The Seven Questions I Ask Every General Contractor (GC)

How do you find your General Contractor?

Much in the same way you find your architect - although there are some key differences.

At this point in your developer journey, you know your city, market, and dreamland. Shoot, you know intimately (!) the approval process for getting city approval for your build. You know how to navigate neighborhood meetings. And most importantly, you know Frank, the eccentric retiree who lives five blocks south of your building site, is not happy about the “noisy kids” who will live in your building and has promised that he intends to let his dog relieve himself on your front lawn every morning at six am. Apparently, revenge is not cold. It’s a hot stream of dog urine from a scruffy-looking German Wirehaired Pointer.

But I digress.

In the process of gaining this expertise, you’ve identified multi-family projects you admire. Realistically, that’s likely how you found your architect. You saw a building and figured out who designed it. At the time, you really weren’t searching for a general contractor.

It was too early in the process.

But now we need someone to make stuff happen.

When I started out my developer career, I took note of every new development. And I figured out who built them. I knew which projects Frana was hired to build. I watched what Opus and YellowTree were up to. I had a sense of the cadence and scope of builds by the major developers in town.

I don’t know that I’ve said this out loud yet to any of you, but you want to cultivate the habit of watching and documenting. I mostly work off my iPhone now, but when I started out, I had a small notebook where I regularly jotted down observations on three different builds within my Dreamland. In part I was tracking the cadence of the build. On this date, they poured the foundation. On that date, the exterior materials went up. I wanted to see if I could spot meaningful differences between the three projects even without access to their plans/any insider information. While this might seem like busy work, it gave me valuable information when I later talked with general contractors. One prospective GC on my first project gave me a long, detailed, and entirely convincing story about the efficiencies they incorporated into their projects so as to meet project deadlines. But I knew from observing successive builds that their last two projects, at the very least, had stalled slightly between the concrete pour and framing.

So, all of this is to say, watch and document.

Now, to be clear, you’re only going to get so much information standing on the edge of a job site, so in addition to working from your own observations, you’re going to ask other developers who they use. Take them out for coffee. Explain the project you have in mind and ask who they think might be a good fit. The truth is, you’ll start to hear the same names over and over again. And put aside your anxiety about other developers refusing to share their trade secrets/resources with you. Yes, you’re going to get someone who doesn't return your call, but I’ve found that the vast majority of developers are curious and helpful.

Once you’ve narrowed down your list you’re going to reach out to those general contractors, explain your project and request bids.

They’ll ask you who your architect is and request that he or she send over the construction documents. If your construction documents are 75%- 80% done, that's typically enough for a good builder to give you a solid price. They will always add a caveat that if your documents aren’t 100% done, they can't give you a 100% number, but if your documents are 80% complete, they should be able to give you a reasonably accurate bid.

They’ll send you bids that list all the construction trades, the mechanicals, the electrical, the plumbing, the windows, etc. How much the site work costs, how much the concrete costs. Anything and everything related to the cost of that build.

Now here’s the catch.

You asked for bids and you’re going to get bids :-)

But you’re not going to get them in any format that is standardized across the industry. Imagine if Dali, Kahlo, and Picasso all mashed their fingers against a MacBook pro and came up with a spreadsheet.

Okay. Maybe I took it too far there. But you get the point.

Your job as a developer is to work with the architect, take all these bids when they come in, and set up your own spreadsheet and organize the various line items so that they are then apples-to-apples comparisons.

And what you're looking for in the data are any major outliers in the line items. You'll need to reconcile those, because you might get three bids, say, $20 million, $20 million, and $22 million, and as you sift through the data, you find out two of the bids at $20 million have the mechanical at a million bucks.

The other one has the mechanical at 3 million bucks.

That's a red flag.

Either one of the bids is way too high, or the other two bids are way too low. You need to ask questions and understand how they’ve arrived at their math. You’ll do this exercise for every line item.

In terms of who we hire, do you always go for the low bid? No.

Do you always go for close to the low bid? Probably.

You usually don't want to hire somebody at the top end of your bid range. I’ve always been of the mind that top-of-the-range bids are an indication that they don't want the job bad enough, and they just threw together a higher number with the hopes that you’ll stomach, say a 10-15% upcharge.

Once you have some projects under your belt, you might find that you have a great working relationship with a certain general contractor. For example, I’ve used YellowTree Construction Services for the majority of my projects at this point. We trust each other, and they have a very good sense of what I’m looking for as a final product, so they are able to anticipate issues in the field before they happen. Some experienced developers bid out every project, and some pick a horse and ride it. But that comes later. First, you need to get some projects under your belt so you can figure out what path is better for you.

There are some equally important questions you need to ask and you won’t find this information in the bid.

Here’s what I want to know as I review builders:

Is it a big contractor, or is it a small contractor?

Knowing the size of the contractor helps assess their capacity and resources. A bigger contractor might have more resources, manpower, and experience to handle large-scale projects, while a smaller contractor might offer more personalized service and possibly lower costs.

How many projects at this scale and size have they done recently?

This question helps determine the contractor's experience with projects of a similar scale and complexity. A contractor familiar with the size and scope of your project is likely to manage and execute the project more efficiently.

How many have come in under budget?

A record of completing projects under budget indicates good financial management and the ability to save resources. You want this because, at the end of the day, you’re hoping to maximize profit margins by reducing costs where feasible.

How many have come in on budget?

Completing projects on budget demonstrates reliability and predictability in financial planning and execution. It suggests that the contractor can accurately estimate and manage project costs, reducing the risk of unexpected expenses.

How many have come in over budget?

Information about projects that have exceeded the budget is crucial for risk assessment. It highlights potential red flags in project management, cost estimation, or unforeseen challenges the contractor has faced.

Who will be the on-site team?

Knowing who will be physically present on the construction site daily is vital for assessing the quality of supervision and management the project will receive. The skill, experience, and professionalism of the on-site team can significantly influence the project's success.

Who's the project engineer, and who's the site superintendent?

The project engineer and site superintendent play critical roles in project planning, daily operations, and overall execution. Their qualifications, experience, and past performance are good indicators of how they might handle the development project. For example, if you hire a builder with a stellar track record BUT they put a 26-year-old trainee in charge, then that's a problem, versus if you hire Frana and get a 46-year-old site superintendent who has built 17 projects and a project engineer who’s built 11. Now, before anyone sends me cranky emails about ageism, hear me out. I get it. Talent knows no age, and I HAVE NOT A SINGLE DOUBT that there is some younger-than-me developer hot on my heels. My point above is simply that the longer you’re on the job, the more mistakes/challenges you’ve encountered, and the more solutions you’ve witnessed!

Alright.

As I sit here and look over the above, I realize that I want to cover different types of contracts you’ll see from developers as well as important terms.

But that seems appropriate for the next newsletter.

And I’ve also run out of coffee :-)

Stay tuned.

Peace!