How To Select A Contractor The success of a construction project can be influenced by the methodology for choosing a building contractor. Pre-selection prior to bidding is preferred.
Contractor selection is really based on the type of owner and the type of project delivery system that is selected. Traditionally, under the design-bid-build system, the contractor is selected on the basis of the lowest qualified bidder. Under this system, the contract documents are prepared by the designer (Architect and/or Engineer) and then issued to several contractors for bidding purposes. Once bids are received and reviewed, the construction contract is awarded to the lowest bid contractor. While private sector owners can (and should!) investigate potential contractors and establish a limited list of contractors from who bids are solicited, public sector owners are, for all practical purposes, at the mercy of any licensed contractor…proving that a licensed contractor is “not qualified” is essentially impossible.
In the private sector, and increasing in the public sector, the design-build delivery system is utilized. Under this scheme, the designer prepares a set of “preliminary” design documents to define the scope of the project and one to three contractors are invited to examine the documents and offer a guaranteed maximum price (GMP) for the project. The designer and selected contractor then work together so that the project scope remains within the GMP as the design and construction is completed. Only if scope changes are required, with the owner’s agreement, is the GMP is increased correspondingly.
Pre-Selection
Assuming that, under either delivery system option, contractor pre-selection is available to an owner, the first step is to identify and evaluate contractors from whom proposals will be solicited.
Depending on the type of project, the contractor may be a general contractor, mechanical contractor, or electrical contractor. Under North Carolina law, if the project scope includes at least $30,000 of general construction work, a general contractor is required. Therefore, on most projects, all three contractors must be evaluated and selected even if, for convenience, the general contractor retains the mechanical and electrical contractors as subcontractors.
A selected list of contractors for consideration is highly recommended. Your designer, your own past experience, input from other owners, etc. can provide recommendations for contractors to consider. The state licensing boards can provide lists of contractors in a given geographic area for consideration.
Request For Qualifications
From this input, a list of 5-10 contractors of each type should be developed and a request for qualifications (RFQ) issued to each. The RFQ must also contain a basic project description, including proposed design and construction schedule. The following qualification checklist, in the form of questions in the RFQ, should be utilized to investigate and evaluate all contractors considered for the project:
1. How long has your company been in business?
2. What is your bonding capacity?
3. Who is your bonding agent and how long have you done business with them?
4. Provide at least 5 references for projects of similar scope. Include project name, address, type, size, along with the owner and designer names, addresses, phone numbers, and contact persons.
5. For these same projects, provide a list of major subcontractors utilized for each, along with addresses, phone numbers, and contact persons
6. Provide banking references.
7. How many employees work directly for your firm?
8. What is your policy on Change Orders?
9. What is your record for completing projects on time?
10. Which Project Manager and Superintendent will be assigned to this project and what is their construction experience? Provide detailed resumes for each.
11. How many times, in the last five years, has your firm been involved in a dispute with an owner that resulted in litigation, arbitration, and/or mediation?
You will, most probably, receive a response from each contractor contacted. Your next job is begin an interview and selection process.
Reference Checking
No matter how good a contractor looks on paper, follow-up on the information provided with each response to the RFQ:
1. Call each of the references, both owners and designers…you would be amazed at the response of some “references”.
2. Call the state licensing board for that type of contractor to determine if any disciplinary actions are pending or have been taken against the contractor within the last 5 years.
3. Call a representative sample of subcontractors who have worked for this contractor to determine if there are potential management or financial problems at that level.
Interviewing
Based on the RFQ responses, you can "cull" the contractors to the 2-4 you consider best qualified for your project. The next step, with the help of your designer, is to interview each firm of these selected firms…and make sure the proposed Project Manager and Superintendent participate…it is well understood by experienced owners and designers that a project’s success hinges on the performance of the contractor’s Project Manager and Superintendent. (By the way, if you select a contractor and he wants to switch either the Project Manager or Superintendent when you get ready to award a contract, pick a different contractor!) As you interview separate general, mechanical, and electrical contractors, make sure that your selected firms can work together…sometimes there’s “history” that cannot be overcome.
Selecting
From these interviews, "rank" the top 2-3 firms and begin cost and contract negotiations with the one ranked highest on your list. If you fail to reach agreement with that firm, terminate negotiations and move one to the next one on the list.