5 Steps in Choosing a Contractor

 Choosing a contractor can be stressful whether you are a homeowner, commercial property owner, or a representative for a company looking to hire a contractor. Taking the 5 points below into consideration when hiring a contractor will help match your project with a great contractor.

Licensed. In most states in order to pull permits and perform construction services typically in excess of $20,000 monetary limit, the business entity is required to be licensed by the state in which it is trying to perform those services. Most states have contractor boards that have lists of contractors with active licenses filed with that state. These contractor boards monitor the financial status of these businesses and require proof of passing state required exams in order to obtain a license. The board will set monetary limits of work to be performed and may limit the work scope to residential or commercial. These licenses typically expire every 2 to 3 years. An unlicensed contractor operating in excess of the monetary limit for licensing is committing a crime and will not be able to secure permits and legally do the job. Knowingly utilizing unlicensed contractors can be a crime as well. Always verify a contractor's license. If a contractor cannot pass an exam or keep their license active, do you really want this person performing construction work for you?

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Insured. Most contractors carry a variety of insurances. The most common requirements are liability insurance. Liability insurance will pay for any damages the contractor may create while performing services. For example a contractor cuts down a tree and it falls on your neighbor's house, the contractor's liability insurance will pay for the damages. This is very important because your neighbor could actually come after the person who hired the contractor for the damage as the tree came from their yard. Always check for this insurance to be in place. Verify the amount will match or exceed $500,000 at minimum. This value will help to cover most potential damages.

Bonded. Bonding is similar to a form of insurance as well. The most common types of bonds are bid, performance, and payment. A bid bond is a bond turned in when the contractor turns in their pricing estimate to the owner. This bond insures that the General Contractor must perform the job for the price offered or the bonding company has to pay somebody to do so. A performance bond is the second type of bond and it can be obtained for the value of the construction services to potentially pay another contractor to finish the project if the original contractor cannot or will not at any time during the project duration. This is almost like insurance for the owner. A payment bond is another type of bond and it is also equivalent to the value of the project. It will pay all subcontractors should the general contractor fail to do so. This prevents the subcontractors from placing a lien on the owner's property and creating a legal nightmare should they not get paid. These 3 types of bonds are generally utilized more in commercial construction and large value contracts. The negative side to requiring bonding on a job as a protection for the owner these can inflate the cost of a project in excess of 5% and these costs are naturally passed on to the owner.

Experience. Verify that the contractor you are hiring has experience that matches the type of project that the owner places on using them for. For example hiring a residential contractor to build a $3 million hospital when they have never built anything bigger than a $200,000 house is a risky decision. Past experience is often listed on a contractor's website or company brochure. Doing some research on a contractor can pay big dividends.

References. Request 3 references from a contractor prior to signing a contract. Call these references and ask them how the contractor performed and what type of project they utilized them for. Ask questions about the budget and schedule and how well the contractor performed in accordance with those. If these are honest references this will give the owner a feel for how the contractor will perform on their task.