Sunday, November 05, 2006

When the Cost of Materials Increases

Most contractors start out on the same page as the homeowner. It is their goal to create a successful result that they can be proud of, and that will make the homeowner happy. Relationships usually begin on a good note. One of the issues that can derail a project, however is when the cost of materials increases. An unforseen hike in prices can cause a dramatic decrease in the contractor's profit and cause him or her to feel the need to cut corners in order to get the job done. The question is, how can this be avoided, and what should a contractor do if this happens?

As always, a good project starts with a good contract. When a contractor hands a homeowner a proposal, that proposal should have an expiration date. Individuals vary greatly in their timeline for making a decision and implementing a renovation or addition. A homeowner may take a proposal and then end up being delayed in starting a project for any number of reasons. A contractor should not be forced to stick with a quote that may no longer be appropriate after a period of time.

A good contract will have a start date and end date for a job, but it will also have allowances for delays. If the homeowner delays, there may be one remedy, if the contractor delays, another, and weather conditions, etc. can cause unforseen delays. In any of these scenarios, a significant delay can result in a dramatic increase in price of materials. For this reason, the contract should build in an "out" for the contractor if prices increase by more than a certain percentage, or even for an opportunity to re-evaluate material prices or allowances if delays occur.

What if the contractor has not addressed the issue of an increase in cost in the contract, and/or doesn't have allowances build in? At that point, I think it is better for the contractor to "fess up" with the homeowner, rather than lose interest in an unprofitable job or cut corners in other areas of the work.

Most people are reasonable. If something is going to cost a great deal more than anticipated, it is better to view the renovation as a partnership and ask the homeowner to work with you. You can always sweeten the deal by throwing in an extra at less cost to yourself. For example, if the price of teak increases, but you can get a deal on cherry, you might agree to throw something in (an extra shelf, doors on a cabinet, etc.) as an acknowledgment that something unexpected has occurred.

It is better to deal with the issue when it arises than to have a homeowner discover after the fact that work was done in an inferior fashion or cheaper materials were used. After all, that good feeling that existed at the beginning of the job should hopefully continue all of the way through. This will result in much more good will at the end.

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