Contractor Management: How to Manage Your Project Budgets

In a struggling economy, it can be a very nerve wracking experience to take on a construction project (no matter how major or minor) with the help of a professional contractor. For most businesses, budgets are tight, and it seems that when it comes to construction projects, the unexpected is always waiting to happen and rack extra dollars onto your bill.

Though there are obviously issues that may arise that are beyond the control of anyone, there are steps that you can take to help keep your project budget under control, and as close to your original cost projections as possible. When you adhere to these simple yet highly effective contractor management tips, you will be able to successfully stick to a reasonable project budget.

Contractor Management Tip #1: Have a game plan

Before your project ever begins, it is prudent to have a complete design plan established. This plan is what will help you to estimate the expenses you can expect throughout the construction project. It is important to begin this process well in advance so that you can take the time to closely estimate your costs to easily stay within your budgeting plan. Any last minute changes can rack up extra costs due to the time and money involved for both yourself and your contractor.

Contractor Management Tip #2: Expect the Unexpected

One smart way to keep your project from going over budget is to plan for additional expenses along the way. Though careful planning went into your original estimate, it is inevitable that a situation will arise where you will need to spend some extra money. Expecting these costs ahead of time will help you to stay on track. In order to do so, factor in an additional ten percent of your total budget to account for any extra costs.

Contractor Management Tip #3: Get it in Writing

You may be surprised to learn that written contracts between clients and contractors are not actually required by law. Regardless of this, it is wise to always get your contracts in writing. These contracts should list, in detail, all of the services that are to be performed for a given price. In this way, there can be no way for a contractor to charge you extra for something you earlier agreed upon as a part of the original price. In addition, making sure that there are no inconsistencies or hidden costs due to subcontracts will go a long way in keeping your budget on course.

In this same vein, it is critical that all “change orders” or additional costs be recorded in writing. Any extra work that needs to be done should be put together on a change order document stating the breakdown and cost of services, and should be signed by all parties involved. In doing so, you will have a clear idea of how much extra money is being spent at all times, and will be able to easily determine if your budget will cover the added costs.

Contractor├é┬áManagement Tip #4: “Pay” it Safe

Most often, contractors will expect a series of progress payments based upon a schedule of values. It is important that you pay all of your bills in a timely manner in order to avoid any extra costs or lawsuits. It is also critical that you contractually require your contractor to provide you with both conditional and final lien releases (or waivers) which state that your progress payments have been received. This will protect you against lawsuits and the potential for a lien to be held against your property.

Of course all of these are useful tips in managing your project budgets, but first you need to find a contractor!

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