Changes to Contractor/Subcontractor Agreement Can Have Profound Effect on Roofers

Whether they like them or not, most subcontractors and contractors have used American Institute of Architects (AIA) standard form contract documents at some point in their careers. Several options exist for those wanting to utilize standard form documents, like ConsensusDocs, Design-Build Institute of America, and the Engineers Joint Contract Documents Committee forms. However, the AIA, being founded in 1857 and having published standard form construction contracts for more than 100 years, is the most established of these organizations, and its form contracts are still the most prevalent and most commonly used forms for commercial construction projects in the United States.

The AIA updates its forms every 10 years and completed its most recent revision in late April 2017. The updates included revisions to several forms in its A-Series (Owner/Contractor Agreements), including its widely used General Conditions (AIA Form A201) and its standard Contractor/Subcontractor Agreement, AIA A401. While these are only a few of the AIA’s updates, these changes may be particularly pertinent to subcontractors and those working in the roofing construction industry. Some highlights of the 2017 updates to A401 follow here.

Designated Representatives and Notices

Both the Contractor and Subcontractor are now required to designate (in the space provided in Section 14.2) an individual who will serve as each party’s “representative” for the project. This requirement is set forth in Section 3 for the Contractor and Section 4 for the Subcontractor. Parties are permitted to change their designated representative only if they provide 10 days’ notice. This is significant for both parties because the updated form requires that notices — for example, notices of a party’s potential claim arising from the subcontract — must be made in writing and are valid only if served upon the designated representative. The new form allows notices to be made via e-email or other electronic means only if an electronic method is set forth in Section 14.4.3. Parties should remember not only to designate a point person who is prepared to serve as a project representative and an email address for notices, but they should also ensure that the other party has done the same. Failure to do so could result in notices not being made by the proper means and to the proper individual — which in turn could result in parties waiving potential claims.

New Contractor Responsibilities — With Limitations

Although it has long been a standard practice (both on AIA projects and elsewhere) for the Contractor to include the prime contract as an exhibit to the subcontract, the updated form takes this a step further and requires the prime contract to be attached to the subcontract as “Exhibit A.” If Subcontractors hold Contractors to this requirement, Subcontractors will be able to review all of the contract documents with greater ease before signing.

Furthermore, Section 3 requires Contractors to “render decisions in a timely manner and in accordance with the Contractor’s construction schedule” and to “promptly notify the Subcontractor of any fault or defect in the Work under this Subcontract or nonconformity with the Subcontract documents.” However, in Sections 3.4.4 and 3.4.5, the phrase “written notice” has been changed simply to “notice” with respect to the Contractor’s requirement to notify the Subcontractor of defective work as a prerequisite of finding the Subcontractor to be in default. Section 14 still clearly states that all “notices” must be made in writing to the designated representative. This change could result in debate over what Contractors must do in order to notify Subcontractors of defective work before they avail themselves of remedies for breach, such as withholding subcontract payments.

Contractors also now have additional duties to provide Subcontractors information they may need in order to preserve their lien rights. Section 3.3.6 previously required Contractors to provide Subcontractors “a correct statement of the record legal title to the property … and the Owner’s interest therein.” The revised A401 now requires the Contractor to request this information from the Owner if the Contractor does not have it and give the Subcontractor the information upon receipt; a corresponding section in AIA A201 requires the Owner to provide it to the Contractor.

New Subcontractor Duties and Concerns

The above requirement to submit lien information is perhaps balanced by revised Section 11.1.10, which provides Contractors additional rights to indemnification from certain lien claims. “If Contractor has paid Subcontractor in accordance with the Agreement, Subcontractor must defend and indemnify the Contractor and Owner from liens and claims from lower tier subcontractors and suppliers, including being required to bond off liens,” the new form states.

Another noteworthy change concerns alternates — alternatives to a base bid that provide for a change in the level of quality, or scope of the work specified in the base bid. Alternates provide the owner with the option to modify the project by accepting or rejecting the alternate. The newly revised A401 contains a new section, 10.2.2, which allows the parties to list alternates that the Contractor can accept after execution of the agreement. Subcontractors should consider carefully whether it is wise to include alternates under this section.

