Choosing the right contractor can be a daunting task, and it simply cannot be taken lightly. However, I’m not going to preach why or how you should go about selecting one, but instead I’ll explain the logic behind our decision and why we felt it was right choice.

We decided upon a contractor we know personally. Yes, an actual “friend of a friend”. I recognize this seems somewhat crazy (and completely contradicts everything I’ve read on the matter), but I believe the logic is sound. We still went through the necessary steps before making this decision; ensuring that we toured previous projects and checked all references. We also arranged a meeting between him and our architect to discuss roles and responsibilities, plus went through contract negotiations before we made it official. He’s someone we trusted implicitly, so if (when?) things go sideways, I’m confident he’ll make it right. That, and I know where he lives. That’s gotta count for something, right?

Traditionally, a contractor’s compensation is based on a percentage of the overall construction costs, plus they handle the payments made to the sub-trades. There is a payment schedule based on milestones, and reciepts are provided for all materials purchased.

So long as you’re demanding proof-of-payment (so you know the trades are going compensated correctly), I see plenty of logic in this approach. Although I can’t say I’m comfortable with it. I mean, why should the contractor make more if I choose a more expensive product? What about situations where the product costs more, but installation is less complicated (such as sprayfoam insulation)? It may end up costing me more, but didn’t it make the contractors job much easier. I’ve simply heard too many horror stories of “hidden” costs that present themselves at the end of the project… Isn’t it in the contractors best interest to use expensive products and labor-intensive installation methods?

I don’t mean to demonize those who charge a percentage (they’re not all evil!), but we decided to doing things a little differently. Our contractor will be paid a flat-fee for his services, and we’ll be paying the sub-trades directly. With this arrangement, all of the savings are passed onto me (I’m free to choose the products and sub-trades as I see fit), plus I can ensure everyone is being compensated correctly (and not worry about getting liened at the end of the project.)

There are obvious downsides to this approach though. I’ll be taking on more responsibly throughout this process, so the onus is on me to understand the building process and techniques as much as possible. That, and it’s theoretically in the contractors best interest to get the project done as quickly as possible. Why sweat the details when you’re getting paid the same no matter what, right? I’ll be watching closely, and can only hope this arrangement will force our contractor to be efficient… and not sloppy. Time will tell.

Ultimately I felt this arrangement afforded us the most transparency, and provided the best risk to reward ratio. If all goes according to plan, there shouldn’t be any many surprise expenditures we haven’t budgeted for.

Or so I hope.

Photo via Flickr user {ryan}