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Contractor billing format for Construction Industry

hi I'm Scotty from Ogden built and today we're going to talk about Construction contract Basics if you're a contractor in the construction industry you got to have some contracts in place you got to have some agreements in place we're going to talk about why we need to do this and basic steps along the way as to what to include in your contracts the reason that I started writing contracts is because I had a builder that really wanted to know what I was including because he didn't want a list of extras at the end of the job and I was really apprehensive to write this because I thought it was going to trap me into something that I wasn't going to make money on I ended up writing an agreement and because I was so detailed in thinking about the steps along the way I included every little detail in writing and I allowed for that price so at the end the owner was satisfied that I did what I promised and I was also satisfied because I included everything and and actually got paid for that and it was a real valuable lesson for me so since then I've been writing contracts very important that the Agreements are in place and that you cover your butt and with that being said I always think there's four aspects to the conversation and this is why you need to write it down it's what I'm trying to say what I actually say what the homeowner hears me say and what the homeowner thinks I'm trying to say so there's four different different ways that it can get translated and mixed up so you really want to put it in writing so that it makes sense to both parties so let's go over four main aspects of why you should have a contract in place number one your deliverables and responsibilities what are you delivering to your client are you providing them a whole renovation a framing bid a whole house what's included in that what is your responsibilities this needs to be outlined so that it's clear to the owner what you're providing them number two the owner's responsibilities what is the owner going to provide you don't have a crystal ball and you can't read mine so the owner has to tell you their Vision along the way if they don't like something it's their responsibility to come to you and say hey this isn't being built the way that I visioned it but if you could write those contracts in place that that's the owner's responsibility that they need to be proactive during the job this can help a lot in the long run number three additional notes so I always tell my owners if you want something to be saved let's say we're doing a renovation and we're going to be tearing down this wall but you want that plant or you want you want this fridge or some Appliance write the word saved on it because you telling me you want to save that and then I have to tell my project manager and then my project manager has to tell the site super and the site super has to tell the staff somewhere along the line online it's going to get misconstrued and people are not going to get the picture clear so they need a clear sign that says saved so there's additional notes that you really need to put in there if a homeowner is living in a house well there's dust so you need to make that aware to the owner that there's going to be dust because there's been so many times where the owner has come to me and said I can't stand all this dust and I said well I told you it was going to be this way but if you have it in writing they know they can look back and go oh yeah he did actually tell me that number four is your terms and conditions what are you going to do once the job's done are you going to just they have to look after all the warranty issues or are you going to provide some sort of warranty quality control checklist making sure that the products are are working properly and that they're looked after there's a problem in the future they want to know that they can come to you and you provide a service that'll look after them and this is part of why we need to write these agreements so here's some things that I include in my contract the first thing I start with is the introduction this kind of introduces Who's involved in this agreement so it's going to be me the contractor or you the contractor and the stakeholders which are the owners so if there's more than one owner you want to include let's say a husband and a wife or a a partnership or maybe there's only one person but everybody that's part of the stakeholder needs to be written in this agreement anyone that's going to be making decisions needs to be written in this you also want to include what the client has requested you to do such as the client has requested me to renovate this building or the client has requested that I build them a house on this particular land and you always want to include at minimum the address of the job that you're going to be working on so it's clear that you're not doing a renovation on a different different job site if this ever went to court or you wanted to have a dispute it's written on the agreement it's clearly that this is where the job is and I always write out the purpose of the contract it's the why so the contractor's responsibilities the owner's responsibilities additional notes deliverables Services terms and conditions and whatever else is needed to complete the project the next part is the contractor's responsibilities for me as a contractor we are a project management and superintendent so we supervise the entire project so we always say that we are the project manager and we're supervising we're also Labor Management we're managing the labor on that job site as as well that's not the owner's job to manage that it's it's the contractors's workplace amenities so we provide toilets fencing security we're going to we're going to include that in the contractor's responsibilities Safety Management is your responsibil responsibility to go to worksafe and file a notice of construction this is so that worksafe is aware that the job sites are being done safely and for the health and safety of your staff and the owners on the property debris and waste management is another one you're going to be responsible for or I'm responsible for getting rid of all the scrap and all the debris on the job site also during renovation there's going to be some hazardous materials perhaps that you need to dispose of in a in a in a legal fashion home protection the owners need to know that you're going to be responsible for protecting their home you can't be dragging cords or things across the brand new floor and scratching them up or dinging up their Corners so they need to know that you're protecting those with either a corner wrap or floor floor protection action schedule and development it's very important that the owner knows when your when your start date is and when you when you plan to finish this is one of the biggest things in construction that owners are most frustrated with is there's lack of communication when is this job going to be done people always ask me that how long is because the last time we had a contractor it took months and months longer than we expected so you have to be able to provide a schedule for the owner budget development and management so yeah it would be nice if someone just had an unlimited budget but I always design a budget for my owners so that they know exactly where to put their money if one job goes over in budget then maybe they can if they're really tight with their numbers then maybe we could look for savings on the next one and it's it's also very good to provide your owners with updated budgets as as well on a monthly basis so they know where they're sitting with their budgets material and Equipment installation so I'm going to be the one in the fridge and and all the equipment in the house we're not going to ask the owners to do it so we want to provide that as our responsibility so that the owners understand quality control it's our job it's the contractor's job