Small contractors or contractors that are just getting started run a high risk of failure. Successful contractors have several common qualities, and a lack of these attributes can lead to failure.
License, Insurance and Bonding
Each state has requirements for licensing contractors. In addition, reliable contractors need insurance and the ability to obtain any necessary surety bonds. Insurance and bonding are not the same. A reputable contractor will have general liability insurance to protect against liability for injuries or property damage during the project along with Worker’s Compensation insurance for employees.
Bonds protect the owner of the project against failure to perform. On public projects (and some private projects), a bid bond may be required to ensure that the contractor will commit to the price quoted for the bid. Performance bonds are designed to protect the project owner against the failure of the contractor to complete the project as contracted.
Payment bonds are also used to make sure that subcontractors and suppliers are paid for work and materials. Requirements vary by the state and nature of the project. The National Association of Insurance Commissioners is a good source of licensing and insurance information and has a map with links to each state department of insurance.
Location, Business Duration and References
A general contracting business may be a small local company or a larger regional operation, but it is important that the contractor not take on projects out of its area of expertise, in unfamiliar locations or larger than it normally builds unless it is truly prepared for expansion.
Solid contractors show a strong record of accomplishment and excellent references. While successful contractors may have complaints, the difference between failure and success is in the resolution of the complaints.
An effective contractor will have established working relationships with the other skilled trades. Subcontractors should also be licensed, insured and bonded.
Contract Details and Warranty
Contracts are legal agreements and should be reviewed by a knowledgeable party before the documents are signed. Warranty information must also be included in the contract. A reliable contractor supplies details regarding the guarantee for both the materials and the labor. There are many things that can go wrong during a construction project so consider how the company will handle:
- weather, equipment and material delays;
- change orders;
- permits and inspections; and
- failed inspections.
The most important quality in a contractor for successful commercial construction is communication. Communicating with project owners and subcontractors can help head off problems before they start. Good contractors answer questions promptly and deal with clients professionally.