Contractor Pay Schedules

[Neil Sikka]

Hello,

I am trying to get some work done in my house that would require licenses/permits for Mechanical, Electrical and Plumbing. I am talking to multiple contractors and they all want 20-35% up front because they say they need to pay their people in order to use their master tradesmens' licenses to get permits from DCRA. In addition, they say that the trade permits for my project would be expensive.

1) Is it really standard for contractors to require so much money up front? My first thought would be that I hope I see them again after I give them thousands of dollars.

2) How much do these trade permits cost from DCRA? I cannot get a price from their website because it requires me to enter a license number of a contractor.

3) What protections do I have as a customer that contractors won't avoid me once I pay them and wait months for DCRA to grant permits?

4) Contractors do not want to work with performance bonds because they say bonds are difficult to manage. This was one of my proposals

5) Contractors are not agreeing to let me pay for the upfront permitting costs or materials from my credit card. This was my other proposal.

Any thoughts, ideas or suggestions on how to make this more fair for me?

Thanks in Advance.

[Andy P]

Neil,

Happy to discuss with you all of the permitting concerns and provide some insight on those items. I obtain permits for a living and there is a certain lack of transparency in our industry, unfortunately. 

Feel free to email me directly and we can arrange a call when convenient for you. 

Andy

accupermit.com 

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[Jim P]

What's the cost of the project?  20% of $30,000 is not a lot of money.  But I definitely wouldn't pay 35% of a $120,000 job. That's many weeks payroll.

I would try to have a contract that stipulates amount of later payments, and after completion of specific phases. Like remove all sheetrock and install electrical and plumbing.

Don't know how hard it would be to find someone, but might be wise to pay someone highly knowledgeable to help you negotiate and then oversee your work occasionally. And your contractor might be on his or her best behavior if they know they're going to be scrutinized by a knowledgeable person rather than just a homeowner

[Neil Sikka]

Thanks for all the responses public and private. Where are you all finding these contractors who are willing to work without money up front? Could you please refer me?

I prefer and have tried telling contractors they can use my credit card to buy materials or permits so I dont have to pay the contractors up front, but the contractors refuse. Since I am paying a fixed fee for the whole project, it shouldn't matter to contractors if I know how much they are marking up materials by. Here are the 2 schedules that 2 different contractors are DEMANDING from me for a project on which they are quoting me more than $50K:

Contractor 1 demand:

Permits/Signing - 20%

Contractor 2 demand:

Permits/Signing - 14%
Day1 - 20%
After Drywall - 30%
All Allowances/HVAC+Ductwork    25%
Final Fixture/Paint - 11%

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Twitter: @neilsikka

[Ileana Schinder, PLLC]

Hi Neil,

Architect here. The documents produced by your architect should allow the GC to pull trade permits at a minimum cost. Also, the permit set should allow each GC to give you comparable estimates for the work. 

Without drawings each GC will guesstimate costs, all to his/her advantage, naturally.

Feel free to reach out if you need assistance,

Ileana

Pardon per le tpyo. Sent from a iphone.

On Apr 15, 2021, at 10:56 PM, Neil Sikka <neil...@gmail.com> wrote:



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[Neil Sikka]

Hi Ileana,

Contractors are telling me they need more than $10K for the permitting stage. That doesn't sound right to me. Is it reasonable for me to ask them for a breakdown of how much the permits will cost and possibly invoices? I've heard that telling them they can use my credit card number will not be agreeable in most cases. I am surprised by the lack of transparency here, considering I am looking for a fixed price, making their markup irrelevant.

[Ileana Schinder, PLLC]

Hi neil,

The most important part of the process is to have a solid set of documents that details the work to be done. Your architect/designer should produce a set solid enough to pull permits. If you dont have documents, you are asking the GC to produce drawings. They rarely do that. In fact, the ones that produce design and documentation charge handsomely for them. Drafting is time consuming. 

Ile

Pardon per le tpyo. Sent from a iphone.

On Apr 16, 2021, at 1:45 PM, Neil Sikka <neil...@gmail.com> wrote:



[Cynthia Hartley]

Neil,

Permits can be expensive. It all depends on the scope of work. A building permit can be $1,000 alone.  On top of that you would add electrical, plumbing, mechanical, demo, etc. They add up! 

It is not unheard of to ask for 20% down. Some ask for 30% down. I believe the law in MD allows for no more than 30% down. Contractors will ask for it and it is up to the customer to negotiate. 

Cynthia Hartley
"Life is not a dress rehearsal."

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From: ad...@googlegroups.com <ad...@googlegroups.com> on behalf of Neil Sikka <neil...@gmail.com>
Sent: Friday, April 16, 2021 1:44 PM
To: Ileana Schinder, PLLC <i...@ileanaschinder.com>
Cc: Jim P <jim...@gmail.com>; DC Accessory Apartments Forum <ad...@googlegroups.com>
Subject: Re: [DC Accessory Apartments Forum] Contractor Pay Schedules

 

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[Jim P]

If you liked my idea of engaging a consultant, you might consider Tom Moser, 240 793 0817   who has decades of experience doing quality, ethical construction work. I give him my highest marks for knowledge, integrity, communication skills and ability to keep folks from making mistakes.   He mentioned an AIA standard contract that has a number of benefits over typical contracts, including an arbitration clause.

Jim P