Buying Design & Build Services? Show me the "BUILD FAX"

Posted on January 24, 2018

Wouldn’t it be great if there was a CARFAX for builders? In this economic climate, a business has to get beyond the sales presentation and the pretty pictures and get to the facts about their builder. The toughest part about getting to the facts is that sometimes what you find isn’t very nice. Facts are facts, and sharing with someone your situation, or experience, may very well keep another business from making a less than optimal decision, or at least may help them in making an informed decision.

The most objective way to get to the Facts is to look at what CARFAX supplies to their subscribers: Title Problems, Ownership History and Accidents & Service.  Using CARFAX as a framework, let’s breakdown how a business can ask and receive objective feedback about their prospective builder.
Title Problems – or – Builder Financial Stability
The financial stability of the firm you will work with is important not just to get your facility designed and built, but also to back up various warranties and service requests. The financial group that you partner with for your construction and permanent financing will cover, not just your business’ finances, but also the design and build firm’s financial situation.
The following questions posed to the design and build firms that you are considering might narrow down the list a little. If any of the following requests are met with resistance, you should proceed with extreme caution. 

  1. Will you supply the last two years of Financial Statements?
  2. Who were the last three clients your firm served?
  3. Will you arrange for a meeting with our business and your banker to review Financials?
  4. What other industries/markets does your firm serve and what percentage of your corporate volume is accounted for in each? Diversification is good.
  5. ​What is your firm’s Bondability and Capacity?

Ownership History – or – References & Staff Stability
Check references. Really, check the references! The attitude of “they wouldn’t give us the reference if it wasn’t good” needs to change. Any design and build firm that claims to build problem free, either has not built, or is less than honest.  The issue is not “if” you are going to run into a problem, but “when”. That is why you owe it to yourself and your business to check, extensively, the firm’s references. There is a saying that companies have resumes, and people have references. Without a doubt, the people that you will work with will make your project a success, or something less. 
When speaking with the firm’s references, ask six simple questions:

  1. Who were the people that you worked with on your project?
  2. What were the problems that took place on your project?
  3. How were the problems resolved?
  4. Who paid for the problems?
  5. How is your relationship with the people that worked on your project?
  6. ​Would you hire them for your next phase?

The local building permit office and the local building inspectors are an additional reference point. Questions for building officials include:

  1. What were the problems that took place on the project?
  2. Did the firm respond immediately to rectify the situation?
  3. ​​Would you hire them for your own business?

Accidents & Service – or – Legal Issues & Warranty Record
Construction still remains the number two most litigated industry in America today behind medical. Almost $.20 of every construction dollar goes towards claims and litigation. So how does a business protect themselves from becoming a statistic, while building positive relationships with their designers and builders?  Your insurance agent can supply several risk management ideas and devices to protect you and your business.  Most of the risk that a business faces can be mitigated by a design-build firm that has systems and processes to reduce, and better yet, totally protect your business. The primary areas of risk for your business are: financial default of your builder or your builder’s subcontractors, injury on the jobsite without proper insurance coverage’s, and errors on the building plans resulting in change orders. Risk management is probably the most important area of financial protection. The following questions are probably just the tip of the iceberg, but a great start to finding a design and build firm that protects you from many of the risks that exist.

1.  Will you supply a written program on how you will qualify all bidding subcontractors?
2.  Will you hold all of the subcontractor and supplier agreements on our project?
3.  Will you supply a Two-Tier Mechanics Lien Waiver with every invoice?
4.  Do you have a written, OSHA approved safety program?
5.  What are your insurance coverage limits and what do you require of your Subcontractors, suppliers and vendors?
6.  Will there be any Change Orders on our project? Why would they happen?
7.  What amount is your Design Errors & Omissions Insurance for?
8.  Where is our business at financial risk in your process of building for us?
9.  What is the Term of your Warranty?  What does your Warranty cover?
Buying design and building services is tough. Getting to the Facts, should, at least, narrow down the possibilities, while bringing the best design and build teams to the front for the interview and decision process.  An informed business can then make the right decision after sifting through the “marketing” and finding the design and build partner that will take the vision and make it a reality.