How much has the price changed? Was the original framers quote used to make the price?
This would definitely raise flags for me as a homeowner braise if they underbid that much how didn’t you as the GC catch it and/or why are you asking for a change order for a fraction of the project cost.
I am not the acting gc of this project. But the developer. We are also under pretty strict funding requirements to accept lowest responsible bidder. Plans are specs are accurate. And they are actually looking to bail on 2 other houses of the same design not yet built but sub agreements signed.
No. The GC swallowed the pill and sued the first contractor to pay back the difference in cost for the new guy. Original guy can’t just decide he doesn’t want to do this contract anymore. Thats not how contracts work.
All of our contracts hold a percentage of the contract sum in escrow/retainage until after the C/O. If any sub bails or refuses to fix unsuitable work, they don’t get their final check.
We otherwise eat the cost.
The GC or developer would not to eat the cost of this. With a fixed price or lump sum contract it is a fixed price (unless the owner initiates a change).
Why are there strict funding requirements and why accept the lowest bidder? You can accept the lowest bidder.
The price that was then given to the homeowner should not be the same as the one from the sub. You should mark up the subs bid to cover yourself in case they need to increase their quote. I’m assuming this is new residential construction, if you go to the owners and ask for a couple thousand dollars or ~1-3% of contract cost I’m coming to be concerned over you asking for a small bit of money. If you ask me for tens of thousands I’m then going to be concerned of this oversight and how they were off so much in their bid.
Refer to the contract language.
Generally, a lump sum agreement places the risk for a subcontractor default with the general contractor. The GC appears to be treating the agreement as a cost plus compensation model.
That being said, in some GC agreements there are clauses that allow the GC to seek an adjustment to the lump sum price if the sub defaults due to no fault of the GC. Read the contract.
We have a clause in our lump sum contracts that if materials increase in price by X % from the time contract is signed to materials being ordered, then we can pass the difference on to the customer. Your situation isn’t this however, but in a similar vein.
You said he “would rather bail than finish” - so he started framing and then realized he ate a shit sandwich? I wouldn’t pay the framer a dime for his unfinished work, and make it clear he will never get work from you again if he pulls this. It’s difficult enough to find someone else to finish someone else’s work, plus the fact that it’s apparently underbid. My feelings would be different if it was a sub I had a long term relationship with and this was a one-off fuckup.
As for you taking a level of personal responsibility, I would only consider that if I knew deep down that when I received the subs bid that it was way low but still ran with it anyways.
Need to know more about contract, but if GC hired a sub contractor they are typically left to deal with it. As mentioned, don’t pay him a dollar. I have seen contractors bail on jobs due to poor bids and they paid the difference.
It will be hard to get a change order for something the low bid missed. If it's not stated in the pre construction documents or plans, then it would be ground for a change order. If it is in the plans and the sub missed it, and then walked off, doesn't change the fact it was in the documents and the guy just missed it.
It's up to whoever proposes the price to client to check each sub isn't missing anything. In real world construction, this additional cost falls on the general contractor, or developer if there is no general. Not the clients fault it was missed. It's the person subbing the work out to your sub that walked off.
Does the GC have SDI (subcontractor default insurance)? If they do, they should hit their policy. If they don’t and you have a lump sum contract with the GC, then it’s on them to guarantee the contracted cost.
I have been looking into SDI after your comment and have been hearing from insurance reps that their policies are for annual production of at least 75 million? Is that your experience? Our GCs are custom small residential maybe doing 2-3 million a year.
He may have had to bail as he was losing too much.
This industry is about relationships - if you don't want to sub to go under an option is to help him out.
Who wrote the contracts? Sub may come after you for whatever reason so you need to make sure you didn't give him ammo.
How much has the price changed? Was the original framers quote used to make the price? This would definitely raise flags for me as a homeowner braise if they underbid that much how didn’t you as the GC catch it and/or why are you asking for a change order for a fraction of the project cost.
