When and Why to use a Demolition and Discovery Agreement
June 8, 2011 4 Comments
In today’s market, determining if multiple construction project bids are truly apples to apples can be a daunting task.
There are contractors out there who will utilize every possible shortcut in order to come in as low bidder and you would never know it by examining their written estimates.
Often in remodel construction there are unknowns when determining what may or may not be hidden behind walls, buried in attics, or underneath slabs or landscape needing to be excavated and some contractors feel they are left with no choice but to bid the job as “worst case scenario” to avoid taking a loss. In effect, the contractor who is the highest bidder may be omitted from the selection even though he or she is the most qualified.
There is one alternative that can be advantageous to both the parties which is worthy of some serious consideration.
Here’s how a Demolition and Discovery Agreement works-
In order for the contractor to bring in his project bottom line at the lowest possible cost,
both parties can opt for an agreement to do enough minor demolition to reveal hidden conditions and to more precisely determine the actual scope of work needed to complete the project.
All work needed to assess these conditions would be done through a separate contract for an amount both parties agree to beforehand. As a condition of this agreement, the homeowner should not be obligated to award the job to the contractor performing the observation. This gives them the advantage of providing this information to other bidders in hopes of keeping the cost down. The contractor providing the assessment may opt to reimburse the expense to the homeowner if they are awarded the job. If the discovery determines that the job will be cost prohibitive, the contractor should be paid to repair all damages incurred from the demolition.
This also allows the contractor performing the work to be compensated for their services even if the job is awarded to someone else while at the same time providing the homeowner with some very useful information.
This is one of those issues that desperately needs to be addressed in remodeling circles. I’ve heard something like this called an “x-ray” or “feasibility study” where said contractor is paid to do some detective work.
One hurdle I see is that even if the homeowner is not obligated to hire that contractor, they are obligated to hire someone and if the detective destruction is not minimalistic, reconstruction could be more than they wanted to spend.
One alternative we’ve found is to include an “existing conditions” 3d model of the building gives much understanding, and can pinpoint specific areas that may need a probing scope (minimal damage) for the final picture.
This also gives the homeowner and contractor a great springboard to talk about the future plans. With creativity, we’ve pieced this process together so that the homeowner isn’t paying full price for a design agreement all at once; but becomes more comfortable with the people involved, creating relationship, as each step progresses.
Excellent insight Tim. Thank You for your comment.
This totally makes sense. I haven’t used it as much as I could and it really should become standard operating procedure for any project that has to potential for ‘unforseen conditions’. of course there are practical limits to this but the idea is sound and should be promoted by us professionals as one more differentiator between us and the ‘rest’. J Steele
Thank You J.
It really does work well for both client and contractor if implemented properly.
I’m in the process of putting one together right now.
Phil