If you’ve never had an insurance repair job, that’s likely to change in 2013. Contractors along the entire eastern seaboard and as far west as Wisconsin and Michigan are about to get an introduction to insurance repair work.
But along with the opportunity comes a problem, as described in an email I received this morning:
"My clients want to get started, even before the insurance claim is settled. I’d be happy to jump into architectural, engineering and permitting right now. But I’m not going to do that without something in writing. How can I get a commitment from the owners before we know the full scope of the job?"
Good question. By definition, there’s no fixed price contract without a fixed price.
One possibility is to do the job on a time-and-materials basis. But that won’t sit well with an owner trying to fit a job inside the insurance settlement. There’s a better way.
The largest engineering and construction companies call it ECI, Early Contractor Involvement. I call it good common sense.
Offer to work with the owner as a consultant from the day planning starts. Help settle the insurance claim. Flesh out the design and engineering. Write an estimate. Pull the permit. All on a fee basis. When the job is ready to bid, you’re sure to have a seat at the table. Sweeten the deal by offering to rebate a portion of the consulting fee if your fixed price bid is accepted.
There will never be a better time for ECI work than right now in the 24 states visited by Super Storm Sandy. It's a rare opportunity for builders.
Now the Hard Part
Managing pre-construction services will be a snap for experienced contractors. What won’t come easy is drafting the contract for that work. This is consulting, pure and simple. But it’s construction consulting. Most states require a written contract with specific notices and disclosures when consulting work is residential and comes with a down payment. Maybe most important, define very precisely what’s included in, and excluded from, your consulting task.
If you need a practical guide to pre-construction consulting, I can recommend Paper Contracting. The e-book download is under $30. For drafting consulting contracts, you won’t find anything better than Construction Contract Writer. The trial version is free.
Before you write that insurance repair contract, glance at my November 30, 2012 blog post. Thirteen states (AL, AZ, GA, IL, IN, KY, LA, MN, MO, NE, OK, SD, TN) now have special rules that apply on insurance repair jobs.