© THE CONTRACTOR’S LEGAL KIT, LLC, 2022. All rights reserved
Contractors use a wide range of methods to market their companies and attract new business. Some contractors make fancy websites, highly visible jobsite signs and newsletters. Some present their work at local home shows or advertise on contractor referral sites or homeowner design websites. Some stablish close relationships with local architects and are frequently referred to owners getting ready to build. Others play golf and join all the “animal” clubs (e.g., Elks, Lions, etc.) in an effort to get the word out that they are civic minded and available to service all your construction needs. Some depend on other forms of advertising that costs thousands of dollars each year. Still others make it a point never to advertise letting you know that they work only with referral customers (all contractors should be so lucky!).
The purpose of this chapter is not to survey these and other marketing methods — plenty of other sites and books on marketing do that well, far better than this site ever will. Rather, this part of the site briefly looks at a few strategies for good communication that can have a positive impact on a contractor’s legal and personal relationships with owners.
Whenever you conduct business in a positive way with current or prospective customers, you are doing a good job of marketing your business because you are building a referral base of satisfied customers who will recommend you to others. This is perhaps the best marketing of all because it builds your word of mouth referral client base.
If, on the other hand, your style of doing business leaves owners upset and has you frequently on guard about disputes or litigation, then your methods of operating and communicating may need to be reviewed. When there is constant tension between the owner and contractor, any advertising you do will be much less effective due to the negative comments being passed around town or the internet about your business and style of operating. As they say in another business, “Your reputation precedes you.” The internet and online review companies such as Yelp and your Google ratings can be your best friend or your worst enemy in a marketing sense.
Good Marketing Is Good Communication:
Why focus on communication? First, because marketing is a form of communication and most contractors are “marketing” more by how they operate than through the dollars they spend on advertising. In this sense, a contractor can often improve marketing without spending much on traditional advertising. Second, many, if not most, legal disputes I’ve seen could have been avoided by better communication both in the construction contract and between the owner and contractor in other interactions. Remember, the dynamic of the construction process is often somewhat new to the owner.
The contractor is — or is at least perceived to be — the seasoned professional in this area and should therefore be the one that attempts to set the tone and style of communication. In my experience, good communicators in this business have a better shot at being successful and are less likely to end up with unhappy customers and legal disputes. Whether they know it or not, good communicators are doing good marketing, and operating in a manner that helps prevent legal problems – all at the same time!
Value Vs. Price:
Owners who aren’t just looking for the lowest bid are looking for something called value. Your style of conducting business and your ability to communicate, both in person and in writing, may convince this type of owner that, while your price may be a bit higher, you will deliver more value for the money spent and therefore you should get the job. Higher-end customers expect higher-end, professional service from their contractor and are usually willing to pay more for this service. Many of these owners are in the position to be able to hire you because they have been successful in their own businesses; they know the difference between a well-run business and a “seat-of-the-pants” operation. Therefore, your business style needs to communicate value, competence, professionalism, and integrity at every stage of your dealings with the owner. If you succeed in doing this, you won’t get every job you bid, but you’ll be in the running for the types of jobs you’d probably rather be working on.
Returning Phone Calls:
Almost too basic to mention, but too common to overlook today as it was in 1996 when the first edition of The Contractor’s Legal Kit was released is that some contractors don’t return phone calls very promptly. Most owners find this very frustrating. The owner then reasons, “If the contractor doesn’t have time to return my calls, how will he have time to run my job? If he doesn’t care enough to make the call, will he care enough to do a good job?”
Make yourself accessible, at least during specified business hours. There is no reason to be inaccessible to your current and future customers for any extended period of time. At the same time, you may want to let the owner know that calls are returned between certain hours of the day and not at all times of the evening so the owner knows what to expect.
Prequalifying the Job:
It doesn’t make financial sense to bid every job that comes your way. In fact, you’ll go broke if you spend all your time bidding fixed price jobs. The alternative is to prequalify job prospects prior to deciding to invest your time in bidding the job. How do you determine which jobs are worth bidding on a fixed price basis and which are likely a waste of time for your company? Consider the following factors:
• Is the type of work required a specialty of yours and an area where you have been competitive and profitable in the past? If you aren’t fully experienced in the type of work the owner needs, you probably will be less competitive.
• How many contractors will bid on the job? If it’s more than three, the odds may be stacked against you.
• How much time will it take to prepare the bid? The more time required, the more important it is to determine in advance whether bidding is a good gamble or a bad investment.