to look at the Quality it's not the owner's job to point out the flaws it's our job to point out the flaws it's best to get to that before the owner even sees it so that they know that you're being proactive in the quality control permits and Licensing so you are responsible for providing the city with your business license as well as all the business licenses for all the subcontractors working on that site it's not the owner's job to do that it's yours it's also your job to apply for the permits receive the permits meet the inspectors B book the inspections and take responsibility for all the legal stuff that's being done with the city or Community communication and Reporting it's your responsibility to communicate with the owner if there's delays if the price goes over budget if they you're expecting something at a different day this communication really needs to be open communication is one of the number one keys in being a contractor and having good relationships with your owners issues resolution if there is a problem if your owners say hey I I did not expect this what do I need to do it's your responsibility to resolve that issue professionally and in a very good tone Manner and project close out when you hand over those keys to the owner or you hand over the job and say we're done here you need to provide them with all the warranty issues for every product that you put in there as well as I mean I like to include photographs and all the all the contracts all the trades that were on site there so that they have this closeout process so moving on to the owner's responsibilities so the owner is responsible for paying you in a timely fashion and if you're an owner and you're listening to this and you want to know well how many days do I have to pay that contractor pay the contractor right away don't wait 30 days don't wait 90 days pay them right away they paying their trades out of their pocket or a deposit and they want to know that the relationship is built on trust so if they send you an invoice write them a check there's no difference for writing it today as it would be in two weeks so write it today the owner is also responsible for picking out their selections like materials like tile flooring paint colors it's not my job I don't know what you want so you need to express what you want the owners are to express what they want want and give you the selections for everything that they want to put in their house another one is invoice submission so we base we're if we're a Cost Plus contractor we base our entire job off of the cost of that job we get a percentage of it so if the owner goes out and buys a product on their own they should submit the invoice to the contractor so you should be asking your owners hey I know that you bought some tile can you please provide me with those invoices there's lots of reasons why one is we like to keep track of what products we put in the house two a lot of contractors work on Cost Plus so that's part of the job costs there's also some warranty issues in in there as well we're going to be taking care of the warranty so we want to know what products you bought and where you bought them so we can look after the owners another responsibility of the owner which is very important is being available for communication if the owner is only available Sunday night at midnight how is the contractor ever going to work for you how is a contractor ever going to be able to communicate so it's best that you set a day that you both can agree on once a week that you can that you like an hour or two where both of you can meet and communicate what's happening on the project another one is site access if we're doing a renovation for you and your doors are locked and we show up there at 7:00 and we can't get in that's not good for the contractors our sub trades are charging us by the hour at that set so you need to provide site access whether it be through a gate a gate code or a key to your house the owners need to provide site access the owners are responsible for final approvals as well if there's a product that you purchased and we're going to sign off on it you need to sign off on that final approval saying that yes I agree that I'm this is the product I want in the house as well as doing the final approval on on the job once it's completed you need to go through the checklist and look at anything that you don't like or something that needs to be fixed and give the approval dispute resolution if the owner has a problem with something and I'm going to talk to the owners right now if you have a problem with the contractor you need to be able to professionally talk to the contractor most contractors thrive on seeing happy homeowners so if there's something that you're upset about you need to approach the contractor in a way that you're not creating uh an unsafe environment for that contractor you need to like voice your opinion in a non-d demeaning tone and just ask for it to be fixed it's very simple so additional notes could be anything that you want to include in there that aren't the owner's responsibilities or contractor's responsibilities such as there's going to be dust there's going to be noise uh holidays you're not working holidays the heating and ventilation like there might be you know when you do drywall we're going to we're going to make sure that the house is heated well so you know we need to to voice these kind of things and uh and keeping the saved items like I said before it's it's really important to express that we're saving these items for the owner so and lastly are the specific terms and conditions I always include this on my contract but you should have a separate terms and conditions that you've worked through with your lawyer but I'm going to list off just some real quick things that I include on my contract so like the date that you're commencing work the date that you're going to be working the course of construction Insurance uh your payment terms It's always important to include those payment terms your items purchased and warranty items emergency response like what happens if the the a tree falls on the house or a tart blows off or a water water main breaks what are you going to do the billing cycle you always want to include like when you're you know when you're going to be billing them so they can expect you know they might expect to Bill once a week once a month bi-weekly your hourly rates you always want to include your hourly rates if all of a sudden there's an extra then they want to know how much they're paying by the hour that's the other thing is extras so what is your extras what is your additional charges if all of a sudden there's a change or change work order what is the procedure so you want to write that in there working capital I always talk about working capital I don't do a job without a deposit because I like to use the owner's money for the owner's job not my money for the owner's job that kind of covers my butt and it it increases cash flow in your company and I always want a non-refundable deposit because we spend time building the budget building the schedule we spend time designing and we want to get paid for that so if we if we do a construction budget let's say $25,000 we do a non-refundable of 5,000 because we're spending time doing this if someone cancels the job in the end we want to make sure that we're we're covered for that and after writing this agreement it is best that you send it to your lawyer for review you don't have to pay your lawyer $1,500 just say hey I wrote this wrote this is there anything that I'm missing anything I can add and it would be great just to get your lawyer to look it over and tell you what needs to be added or changed I want to thank you very much for listening to this I hope this is super helpful and if you've got any questions feel free to reach out to me and give me give me a a like or a thumbs up on one of our channels and uh let us know how we're doing let us know what you think and uh we'll see you next time