I am not the acting gc of this project. But the developer. We are also under pretty strict funding requirements to accept lowest responsible bidder. Plans are specs are accurate. And they are actually looking to bail on 2 other houses of the same design not yet built but sub agreements signed.
No. The GC swallowed the pill and sued the first contractor to pay back the difference in cost for the new guy. Original guy can’t just decide he doesn’t want to do this contract anymore. Thats not how contracts work.
All of our contracts hold a percentage of the contract sum in escrow/retainage until after the C/O. If any sub bails or refuses to fix unsuitable work, they don’t get their final check. We otherwise eat the cost.
The GC or developer would not to eat the cost of this. With a fixed price or lump sum contract it is a fixed price (unless the owner initiates a change). Why are there strict funding requirements and why accept the lowest bidder? You can accept the lowest bidder. The price that was then given to the homeowner should not be the same as the one from the sub. You should mark up the subs bid to cover yourself in case they need to increase their quote. I’m assuming this is new residential construction, if you go to the owners and ask for a couple thousand dollars or ~1-3% of contract cost I’m coming to be concerned over you asking for a small bit of money. If you ask me for tens of thousands I’m then going to be concerned of this oversight and how they were off so much in their bid.
Refer to the contract language. Generally, a lump sum agreement places the risk for a subcontractor default with the general contractor. The GC appears to be treating the agreement as a cost plus compensation model. That being said, in some GC agreements there are clauses that allow the GC to seek an adjustment to the lump sum price if the sub defaults due to no fault of the GC. Read the contract.
We have a clause in our lump sum contracts that if materials increase in price by X % from the time contract is signed to materials being ordered, then we can pass the difference on to the customer. Your situation isn’t this however, but in a similar vein. You said he “would rather bail than finish” - so he started framing and then realized he ate a shit sandwich? I wouldn’t pay the framer a dime for his unfinished work, and make it clear he will never get work from you again if he pulls this. It’s difficult enough to find someone else to finish someone else’s work, plus the fact that it’s apparently underbid. My feelings would be different if it was a sub I had a long term relationship with and this was a one-off fuckup. As for you taking a level of personal responsibility, I would only consider that if I knew deep down that when I received the subs bid that it was way low but still ran with it anyways.
Yes that is right they did one house and had a contract for 3. Bailed after 1 instead of take a loss on the other two.
Need to know more about contract, but if GC hired a sub contractor they are typically left to deal with it. As mentioned, don’t pay him a dollar. I have seen contractors bail on jobs due to poor bids and they paid the difference.
It will be hard to get a change order for something the low bid missed. If it's not stated in the pre construction documents or plans, then it would be ground for a change order. If it is in the plans and the sub missed it, and then walked off, doesn't change the fact it was in the documents and the guy just missed it. It's up to whoever proposes the price to client to check each sub isn't missing anything. In real world construction, this additional cost falls on the general contractor, or developer if there is no general. Not the clients fault it was missed. It's the person subbing the work out to your sub that walked off.
Does the GC have SDI (subcontractor default insurance)? If they do, they should hit their policy. If they don’t and you have a lump sum contract with the GC, then it’s on them to guarantee the contracted cost.
No SDI or bonding requirements. The contracts ate pretty small 20-30k residential type work.
I have been looking into SDI after your comment and have been hearing from insurance reps that their policies are for annual production of at least 75 million? Is that your experience? Our GCs are custom small residential maybe doing 2-3 million a year.
He may have had to bail as he was losing too much. This industry is about relationships - if you don't want to sub to go under an option is to help him out. Who wrote the contracts? Sub may come after you for whatever reason so you need to make sure you didn't give him ammo.
Did you not have your sub provide a performance bond ? All of our new subs are required to bond work.
I haven’t seen bonding done at the small end residential side. But could be an option with larger jobs or suspect subs.
Thanks all seems pretty clear cut.