With numerous large scale building companies going broke recently it has to make you think very carefully about your contractor selection process.
When a builder goes broke during a project it causes substantial difficulties completing your project, particularly if they owe their subcontractors and suppliers on your project money.
Subcontractors and suppliers need to provide you with warranties and certifications to enable you to obtain your completion certificate to enable settlements (pay day).
The problem you face is that you don’t know what money they are really owed and if you try to get a different builder to complete the project without those specific subcontractors and suppliers then you will not receive their warranties and certifications.
It’s problems all around when your builder goes broke during your project.
But wait, there’s more; what if the builder goes broke during the defects liability period or during the building statutory warranty period?
If there are incomplete defects you, as the developer, may be held liable for the defect rectification works, subject to your local laws, and be required to rectify them.
Can you see that the selection of your builder is critical? Of course you can, but you need to know the best way to protect yourself from something going wrong and, if it does go wrong, from subsequent costs.
Choosing a reputable builder is a good first step, but as we can see from current events, that’s not always the best way forward. The key issue is to ensure that your builder is not only reputable but viable, they must be able to survive when defect issues arise or disputes happen with you or other clients.
An Expression of Interest (EOI) process is a great way to see what builders have done before and to contact referees and former clients and subcontractors. You would advertise the proposed project, give some initial information on the project and request submissions answer a few key questions such as past experience and the names and contact details of former clients and subcontractors.
You can also do a credit reference check which will show up some, but not all, financial issues they may be having.
Once you have a short list of preferred builders you can tender the project to them. In your tender documents you can request even more information about their company’s past history on projects and also request financial records for the previous 3 years to verify that they are running profitably.
Not all builders will provide their financial information and you will need to make decisions based upon your own risk profile.
Be careful and be aware.