Getting a good deal on construction services is not as easy as it might sound. True, it is a buyer’s market for construction services today. Some owners are trying to get the most building for the least money.

Sounds good in principle. But there are definite drawbacks to consider. Here’s a story to illustrate my point.

Several years ago I was asked to provide expert testimony on a project that went terribly wrong.

A contractor agreed to design and build a warehouse with a two-story office. Part of the building was for his client’s business, and part was to be leased to a tenant. The contractor, being “almost family” to his client, agreed to construct the building for approximately $150,000 less than his estimated cost. Shortly after the project was underway, the building owner became incapacitated.  His wife, who was not involved in the business and the original construction agreement, now was responsible for the business and overseeing the building construction. 

Half way through construction, the contractor informed the wife that a $100,000.00 change order needed to be signed for construction to continue, the change order was for additional items. She signed the change order.  As the construction came to a close, the contractor informed the wife to complete the project, a change order for $50,000.00 needed to be signed. The change order was not signed, the project was completed, the contractor filed suit to collect the $50,000.00 and she filed a counter suit.

It is now a mess for everyone and everyone is looking at the other party did. The contractor wants to get paid what it cost to build the build. The client wants only to pay for what was agreed upon and wants the building that was agreed to. And the contractor is out of business and bankrupt.

Looking back,

• The Contractor agreed to build the building for $150,000.00 less than their cost.
• The Contractor assumed the owner would not hold them to the contract amount since the contract amount was less than the cost to build the building.
• The building owner received a lot of building for a low price.
• The building owner spent several years of her retirement years defending a lawsuit.

Costs can be more than money. When looking at a great building price, an owner needs to look at what the complete costs will be.