• How complete are the plans and specifications? How serious does the owner appear to be about proceeding in the near future? Is a permit available or have the plans been submitted? An owner who already has invested the time and money to obtain a complete set of plans and specifications is more likely to go through with his project in the near future. You can spend a lot of time with “tire kickers” who primarily want some free time from you to discuss projects that may never be built and “what if” pricing. Sometimes this may pay off and other times it never will.
• Do the owners seem like people you can get along with personally? Is the
architect someone you can work with comfortably? Every once in a while, personalities grate on each other. If you notice this tension at the start, bidding the job may be a mistake.
• How busy are you at the time the project needs to be bid and completed? If you are too busy to make a thorough and timely bid, and are too busy to perform the work with your existing crew when the owner is ready to start, you may want to pass on bidding the work.
• Which other contractors are bidding the project? Ask the owner. Get to know how your frequent competitors typically bid against you. If you typically bid higher than the two other bidders and you have plenty of work, you may decide not to invest the time required to bid this project.
• Does the owner have a litigious history? If so, you may want to pass on bidding the project. You may be able to go on the internet or the County Superior Court clerk’s office to find out how many lawsuits the owner has been involved in within that county. If you decide the job is not worth bidding based on the considerations above, let the owner know how much you appreciated the opportunity to discuss the project and that you’d like to consider other jobs for him in the future. If you take the time to send a letter or email to this effect, the owner is apt to appreciate your efforts even though you aren’t bidding the job.
Once you have decided to bid the job, there are many ways to sway the owner toward working with you. During the bidding phase, it is especially important to demonstrate to the owner that you are an experienced, conscientious contractor who is qualified to bid and perform the project. Be careful, however, that your advertising, brochures, informational letters, and even conversations, don’t make promises you can’t keep, since you may be creating implied warranties. For instance, stating that your company is the best and most experienced company and that your roofs “never leak” or your concrete “never cracks” almost certainly will create false impressions and express warranties which you shouldn’t make if there is even a remote possibility that you can’t live up to them.
Being somewhat creative in your advertising is okay, but if you bluster too much about how great you are and how totally satisfied you will make the owner, you may be going beyond the bounds of ordinary advertising and creating unintentional express warranties for your company. If you think you may be on the border, consult an attorney before advertising.
If your bid is too high or extremely low, chances are you won’t get the job. On the other hand, your bid on a job may be right in line with the others, in which case the contractor who appears most professional, experienced, communicates the best and appears to be in tune with the owner’s concerns may end up getting the job — even if he is not the low bidder. With this in mind, you may want to convey your professionalism to prospective customers by providing the following information during the bidding stage:
General contractor reference list:
Providing a list of previous satisfied customers to the owner either during or just after your initial contact will help convince him that you’re both experienced and good at what you do. Provide a brief description of the type of work performed on each job. You may also want to highlight the projects that were similar to the project you are being asked to bid. Of course, much of this may be highlighted on your website already and the link can be sent to the owner.
Subcontractor reference list:
This list can be useful on larger projects if a lot of the work will be performed by subcontractors. Because the success of the project relies so much on the quality of the subs, it can be helpful to let the owner know that you have developed working relationships with respected subcontractors in the area, many of whom may be working on his project.
Evidence of contractor’s insurance:
It is also helpful to give the owner a copy of your insurance binder showing that you have adequate coverage. This binder typically includes worker’s compensation insurance and comprehensive general liability insurance. Providing the owner with proof of insurance may motivate him to ask the other bidders if they also carry this insurance. If one or more does not, you may find that your bid is viewed more favorably, and uninsured bidders may even be eliminated from the bid list.
Also, federal law requires all employers to carry worker’s compensation insurance for their employees. Showing the owner that you carry this type of insurance demonstrates that you are aware of the labor laws applicable to contractors and that you will not put yourself, the owner (and his property), or your employees at risk in the event an employee is injured on the owner’s job.
Assuming your state licenses contractors, if you give the owner a copy of your contractor’s license there will be no doubt in his mind that he is working with a licensed contractor. Again, providing the owner with this information may motivate him to confirm that the other bidders are also licensed. You may even want to confirm that the owner is obtaining bids only from licensed contractors. If the owner is soliciting bids from unlicensed contractors, it’s often a waste of time to bid the job since licensed contractors can rarely compete price-wise with unlicensed contractors.
Photographs of prior projects:
Another way to impress potential customers is to maintain and show a professional-looking portfolio of prior projects, perhaps on your website. Many potential customers are favorably impressed and even excited to spend a few minutes looking through pictures of projects you’ve done in the past.
