Types of Commercial Remodeling Contracts
Before diving into a commercial remodeling project, you first need to familiarize yourself with the various types of remodeling contracts available to you. While there are several types of commercial remodeling contracts out there, we want to focus on two of the most popular types: negotiated contracts and competitive bid contracts. Once you understand the benefits and drawbacks of each, you will have an easier time determining which type of contract is most appropriate for your needs.
Competitive Commercial Remodeling Bid
A competitive bid contract is highly effective at lowering costs because it is very competitive and forces prices downward. While a competitive bid contract may appeal to owners simply because it is so effective at sourcing out the lowest bid, it does come with a variety of drawbacks. Change orders, delay claims and disputes can be experienced when competitive bid contracts are chosen over other contract types. This is why choosing the right local commercial remodeling contractor for your competitive bid contracts are so important. At Randahl Construction we often offer competitive bid contracts but we ensure our clients that our competitive proposals are detailed, accurate and honest, eliminating the worries listed above.
With the wrong contractor, the competitive bid contract is considered to be one of the most confrontational contracts in the construction industry and can cause friction between the builder, owner and architect. This is partially because the contractor is given very limited input during the plan development and design phases, which can lead to friction and disagreements when project construction actually begins. At Randahl we make sure to be involved in all stages of our projects ensuring that teamwork and communication is clear from start to finish.
Often times a competitive bid contract does not encourage collaboration between the various members of the project team. When collaboration is discouraged in such a manner, the Value Engineering process is significantly impeded as a result. For these reasons, it is important to decide whether sourcing out the lowest bid is worth the various drawbacks associated with competitive bid contracts. Ideally, if you choose a competitive bid contract, we recommend interviewing contractors for your project, then selecting the right contractor to offer pricing on the project, followed up by a comparable bid if needed.
Negotiated Commercial Remodeling Contract
A negotiated commercial remodeling contract is relationship-focused and allows the owner, contractor and designer to all collaborate at the beginning of the project. These type of Commercial Remodeling Contracts often delivers positive results in both design and pricing because it encourages teamwork from the earliest project stages.
In a negotiated contract, quality standards, hard costs and soft costs are all discussed during the earliest design phases. This open discussion model allows for competitive bidding and ensures that the predetermined level of quality discussed in early design meetings is maintained throughout the project. Clearly laying out cost and quality standards and expectations during the design phase significantly reduces time spent discussing these matters during contract preparation.
Accountability in a negotiated contract is well-defined due to scope review and open book job cost accounting. This transparency encourages the various parties involved in the contract to take ownership of project aspects for which they are responsible. Time delays, change orders and friction between various parties is also reduced due to a clear understanding of all aspects of design and pricing.
Finally, a negotiated contract minimizes inefficiencies and maximizes design options by placing emphasis on Value Engineering and Pricing. The owner, contractor and designer who have entered into a negotiated contract are all on the same page and working toward the same end goal of meeting predetermined quality and cost goals.
Choosing Commercial Remodeling Contracts
As you can see, there are benefits and drawbacks associated with any commercial remodeling contract. If you are primarily interested in cost savings and are unconcerned about dealing with friction throughout your project becuase you have researched and found trusted contractors then a competitive bid contract may be the right choice for you. If, however, you prefer to be on the same page with other contract members from the beginning of the construction project to the end, you may want to choose a negotiated contract. Remember that negotiated contracts still give you the opportunity to get a low cost because they allow for competitive bidding among all qualified sub-trades.
When you are ready to choose a contract type and get started on your remodeling project, give the experienced professionals at Randahl Construction a call 763-559-1009. We can give you a free project estimate or answer any questions you may have about your remodeling options.