Be Your Own Building Contractor

Taking on the day-to-day management of your building project could reduce your costs by 10-15%, compared to using a main contractor. This might mean being able to afford a larger home within the same budget, having spare money for higher quality fixtures and fittings, or a smaller and more affordable mortgage after you move in.

The savings are only made by taking on the pivotal role of the building contractor with a reasonable degree of efficiency. Running a building project is time-consuming, stressful and requires considerable skill. Taking this extra workload on at the same time as holding down a full-time job can be very demanding. In return, though, it can be incredibly satisfying and, in addition to reduced costs, can give a degree of control over quality and detail that it would otherwise be impossible to achieve.

A contractor will typically charge somewhere between 10-20% on top of the net costs of building work, plus a daily rate for themselves for the time they are on site. This mark-up, on top of labour, materials and plant hire, covers their overhead and finance costs, which will vary depending on the size of the operation, and their margin for profit. If you are to make a saving by not using a contractor, you need to cut out these costs whilst avoiding adding new costs of your own through errors on site.

In practice, it is unlikely that you will be able to match the build costs achieved by a professional contractor. However, by negotiating hard with all of your suppliers, you can get close. The key is research; get help when working out quantities to avoid waste, and always get several prices for suppliers.

If you opt for the DIY management route, be prepared for the project to take longer. If you choose your subcontractors with care, and are willing to listen and learn, they can be invaluable in keeping progress on track.

Have You Got the Time?

The time required to manage a project will depend on its scale and complexity, but is likely to involve at least a couple of hours most days, plus ideally two site visits: one first thing in the morning and the second at the end of the day. This makes it possible to monitor the trades needed in the coming days, and the materials, tools and/or plant required. A good relationship with the tradesmen is essential.

If you have rigid working hours, managing your project may not be an option. If you have more flexible working arrangements, you are ideally placed.

What the Job Involves

If you decide to project manage your own build, you will be taking on everything a contractor would normally be responsible for: including health and safety; provision of welfare facilities (WC and rest area); site insurance; employers and public liability insurance; dealing with utility companies; co-ordinating with the local authority for statutory inspections for building control; hiring subcontractors; buying materials and looking after payments. You will also be responsible for sequencing the build efficiently to prevent hold-ups.

It is also the role of the project manager to monitor workmanship of the subcontractors and to resolve any problems that arise on site.

Have You Got What it Takes?

The role of contractor requires good communication. You must be able to schedule work ahead to be able to assess your cash-flow requirement. The idea is to be able to predict problems in advance.

Strong negotiating skills are also essential to ensure good prices and to help resolve any disputes amicably. A good understanding of the construction process is also necessary to be able to budget and schedule the work, spot potential pitfalls and select the most cost-effective solution for each stage.

Ordinary building and renovations are largely predictable, so with research and advice knowledge should not be a barrier providing you stick to conventional methods and design.

Dealing with Suppliers

Builders merchants and plant hire firms will be happy to set up accounts and will also extend favourable credit terms.

Most subcontractors are used to being provided with all the materials and plant they need. Some trades are used to working on what is known as a supply-and-fix basis, meaning they provide the materials as well as the labour. If this is the way they are used to working, it is probably best to go along with it and get an all-in price, but expect to pay a small mark-up on the materials.

Obtaining Quotes

Day Rates: Most subcontractors will quote for work by calculating how long a job will take, and then apply a daily rate, plus a margin for error and the mark-up they think they can reasonably charge. Some trades cannot give a fixed quote because they cannot accurately work out how long a job will take, for instance groundworks in uncertain soil conditions.

Piecework: Some subcontract trades will estimate how long a job will take by measuring the area and applying a rate per square metre. This applies to roofing contractors, insulation contractors, bricklayers, blocklayers, stone layers, flooring contractors, plasterers and some others. Most of these will provide a quote based on the area measured off plans or on site.

Sourcing Good Subcontractors

As contractor, you must must find and hire all of your subcontract tradesmen and labourers. Get as many names as possible from different sources and vet them to see if they are interested in the work you have and whether they have the skills you require.

Appointing Subcontractors

Some larger subcontract firms may have contracts but on the whole, self-employed tradesmen and small firms of electricians, plumbers and plasterers do not use formal contracts. It is normal for them to provide a written quote detailing what they have priced for, a reference to the drawing or specification, and details of who is to provide what. You can either write back to them to confirm with more terms and conditions or simply allow them to start on site, which effectively forms a contract.

Paying Subcontractors

For a job taking less than a week or two, you should agree to pay for all the work once you are satisfied that it has been completed to the standard you require. For larger jobs you should agree regular stage payments, e.g. first fix then second fix for plumber and electricians, or weekly or fortnightly payments for bricklayers and carpenters. For the big jobs you should agree interim payments for completed work. Make sure you structure the payments so that you are always in pocket and they are always working a week or two in advance of their payment.

