickly. In no time this gem was shining in everyone’s eyes. It passed a wave of inspections, from the bank and the architect to the subdivision and building officials. The final draw was prepared and submitted to the owners.
Several weeks passed and the final payment had not been received. The builder contacted the bank about the status of the final payment. The bank had closed out the loan and referred the builder to the owner. “Hey Jack, this is Jim from Custom Craft. We called the bank to see about the final draw, and they referred us to you. We’re just following up to make sure the check has not been lost in the mail or if there are some issues we are not aware of that would hold up the payment.” “Oh, I’m sorry. I should have brought the check over to your office. Can I bring it over now?” “Sure!” Jim beamed.
Jack Demler arrived at the Custom Craft office with some paper, but it wasn’t a check. He had a typed punch list outlining more than 50 items of wall and ceiling finish problems that needed to be fixed—things the owner defined as unacceptable. Jon and Jim were more than a little surprised. They conducted a walk-through with the owners just prior to final inspection, and all of the items identified during that review had been taken care of. Or so they thought.
The builder team had been through similar situations with a few owners in the past. Once owners occupy their residence, they often find some additional work items, along with some operational questions that need clarification.
The Demlers’ list was reviewed by both parties, and Custom Craft again agreed to get on the items right away. A majority of line items on the list were more like questions instead of repairs. “Should this be doing that?” “The dishwasher is too noisy,” and more ominously, “Why does the finish on the walls and ceilings look distorted and uneven during certain times of the day and especially at night when we turn on the ceiling can lights?”