Payment and Retainage

Finally, subcontractors and contractors alike should familiarize themselves with the newly revised Section 11, which concerns progress payments. Sections 11.1.7.1 and 11.1.7.2 break down the calculation of progress payments into separate subsections for additions, deletions, and retainage. This includes additions for construction change directives and deletions to allow for defective work remaining uncorrected (assuming that Contractor has duly notified the Subcontractor of the issue). Other portions of A401 allow for additions and deletions in these scenarios, but they are often conditioned on the owner’s approval and other factors. It remains to be seen whether this section could change normal progress billing procedures.

Section 11.7.2 opens the door to retainage options other than the typical arrangement (where the Contractor simply withholds the amount the Owner is withholding). Newly added subsections allow the parties to designate items that are not subject to retainage, as well as set forth an arrangement for reduced or limited retainage. This new section (11.1.8.2) could be a helpful avenue for early finishing trades to propose release of retainage upon 50 percent completion of the project as opposed to substantial completion — or even a way for parties to negotiate the retainage percentage down.

The above are just a few highlights of changes to AIA Form A401. For additional information or questions, visit www.aiacontracts.org or email Caroline Trautman at ctrautman@andersonandjones.com.

 

This article is not intended to give, and should not be relied upon for, legal advice. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.

Bonding 101: What Do Roofing Contractors Need to Know About Bonds?

In a number of states, roofing contractors need to get licensed in order to perform roofing work. Obtaining a roofer license bond is a common licensing requirement. Not all states require a roofing contractor license and bonding, but contractors may have to get a bond to meet county criteria, too.

Even if you’re not new to bonding, the concept of how surety bonds work may be a bit difficult to grasp. However, it’s important to understand the basics if you need to get bonded as a part of your contractor licensing.

Besides a legal requirement to fulfill, bonds are also a strong sign for your customers that you are safe to do business with. Being licensed and bonded is one of your advantages on the market.

Here’s an overview of the states which require roofing contractors to obtain a bond, as well as the most significant facts about bonding that matter for your roofing business.

Where You Need to Post a Roofing License Bond

There is no nationwide requirement for roofing license and bonding. Each state defines its rules regulating roofing specialists. Usually state contractor license boards are in charge of the licensing process. They include roofing as one of the specialty contractor licenses that can be obtained. Additionally, towns and counties may impose their own licensing requirements for contractors operating on their territory.

If you want to operate in California, Texas, Minnesota, Oklahoma, Illinois, or Arizona, you will have to obtain a roofing contractor license and bond. The bond amount in Oklahoma is $5,000. In Illinois it is $10,000. California and Minnesota roofers have to obtain a $15,000 bond. Roofers in Texas have to post the biggest bond amount—$100,000.

Town and county licensing varies across the country, so it’s best to check with your local authorities about their exact requirements and bond amounts. In some cases, you will need to obtain a general contractor license and bonding, while other licensing bodies will require a special roofing license and bond.

How Surety Bonds Work

Roofer license bonds are a type of contractor license bonds, which are required from a number of construction specialists. As such, they are a contract between your roofing business, the licensing authority, and a surety. The bond provider backs your contractorship and guarantees financially for you in front of the local or state body issuing your license.

In order to get bonded, you need to pay a bond premium. It is a small percentage of the bond amount that you have to obtain. The premium is determined on the basis of your financial situation. Your surety provider examines your personal credit score, as well as business finances and any assets and liquidity. That’s how it can assess how risky your profile is.

If your finances are in good shape, your bond premium is likely to be in the range of 1 percent to 5 percent. For a $15,000 bond, this can mean a bond price of $150-$750. To reduce your bond premium, you can work on improving your credit score and financials before you apply for the bond.

As you need to stay bonded throughout your licensing period, you can decrease your bond cost with every bond renewal.

Responsibilities Under the Bond

Licensing authorities require a surety bond from roofing specialists in order to exercise a higher level of control over their operations. The purpose of the bond is to protect your customers.

