The RedBook Guide: What you need to know when hiring builders

—24th September 2019

The success of your property project will depend hugely on choosing the right builder. So this RedBook Guide sets out the essential first steps in making the best choice.

Top dog: choosing the best builder demands expertise and close inspection of contenders’ bids. 

HOW TO CHOOSE A BUILDER?

Most people start the process of choosing their builders by identifying a handful of suitable firms. Next, they invite each firm to bid or ‘tender’ for the work. Different firms often come up with wildly different figures for the total cost of the same work for good reasons or bad. They may be factoring in the cost of devoting their most experienced and skilled hands to achieve a superb result for you. Or, conversely, they may be counting on offloading some of the work to a cheap and third-rate outfit. The next step is to compare each firm’s bid, before finally picking the winner.

It is usually the job of the architects or project manager working on a project to advise their clients on the best builders to use, while drawing also on the expertise of the project accountant or ‘quantity surveyor’ to make sure the builders’ bids are accurately calculated and realistic in their pricing.

The technical name for this process of asking several builders to bid is a ‘competitive tender’. And a ‘tender list’ might include as many as 5 or more firms of builders.

A competitive tender is a great approach for most property projects (though not all). It enables you to compare builders’ bids to see which firms are expensive or cheap. It gives you important information about the ‘market’ price for the building works and what is reasonable. Because if you ask only one builder to bid for your project, you will get little sense of whether their price is fair.

Flask on building site

When builders bid in a competitive tender they also tell you how long they expect your project to take them to complete. Generally, the bigger the building firm, the more resources they can devote to a project, so the quicker they can complete it. But bigger building firms, devoting more resources to a project, are likely to charge more than smaller ones. If there is a big difference in the time estimated by the various builders you have asked to tender, you can decide if it is worth paying a more to get your project finished quickly, or equally to go for the cheaper option if time is not so important to you.


BEWARE

There is often a large difference in the amounts that builders bid for the same project. It would seem common sense to go for the builders offering the cheapest bid, but beware of choosing purely on cost. The cheapest firm may not be the best choice for quality or for speed. The cheapest firm may also be offering a low price simply to win your business and, having won it, might try to find sneaky ways to increase the cost to you during the project. The cheapest firm may also be one that desperately needs the business because its finances are rocky—the last thing you want is for your builders to go bust in the middle of your project.

When you ask a building firm to bid for your project as part of a ‘competitive tender’ you should not feel too disappointed if not all of them jump at the opportunity. A particular builder may be too busy to take on your work. Builders are also very aware how much it costs them to prepare their tender—the bill they face can be tens of thousands of pounds on a large project, especially if many sub-contractors are involved. In recent years, when a huge number of residential projects have been taking place in prime areas of London, some of the most in-demand firms have refused point-blank to take part in competitive tenders.


TOP TIPS

– The disadvantage of the competitive tender process is that it can take months to complete. You may also find that the builders you really have your eye on decline to bid for the work for reasons explained above.

A much quicker way of appointing builders is to identify a single building firm, chosen very carefully on the basis of their reputation (and with the help of your professional advisers), and agree with them a fixed profit percentage that they will add to an agreed figure for the cost of the work. This process is known as a ‘negotiated tender’. Builders themselves much prefer this way of winning work, not surprisingly. And it provides a degree of transparency for property owners at the same time.

– Bids by builders in a competitive tender process often reveal more information than the builders intend to give away. For a start, their price will reveal how much they really want the job, and how much commitment they are therefore likely to give the project if they win it. The tender will also reveal how carefully they have thought about tricky issues such as access to your site (especially in central London where sites are constricted in space), and this again gives a fair indication of how intelligently they will approach the job itself.


SEVEN GOLDEN RULES FOR CHOOSING A BUILDER

Make sure the firm you choose:

1. Is well known for successfully completing projects similar to your own and on a comparable scale in your area

2. Enjoys a strong reputation for delivering on time and on budget

3. Can provide references for similar projects (see below)

4. Has a record of getting on well with their clients

5. Has solid financial foundations so they won’t go bust

6. Delivers high-quality of workmanship

7. Has the first-class specialist technical skills and experience you will certainly need if, for example, you are digging a basement for your project or involves a listed building

By all means, ask friends in your area who have done projects comparable to yours for the names of their builders, and keep your eyes out for builders’ hoardings on houses you like the look of that are similar to your own.

But if you come up with a list of builders on your own, you are strongly advised to ask your professional team—architects, project manager, quantity surveyor or indeed RedBook—to assess those builders’ suitability carefully, and to ask your professional team for their own list of recommended builders to add to your own list.


TOP TIPS

– Written testimonials are not sufficient. Always ask builders for a list of past clients you can speak to directly, or ideally visit, to check the quality of the work and find out what the builders were like to work with. Ask the clients what they would have done differently with hindsight in dealing with them, agreeing the budget or the contractual relationship

– The two most important people in a builders’ team are the ‘site manager’, who runs the teams day to day on site, and the ‘contract manager’ who acts as the direct boss of the site manager and ensures strategically and commercially that the project runs on schedule and on budget. Ask to meet these two individuals, or ensure your architect or project manager do, before you commit to working with the building firm.


LAWYERS – THE DEVIL IS IN THE DETAIL

This piece of advice is the most important of all. Make sure to ask lawyers experienced in handling building contracts to review the contract with your builders before you sign it—even if, as is often the case, the builders’ contract is a standard form one. A good builder should be willing to incorporate clauses which ensure a fair balance of risk for both parties. You would be surprised by how few people think they can challenge “standard terms”.

However skillful and honest the builders you choose may be, they will inevitably be driven by the commercial desire to offload as many as possible of the potential project risks on to your plate. Your lawyers are your only defence against this. The cost of having proper legal scrutiny of a building contract is likely to be repaid many times over by the savings you make during the project from avoiding financial exposure you might otherwise face.

Our next RedBook Guide in this series will focus on how to minimise the risks of things going wrong on a building project. Please sign up to our newsletter at the bottom of this page in order to receive it first, if you are not already subscribed.

RedBook is a specialist consultancy that helps clients and their advisers select the perfect creative and technical team for significant property projects.

For further information, please contact us on 0207 060 6222. Or email: enquiries@redbookagency.com