The lot is bought, the design is ready. Now, whom should you hire as a contractor and under what conditions?

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Your choice depends on your budget, urgency, size and characteristics of the building. Nevertheless, four general options exist.

1. Technical Direction: in this option, owners decide not to use a contractor or contracting company. They hire a consulting service, contract labor and purchase materials themselves.

Advantages: 1. The owner saves money on the contractor’s fees. 2. The owner has partial or complete control of the project.

Disadvantages: 1. The budget can get out of control; delays can occur and results are nor guaranteed. 2. If professional laborers are not hired, the project can result in poor workmanship and sometimes not even get finished.

2. Administration: The owner pays a contractor or contracting company all expenses as they arise (upon presentation of receipts) and the contractor add his fees to these expenses.

A professional contractor should provide a budget that gives the owner an idea of total costs, and follow up with periodic reports. Experts advise owners to demand receipts for everything (materials, labor, sub-contractors, payrolls, etc.) and a progress report, usually every two weeks.

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Advantages: 1. More flexibility to make changes, which usually the owner requests. 2. The client has partial control over quality and quantity over materials. 3. If the contractor is responsible and efficient, the client pays the real cost of the building plus the fees that have already been agreed upon.

Disadvantages: 1. On the average, building is always longer than expected. 2. The final cost cannot be exact since materials often increase in price and the project could be larger than anticipated.

3. Fixed Price: Here the final cost is agreed on at the beginning, as long as the client makes no modifications and there are no significant changes in cost of materials or labor.

Advantages: 1.The price is fixed from the beginning. 2. The client knows what he has to pay.

Disadvantages: The plans must be very detailed and include finishing, which is not often done. 2. The plan must be fairly rigid to maintain costs, which can cause friction between the client and the contractor. 3. Unprofessional contractors sometimes go bankrupt or simply stop working.

4. Turnkey. Here the client is handed the key to the building when it is done. The company takes care of plans, permits, materials, labor, equipment, inspection, and social charges, among others.

The contractor charges for all this plus administrative fees. The client hires an outside professional to assure that all work is according to the quality and specific cost contracted for.

The professional should have no dealings with providers, builders, manufacturers, contractors or financial institutions, which could compromise his objectivity.

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Advantages: 1. The client need only worry about paying the agreed-upon amount. 2. There is only one contractor or contracting company to deal with. 3. The client can be sure of the final cost.

Disadvantages: 1. If plans are not detailed with complete technical specifications, the quality of the work can be less than expected. 2. The contracting company can sometimes legally make it difficult for the outside professional to visit or ensure the quality of the work. Changes can cost one and half times the value of a square meter.

Fees:

  1. Technical direction: Plan on adding 5% to the cost of the building, since the law requires a professional on the job.
  2. Administration: Client is charged 12 percent. Includes inspection, cash-flow control, financial reports, labor control, etc.
  3. Turnkey: The percentage charged by the contractor can range from 20-35%, depending on increased responsibility or risk.
  4. Key to choosing well. Whatever the client decides, it is imperative to ask around and get references from people or recent clients for whomever you decide to hire.

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Our thanks to Gloriana Gomez and our friends at La Nación – Costa Rica’s largest Spanish circulation newspaper for their permission use this article.

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