Pre-Qualify Your Contractors

As a project gets off the ground and continues through completion, the lender is an owner’s best friend. Most lenders have experience in construction that many owners do not. Is the project well conceived? Are the professionals the best that the owner/borrower can hire? Is the project progressing as it should? Hiring a good team of professionals will make the others go more smoothly.

Requiring a written, detailed qualification statement from potential contractors is one of the easiest steps an owner can take. Read it and then ask questions of each entry: What does this bit of information mean to me and how will it help my job? The answer – it will help you make an informed decision on items other than price and friendliness.

The contractor should give you the routine information about their legal structure, how long they’ve been in business, who owns them and who are their officers, what type of work they have experience in, and where this experience was gained. The statement should include business relationships like insurance agent and provider, banker, and accountant. It should have references, which they are willing to supplement. You should ask about lawsuits and whether the contractor has been debarred from any type of work. This is all routine and readily available. As interesting and important is information on how they typically run their work: what trades they self-perform, what equipment they own and what they typically rent, how long the project manager has been employed and a little about his or her background, if they have any subcontractors that they routinely use and what are those relationships.

Several industry organizations publish standard format qualification statements and most contractors have a statement that they routinely use. Take a look at the formats published by the American Institute of Architects, and Associated General Contractors. And, there are others.

The answers to these and other questions will help you and your borrower make a more informed decision.

~ Mary Jo Poindexter, P.E.

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