Client and Contractor Communication
In our previous article, How Our Home Needs Affect the Home Building Industry, we touched base on the way our ever-shifting needs have impacted the home building industry. Next, we’ll focus on how this impacts clients and contractors’ interactions.
Shifts in Agreements
Not long ago a typical contract had lower down payments, no clause for price increases, and inflexible timelines. Due primarily to the delays in the supply chain, clients and contractors are agreeing to purchase more items early in the process. Appliances, lighting fixtures, certain finishes may take significantly longer to receive and therefore are ordered at the signing of the contract and not as the project’s phase’s progress. Down payments of 10% to 20% are now closer to 35% to 45%. This is a negotiable aspect of the contract.
A Once Predictable Market Transforms
In the recent past, homeowners would get a specific cost stipulated in a contract. This was because costs were fairly predictable. They aren’t any longer, at least not for the foreseeable future. If a contractor cannot rely on their costs being stable, there needs to be recognition between the client and the contractor on reasonable compensation. That is tricky. Generally, the contractor will need to be more transparent about the costs of certain items and have these listed, along with the contractor’s cost, in the contract. This can be established by cost statements from suppliers. There should be a percentage increase threshold as well. This threshold can vary from product to product. Increasing the price by 5% on a tube of caulking will not affect the bottom line in the same way as increasing the price by 5% on a $30,000 appliance or $100,000 package of lumber.
Time is always ‘of the essence’.
And it still is. Professional contractors typically have a good grasp on the duration necessary to complete a specific project. Over the past two years however, the availability of various commodities has fluctuated. Suppliers are faced with inventory challenges not seen before. The product that was to be delivered by a certain time just isn’t there. (See some of the supply chain discussion above) Contractors have no control over such matters. Homeowners will see more flexibility in contracts regarding duration. This is also a problematic subject. Contractors need to be clear about, and present clear evidence, as to what and why a delay has occurred.
Contracts have changed. Embracing the new phenomena of our times, while a frustrating reality for both the homeowner and the contractor will go a long way to a more harmonious outcome. We need to remember that flexibility and understanding is a new truth needing to be accepted by all of us.
Where does this all lead? What could the future hold for the construction industry? I have written about some of the challenges; next month we’ll talk about opportunities in this industry’s future.