As a Tulsa commercial contractor, it is important to take care of the customer. While it is the first of rule of most businesses to care for the customer or “the customer is alright”, in commercial contracting or construction the project can take years to complete and will consist of regular meetings with the owner and the architect. Last week I spoke about how important the flow of information is from the subcontractor to the general contractor or construction manager to the architect and owner and then back throw the chain from owner to architect to general contractor or construction to subcontractor and vendor or supplier.
The same thing is true of payments, the supplier or vendor sends invoice to the subcontractor and the subcontractor adds their labor and invoices the general contractor or in this case the Tulsa commercial contractor, or construction manager, and the general contractor or construction manager invoices the architect and the architect advises the owner on whether or not to pay the general contractor or construction manger and in turn, the general contractor or construction manager will pay the requested amount, based on work, to the subcontractor and the subcontractor will have to pay their supplier.
It is important of the Tulsa commercial contractor to only bill for the material ordered and the labor that has been done. The architect will advise the owner of the amount of work done typically observed during the regularly scheduled site meeting, where the architect or the architect’s representative will do a field report, and if the Tulsa commercial contractor or the general contractor or construction manager has billed for 50% complete on the pre-engineered metal building erection and only the main columns are up, the architect will advise the owner to only pay a portion and the owner will not have the same amount of trust in the Tulsa commercial contractor or general contractor or construction manager.
Typically, the regularly scheduled meeting will occur around the time the payment application is submitted. The payment application or pay app is submitted or turned in to the Architect or owner in a spread sheet that separates the work based on trades and not necessarily based on subcontractors.
The difference between based on trade and not on subcontractor can be seen in the mechanical or HVAC section. If the mechanical units have natural gas running to them, the work will include the subcontractors that do HVAC work, but the natural gas lines have to be run by a plumber. So while some percentage of the HVAC is complete the Tulsa commercial contractor or general contractor or construction manager will receive invoices from both the HVAC subcontractor and the plumbing subcontractor and the amount invoiced under mechanical on the pay app will have to be separated out between the two subcontractors.
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The architect and owner will see the schedule of values and which is submitted or turned in as part of the pay app and the owner sees the architect continually revising the pay application this will undermine the owner and contractor relationship. The contractor is responsible for large amounts of work that will be unseen or covered up and the owner must have faith that contractor will oversee the work properly.
The payment amounts are contracted out, but if a contractor or subcontractor were to bill for work not done and just walk away the owner would have little recourse for against the general contractor outside of a legal remedy and the same is true if the general contractor were to over pay and subcontractor and the subcontractor were to walk away. The fact the bids usually go the lowest bidder complicates the issue when a contractor or subcontractor just leave, because the owner or the general contractor would then have to ask someone who made a higher bid to try and do the remaining part of the project for cheaper then they bid and start over someone else’s work.
The actual construction process will consist of these regularly scheduled meetings. Once the building has been turned over to the owner and the project has been closeout the warranty period begins. For a contracted amount of time, usually one year, the general contractor will guarantee their labor and workmanship. During this period the owner needs to believe not just contractually but legitimately that the general contractor will be there to take care of the warranty issues. Depending on the situation this can be difficult. In many circumstances the general contractor will know the subcontractor from other jobs, so it is easier for the general contractor to get the subcontractor to do what is essentially free work.
If the general contractor is using the subcontractor on current projects, then the subcontractor is or should be more willing to do the warranty work without hassling of the subcontractor. In both cases the relationship that the general contractor has helps the trust process and the warranty period go smoother. In some cases, the warranty period is longer than the actual project took. A typical small project will take 180 days or approximately 6 months and the warranty period will still be a year.
In reverse order, if a project is over budget and the general contractor is asked to do some value engineering or look for ways to save money, it is incumbent on the general contractor to create that feeling of trust between them and the owner to trust the ability of the general contractor to find subcontractors and get the project in budget. Some owners or people in general believe that contractors and subcontractors double their margins on the material and labor. That thought is progressed by the fact that both subcontractors and general contractors like to divulge their prices. Many times, if a project is over budget the owner and architect will ask the general contractor to send over their bid numbers. What they are asking the general contractor to do is close to disclosing his markup on each separate bid and that should really only be disclosed in a construction management agreement.