The world of commercial construction is unique to all other kinds of work in the industry. Contracts are different, insurance is different, and clients are different. There are a few must-know items when taking the first step to getting into the commercial construction world. Whether you are looking for a change from the residential construction world or are starting your own gig as a commercial subcontractor, this article will uncover some booby traps that can end your career as a commercial contractor before you even start with your first commercial construction subcontract.
Getting Started with Your First Commercial Construction Subcontract
Before you can land your first commercial job, you need to send out your bid for the project. What exactly is a bid? Your bid is a legal offer that can be accepted once sent to the general contractor. You may be thinking, I know, I want the general contractor to accept my bid so I can get the job. But be careful what you wish for. What happens if you do a turnkey bid and you miss something on your first commercial construction subcontract?
For example, let’s say you want to bid on the AC work on a project, and you send the general contractor a one-page bid that says you will do all the AC work on the project for $100,000.00. It turns out you missed $50,000.00 in the scope of work, but your offer is accepted, and now you are on the hook to do the extra $50k of work without being paid for it. How can you avoid this trap? Provide the general contractor an itemized bid, meaning you describe in detail the work you will do and give a price for that work. That way, when your bid is accepted, you are only on the hook to do the work that is described in your bid. To get started with a FREE bid form, download one at subcontractorinstitute.com. Under the current conditions, it is also essential to protect yourself from the unexpected increase in material costs. See specific language in our previous blog on this topic.
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Taking the Next Steps with Your First Commercial Construction Subcontract
Good news! Your itemized bid to the general contractor has been accepted, and you received the proposed subcontract in your inbox. I know this is very exciting, but here lies another huge booby trap that may take you out. Your assumption may be that you are being hired to do the work described in your bid, but this assumption is wrong. You are being hired to do the scope of work that is attached to the subcontract that is sitting in your inbox. 99% of the time, the scope attached to the subcontract is different from the work that was in your bid. So, in this case, what do you do? Review the scope attached to the subcontract as if you were bidding on a completely new project and make sure it matches the scope and amount given in your bid. If the amounts do not match, do not sign the subcontract the way it is. Instead, you would inform the general contractor that the scope has additional work, give the price for the additional work, and request that the subcontract amount be revised before you sign. If you sign the subcontract without getting the amount changed, you will be on the hook to do the work for that price.
There are a lot of tips and tricks to be aware of when moving from residential construction into your first commercial construction subcontract. This is especially true when your hiring hierarchy works differently, and your contracts will go from being between you and the owner to being between you and a General Contractor; you must be aware of what to look out for. These are just the things you need to be worried about before you sign the subcontract. Some nasty traps can also show up within the actual contract, and if you don’t understand them or don’t comply with them, it could end your business. To find out more for free, check out subcontractorinstitute.com and get educated on mastering your subcontract. It is also well worth the time and money to have the commercial construction contract reviewed and explained by a skilled construction attorney before you sign it. You have the skills required to successfully transition from residential construction to commercial construction. All you need now is the final push to take the plunge! Dive in and RSVP for our free webinar: Protecting Your Construction Business as it Grows on Thursday, July 28 at 12 pm CST, where we will break down the most need-to-know legal details for anyone looking to take the next step with their company. Preparation is an investment. Invest in your success today!
This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, consult an attorney.