The company you hire for your next project can determine whether it is a success or a mess. Here are some tips for choosing the right builder.

As Rush’s Geddy Lee and Neil Peart so eloquently put it, “You don’t get something for nothing….No matter what your dreams might be.”

That sentiment certainly applies to the construction industry. But I think there’s a bit more to it. Here’s my (admittedly less poetic) corollary:

“Quality costs money. You won’t get more than you pay for. However, you may pay a premium for things you don’t need or value.”

I’ve worked on some great projects over the years.

Having worked as an architect (and some-time contractor) for more than 25 years, I have learned a thing or two about what makes a construction project successful. Good communication, trust, honesty, and a spirit of cooperation are essential. The most satisfying projects are those where the builder, architect, and client work together to achieve the best possible result. I’m grateful to have collaborated with several smart, talented, trustworthy builders over the years.

I’ve also seen my fair share of trainwrecks.

Builders who regard clients as prey and architects as impediments or adversaries spell trouble. Clients who are naïve or unrealistic about the cost of quality construction are equally problematic. Focusing too much on price can cause even the most intelligent client to choose the wrong contractor.

A big part of my job is to provide sound advice to my clients. By offering them the benefit of my experience—the good, the bad, and the ugly—I try to help them to avoid costly and frustrating pitfalls. In that spirit, I offer the following considerations for anyone who is about to hire a contractor. These points may be obvious, but they are so important that I think they bear repeating.

After that are profiles of four common builder “types.”

Builders are in business to make money.

Risk and Reward

Building comes with significant responsibility and risk, both financial and physical.

Builders and their subcontractors buy the materials and equipment that they will use to create a built project. They employ and manage the tradesmen who execute the work, as well as those who support them.

It goes without saying that builders must, at a minimum, cover the cost of their labor, materials, and overhead—the costs to operate their business. But those who shoulder those risks expect to earn a reasonable profit as well — and rightly so.

Successful contractors price their work appropriately.

Those who provide extraordinary service and workmanship are by necessity expensive. And those who charge too little for high-quality work will soon be out of business. It’s that simple.

“Price is What You Pay. Value is What You Get” — Warren Buffett

When interviewing contractors and evaluating estimates, knowing what you’re getting is every bit as important as the price.

Believing that a cheap contractor can produce the same quality result as an expensive contractor, but for 20% less, is simply naïve…and a recipe for disaster.

Think about it this way: Why would a virtual (or total) stranger give you $50,000 or $100,000?

There is no free lunch. Food for thought.

General Contracting: The 'Wild West' of Professions

Regulations and standards protect the public.

In the so-called learned professions (e.g. architecture, engineering, law, medicine, etc.), regulations and standards exist to ensure a basic level of competence among practitioners. The primary goal, of course, is to protect the public’s health, safety and welfare.

These regulations and standards represent significant barriers to entry.

To become licensed, one must satisfy stringent educational and training requirements, obtain the endorsement of licensed peers, and pass a rigorous licensing exam. To keep a license, one must meet the profession’s continuing education requirements and uphold its ethical and practical standards.

Each profession’s state licensing board has the power to censure a licensee who fails to comply with its regulations and standards. In extreme cases, it can and will revoke a license.

Regulations don’t guarantee competence. But they help.

Even with these standards in place, though, few would say that all doctors, lawyers or architects are equally competent.

Competence depends on many factors: the quality and duration of education and training; the number of years in practice; the degree of specialization; and hard-to-define personal attributes. These factors shape a professional’s reputation and thereby the demand for his services.

In New Jersey, general contractors enjoy few barriers to entry.

One can become a licensed “home improvement contractor” in New Jersey by paying a nominal annual fee, maintaining a minimal amount of general liability insurance, and passing a criminal background check. The law tries to protect consumers from contractor fraud, but in terms of competence or expertise it provides little in the way of assurances or safeguards.

General contracting companies run the gamut from the proverbial guy with a truck and a toolbelt to the professionally managed corporation. A practitioner may be a talented, well-trained artisan, a glorified do-it-yourselfer, or a guy with an accounting degree who’s never touched a hammer.