The Bidding Phase:
After you have bid the job and have been selected for the work — or have a strong feeling that you will be — you may want to provide the owner with one or more of the following forms, depending on the type of project, most of which are included with the forms on this site.
• Preconstruction Conference Form
• Ups and Downs of Remodeling: Customer Information Sheet
• Change Order Contingency Fund: Customer Information Sheet
• Sample Construction Schedule
• Construction Proposal
These forms are not generally contractual. Rather they are strictly informational and meant to communicate the contractor’s expectations about how the project will proceed. This is an ideal time to begin to temper any unrealistic expectations the owner may have about how the work will proceed — a critical factor in preventing future misunderstandings and disputes. If you are working for more than one owner, it is helpful to have a contract meeting (or preconstruction conference) with both of them to review these forms along with the unsigned contract. Usually it is a waste of time to meet with one individually since most decisions are made jointly. If, for some reason, there is no contract meeting or preconstruction conference, you may want to email these forms to the owners when you send them the contract for signature.
Change Order Contingency Fund: Customer Information Sheet:
Depending on the size of the project, it can be helpful to educate owners in this early stage about possible change orders. The construction contract indicates that under normal circumstances change orders will be issued in writing and should be signed by the owner before change order work is started. But the topic merits further explanation in the preconstruction conference. You may want to use the “Change Order Contingency Fund: Customer Information Sheet” to describe how change orders arise and how to keep them to a minimum. It’s simply being honest to tell the owner that a few change orders are very common on most jobs and that it only makes sense to have a certain amount of money budgeted for them prior to beginning the project.
Coming in On Time: The Construction Schedule:
A lot of tension can arise if the owner expects that the job will take six months to complete but you know that seven or eight months is more reasonable. Providing the owner with even the most basic construction schedule along with the contract is a good way to put the owner at ease while better organizing your own job performance. Make sure to put in realistic and achievable time periods for work completion. Do not underestimate the time it takes to perform the work since this schedule will create definite expectations on the part of the owner. Ordinarily, it will also create a legal contract obligation for the contractor. When you provide a schedule, you guard against the owner later claiming that you are significantly behind schedule when that is not the case. On the other hand, giving this schedule to the owner can work against you if you fall significantly behind the projected completion date. So be sure to document additional work days for completion with your change orders. A place for this is included in the change order forms on this site.
Contract Presentation Detailed Construction Estimate on Fixed-Price Contracts:
I have seen a few contractors impress the owner and, I believe, win large projects based on an extremely detailed, line item estimate they provide to the owner before they present their contract. This type of detailed, line item estimate takes a lot of time, costs the contractor money (bidding time is money), and won’t mean a thing if the contractor’s pricing is way out of line. However, it does seem to help many owners better understand what they are paying for and also convinces them the contractor is detail oriented and hard working. The downside is that a detailed line-item estimate showing the contractor’s line item pricing can cause problems down the road when the contractor is issuing credits for deleted work or in certain other situations.
If the credit issued is smaller than the line item in the contractor’s estimate, the owner will always have a problem with this. Maybe the contractor originally underestimated the item now being credited to the owner. If you explain that a particular category of work cost you more because you underestimated it, no owner will want to pay more for that category of work because it was your fault and because it is a fixed price contract.
However, when the roles are reversed and you are giving a credit, the owner will almost always use the construction categories in your initial estimate as the maximum amount of your credit whether right or wrong. Also, when figuring the cost of extra work, owners will sometimes look at your detailed line-item pricing and may not understand that the pricing you use for certain change order work — due to higher costs — may not always be consistent with the pricing you used in your initial construction estimate. Bottom line is you may want to try it both ways and determine what works best for you.
Important Notice to Contractor and Disclaimer:
Before using or relying on the template forms and information above, read the template forms with care, fill in, modify, delete, add language to, and revise portions of the template forms according to your specific needs and any state laws applicable to the type of job you are using the document for. Use of the form templates on this site does not constitute the formation of any kind of attorney/client relationship between you and us. You should seek and obtain independent legal advice from a licensed attorney in your local area familiar with construction law before using or relying on any of the forms or information on this site. The forms and information on this site are provided only as general information, not legal advice and may or may not reflect the most current legal developments, your specific needs or laws applicable to the state where you conduct business. Only the original purchaser of the forms has a limited license to modify, edit, print and use the forms.
© THE CONTRACTOR’S LEGAL KIT, LLC, 2022. All rights reserved