Never pay for anything up front: you will take away a builders incentive to turn up and also your ability to control quality.

Managing Subcontractors

Keeping the project on schedule means making sure that trades turns up when they are supposed to, as this can have a knock-on effect on the whole schedule. Subcontractors who fail to turn up on site are invariably juggling your job with other work elsewhere. There is little you can do in these circumstances, apart from stay in contact and call them every day. If a subcontractor consistently fails to turn up, it is best to ask them to finish and pay them for the work they have completed make sure you have someone else lined up.

Checking Workmanship

As contractor, the task of checking the workmanship is down to you. This job is easier if you know someone in the industry who can check the work. Alternatively, retain your designer or surveyor in a supervisory capacity.

Projects involving structural alterations, or new building work, must be inspected by the local authority Building Control department. It will be your responsibility to keep in touch with Building Control and make sure that they inspect at the appropriate stages. You should view the Building Control surveyor as an ally: they are an immensely useful source of advice.

In the case of new build, you may be working with an insurer such as NHBC, Zurich or Project Builder in order to get a ten-year warranty. Making sure these checks are made is also your responsibility.

Negotiating Extras

If your subcontractors are working to fixed prices and you make changes, they will charge for the extras. If you do not discuss this, the bill for extras at the end of the project can be a nasty surprise. To avoid this, insist that extras are discussed before they are carried out. Agree a price for extra work up front: it should be at the same rate as the rest of the contract. If you cannot agree a price, bring in a third party, such as a surveyor, to find a settlement.

The only way to avoid extras is to base all work on day or measured rates and to supply all the materials yourself but you have to be confident that you know what you are doing, as you can take away their sense of urgency.

Filling in Between the Trades

One of the problems of managing a project is getting people to do the ordinary labouring that a general builder and his team would normally handle, such as taking deliveries, keeping the site tidy, moving materials around the site and fitting insulation. People on day work may help with these tasks, but those on a price have no incentive to do this additional work. It is useful to hire a general labourer on a day rate.

Record Keeping

When managing a building project, keep good records. In addition to organised filing it is a good idea to have a project schedule and budget on a spreadsheet. Keep a record of payments and run this alongside your budget to keep an eye on cash-flow and how closely expenditure matches your estimated budget.

It is also important to keep a site diary. Note each day who is on site and when, weather conditions, what was discussed, and when deliveries arrive or are required. This will prove an invaluable reference should there be any disputes later on with suppliers or tradesmen.

Completion

Completing a building project when you are acting as contractor invariably takes longer than using a builder. Produce a list of tasks that need finishing and do them yourself, or get the various tradesmen back to complete the work.

If your project involves structural alterations or new building work, then you will need to obtain a completion certificate from the local authority Building Control department, who will make a final inspection and list any defects that need correcting before it will sign the work off.

Once the local authority is satisfied, it will issue a completion certificate to prove the work is in compliance with the Building Regulations.

Retention

Whilst it is normal to hold back a proportion of the final payment to ensure builders come back, this is not the case with subcontractors. If they have given a price for their work they should be willing to come back and correct defects. Defects that result from faulty materials, or faults you would expect on a new building (such as settlement cracks) will have to be put right at your expense.

VAT

Some VAT concessions are only available if you use a VAT-registered contractor.

VAT on New Build: On a new dwelling most labour and materials are zero-rated, so subcontractors should not charge you VAT. Non-VAT-registered tradesmen must never charge VAT and cannot zero-rate eligible supplies, so make sure you buy materials. The VAT paid on any materials you buy can be reclaimed at the end of the project under HM Revenue & Customs Notice 719.

Conversion: On a new dwelling created by a material change of use (including the renovation of dwellings empty for ten years or more) most labour and materials are zero-rated. Builders must apply the reduced rate of VAT of 5%. You can claim this back, together with any standard rate VAT paid on materials you have bought, on completion of the project, as with new build.

Renovation: Most renovation work attracts VAT at the standard rate of 17.5%. Exceptions include: Approved alterations to listed buildings (zero rated); a change in the number of dwellings (reduced rate of 5%); the renovation of a dwelling empty for three years or more (reduced rate of 5%); the installation of certain energy efficient materials (reduced rate of 5%).

Concessions are only available through a VAT-registered builder, or if you register for VAT.

Further reading:

• Building Contracts: When Things Go Wrong
• Builders' quotes and Estimates
• The Trades Explained
• Six Key Stages to a Stress-free Project
• Who Should Project Manage?