Time to roll the dice

As one would expect, different contractors may achieve vastly different results. Some will focus on fine craftsmanship, others on low cost, and still others on volume. Contractors’ strengths—and the performance and results you should anticipate when hiring them—will be reflected in their marketing efforts (or lack thereof), the prices they command, the people and areas they serve, the appearance of their work, and their clients’ reviews.

Do your due diligence.

Ultimately, identifying the right contractor for you depends on your priorities and your diligence. Do your research. Check references. Speak with people you know and trust who have worked with a builder you’re considering.

A healthy does of skepticism doesn’t hurt: If it sounds too good to be true, it probably is.

Four Common Types of Builders

If four contractors are bidding on the same set of drawings, their estimates should be identical, right? Theoretically, perhaps, but in reality that’s unlikely.

Contractors’ approaches to estimating are as varied as the businesses themselves, each reflecting the owner’s business model—and sometimes her ethical standards. If you are interviewing contractors for your project, you’ll probably encounter at least one of the following characters:

“Sloppy Joe”

Sloppy Joe likes to shoot from the hip.

He’s busy, hates paperwork, and doesn’t like to spend a lot of time preparing free estimates, especially when he suspects the prospective client is a tire-kicker or is just price-shopping. So he’ll quickly come up with a rough number based on “gut” or an educated guess, figuring that he’ll worry about the details “later”—if he gets the job.

Questionable Assumptions

Sloppy Joe may make assumptions about the materials to be used, the design details, and your expectations regarding overall quality. If you present him with partially complete drawings—the kind you typically have when you and your architect are still developing the design—it is easy for that to happen. Even if you do provide the specifications and details found in a more complete set of drawings, he may gloss over or simply ignore them. Sloppy Joe will rarely contact the architect to request clarification or additional information. (Details, details!)

Sloppiness: An Advantage?

Contractors who estimate this way tend to underprice projects. Low bids are understandably attractive to clients, so this approach often works to Sloppy Joe’s advantage in a competitive bidding scenario.

Not a bad guy. Just a bad estimator.

Either Sloppy Joe doesn’t want to spend the significant amount of time needed to prepare a good estimate, or he simply doesn’t see the need. Even if he’s a talented carpenter, he may not know how to manage a project or run a business.

Ready to Roll the Dice?

Either way, working with Sloppy Joe is a risky move. Once the project starts and the estimating errors and omissions appear, one or more things usually happen. He has to tell you—repeatedly—that he overlooked something in the plans and that you’ll have to pay more than expected. (“My bad!”) Or he starts to cut corners—in ways that you may not see—to avoid going over budget. Or he runs for the hills, leaving you with a half-done project that no other contractor will touch. Obviously, these are all bad outcomes.

“Shady Sam”

A Predator

Shady Sam has much in common with Sloppy Joe, and his approach is equally problematic. The main difference is that, while Sloppy Joe is basically a good guy, Shady Sam is basically bad guy.

A Business Model Based on Exploitation

Shady Sam’s business model is based on abusing clients’ trust and exploiting their lack of experience with construction. Using a poorly written contract, one that loosely defines the scope of work or does not reference the architect’s drawings, creates profit opportunities for Shady Sam. Change orders, normally a legitimate way to make adjustments during construction, are an integral part of his strategy.

Change Orders: The Weapon of Choice

During construction, you find out that Shady Sam plans to install low-cost windows from a big box retailer. You are surprised; the architect specified high-quality windows in the construction documents. When confronted, Sam explains that the cheap windows were one way he was able to offer that magically low project cost. You are annoyed, and you make it clear that you want the good windows. Sam says no problem and explains that the project cost will increase. He issues a change order, which describes the change and its cost. You must sign it to move ahead with the change.

The caveat is that Sam can essentially name his price. It need not be fair or reasonable. While some clients might grumble and decide to keep the cheap windows, you grumble and accept the price because you understand the benefits of using good windows. This is a highly profitable transaction for Shady Sam—one that he probably saw a mile away.

If this happens more than once, you will start to view Sam as opportunistic (or worse). The trust will erode, and that is never a good thing. But Shady Sam won’t lose any sleep over the deterioration of your relationship. Hey, it’s just business! And this is just the way he runs his business.

Too Good to be True? Yup.

Working with Shady Sam may be even worse than working with Sloppy Joe. By the end of the project, you may be dismayed to realize that the actual project cost was 40% over the contract price. Adding insult to injury, the quality of the work may be far lower than you expected, or lower than you know. So much for the appeal of the low bid.

“The White Glove”

When Only the Best Will Do…

You will see this type of contractor’s sign in front of very high-dollar projects in the poshest locations. They have a sterling reputation. The clients who can afford such contractors are often very demanding. In addition to expecting flawless workmanship, they require “white glove” service. And these contractors deliver. That means a dedicated project manager who is almost always on-site, supervising the talented tradesmen; communicating with the architect, suppliers, and the client (or the client’s representative); keeping the project on schedule and running smoothly; and ensuring that the jobsite is left immaculate at the end of every workday.

By virtue of their size and professional management, many White Glove firms can offer something that others cannot: speed and agility. If you have an ambitious (unrealistic?) timeline for your project, the White Glove may be the only builder who can accommodate you.

A polite and refined staff member is always available to take your calls. Communication is exceptional. If you stop by the White Glove’s neat and comfortable office, you will likely be offered a chilled glass of sparkling water or prosecco—and, of course, a friendly smile.

Naturally, this level of service doesn’t come cheap. The White Glove has to cover his significant overhead, and he understandably expects to be amply compensated. Those costs are of course passed on to clients. I have heard stories about such contractors marking up their subcontractors’ invoices 100%, whereas a more typical 20-40% markup allows for a reasonable profit.

The Million Dollar Question: Is It Worth the Price?

For certain clients, choosing the White Glove is a no-brainer. It gives them peace of mind and bragging rights. And why not? They can afford it.

But for most clients—even those who can afford it—the White Glove may not be worth the premium price. Without a doubt, the White Glove will provide an excellent finished product and a stellar customer experience. Whether you really need that glass of prosecco (and the smile that comes with it) is another question entirely.

“The Straight Arrow”

The Good Guys

About 90% of the builders I work with fall into this category. In my opinion, these guys (or gals) offer the best of all worlds. Straight Arrows are capable of doing the highest quality work. They play nicely and communicate well with architects. They are trustworthy and ethical. And, in my opinion, they charge reasonably for their work.

So, what’s not to love? Why wouldn’t everyone hire a Straight Arrow? There are a few reasons.

Hard to Get

First of all, they are hard to get. Thanks to their excellent reputation, these folks are in high demand. It is not unusual for a Straight Arrow to have one-year (or longer) backlog of work.

Secondly, many Straight Arrows are on the smaller side. They typically operate out of a home office and have little or no support staff. In general, these are very hard-working people. They manage projects all day, sometimes even strapping on a toolbelt to work alongside their crew, and then spend their evenings and weekends preparing estimates and invoices.

A Straight Arrow can only handle so many projects at one time and may not be able to move as quickly as some clients would like. Having to wait a year or more to start a project is simply not an option for some people.

Quality Materials and Workmanship Are Not Cheap.

I noted above that their fees are reasonable. But not everyone agrees. Many Straight Arrows will give a reasonably accurate estimate and then charge on a time and materials (T&M) basis. Doing high-quality work takes time and care, and talented, well-trained workers expect to be paid a decent wage. Moreover, good contractors tend to use high-quality materials. For example, they buy lumber from a building supply company rather than a big box store. (Trust me, there is a difference.) Over the course of a project, the cost of quality materials and skilled labor can really add up. Though justified, these high prices can turn off certain clients: those who don’t understand what it takes to produce a high-quality job; or those who trust Shady Sam, who promises to do the “same” job for 25% less.

Clients who choose to work with a Straight Arrow are those who want quality workmanship and peace of mind, without the frills that the White Glove offers. These folks are willing and able to pay—and if necessary, wait—for a job well-done.

A Solid Bet

For what it’s worth, I would choose a Straight Arrow to work on my own home.

Final Thoughts:

When it comes to construction and contractors, perhaps the best advice I can offer clients is to formulate a realistic construction budget at the beginning of the project and then let us design to fit that budget. By looking at the cost per square foot of similar, recent projects, we can roughly establish a project scope that is financially feasible.

We place a great deal of importance on quality, and our clients tend to be of a like mind. When cost is a factor—as it almost always is—we recommend reducing the scope of a project as needed to fit the budget rather than compromising on materials and workmanship. In the long run, it’s the smarter approach.

4 Types of Builders: How to Choose the Right One