However, it does not protect your business like insurance does, for example. It ensures your compliance with relevant laws by providing an extra layer of guarantee for the general public. In practical terms, this means an extra assurance that you will perform the contractual roofing work you have committed to.

In case you transgress from your contractual and legal obligations, the bond can provide a financial compensation for an affected party via a claim. Such situations include not completing the work you have agreed to in a contract, delaying the completion, delivering low-quality work, or similar issues with performing your contractual agreements.

If a claim against you is proven, you are liable to reimburse the claimant up to the penal sum of your bond. If your bond is, say, $15,000, that’s the maximum compensation that can be claimed.

At first, your surety may cover the claim costs. This is the immediate protection for consumers who have been negatively affected by your actions. However, your responsibility under the bond indemnity agreement is that you have to repay the surety fully. This means that the surety bond functions similarly to an extra line of credit, which is extended to your business temporarily.

Bond claims can be quite costly for your business, not only in terms of finances, but also by harming your reputation as a professional in the field. The wisest course of action is to avoid them.

Roofing contractors in a number of states have to obtain a surety bond as a part of their licensing. If you’re launching your business as a roofer, make sure to check with your state authorities about the requirements you have to meet. This will ensure your legal compliance, as well as a smooth start in your trade.

About the Author: Todd Bryant is the president and founder of Bryant Surety Bonds.

Learn to Delegate: Determine Which Tasks You Can Let Go and Concentrate on Your Zone of Genius

You have 168 hours each week to design your life. You use some of the hours for sleeping, some for exercising, some for eating, some for showering, some for work, and some for family—but when you run out of your 168 hours, you are out!

Time is the one commodity you can’t create more of. Once it is gone, it is gone. You can always make more money; you can’t make more time. Or can you?

You are limited in what you can accomplish each week by the mere fact you only have 168 hours. However, there is no limit to what can be accomplished each week if more people pitch in to help.

When you effectively delegate some tasks, it’s like adding 10, 20, 40, 80, 800 hours to your week. It’s almost as if you are creating more time each week.

When I work with clients, one of the first things they share with me is they just aren’t sure what they can delegate. They admit that delegating, in theory, makes sense. However, they aren’t sure how to apply it to their business.

There isn’t a “one size fits all” solution to the delegation challenge. However, there is a process you can follow to find a solution that works for you.

Use the Acronym A.W.E.

You can determine which tasks to delegate by following a three-step process represented by the acronym A.W.E.

  • A—Awareness. What are some of the tasks currently on your plate?
  • W–Work. How do you decide which tasks to delegate?
  • E–Evaluation. What worked and how do you do more of it?

Get ready to delegate! The following exercise will take about 20 minutes to complete–and the payoff is you’ll gain a minimum of three hours of you do it effectively. That’s pretty good ROI on 20 minutes, wouldn’t you agree?

Awareness: The exercise begins by defining what is important and determining what is on your plate.

Step #1: List your top 3 goals.

Step #2: What is your Zone of Genius? That is, list the things in your life and your business that only you can do. (Hint: If you are honest, this list should be pretty short.)

Step #3: Next, list all the things that you “don’t have time to do.” What are the tasks you put off because you don’t like doing them? What are the tasks you are waiting to start until the “timing is right”?

Step #4: Pull out to-do list out from the last week and your to-do list for next week.

Work: At the next stage, you can start to narrow down the tasks you can delegate.

Step #5: Look at your to-do list and your “I don’t have time to do this” list, and for each task, ask yourself, “What goal does this task support?” Write the corresponding goal next to the task. (Hint: Writing the goal down ensures you don’t just skip this part.)

Step #6: You are almost finished with the exercise now! Put a smiley face next to all the tasks that line up directly with your Zone of Genius.

Step #7: Circle the items that relate to a goal, but do not have a smiley face. These are the tasks in your business or life that can be delegated. They support a goal and they are not in your Zone of Genius. They don’t need to be done by you to be done effectively. (Bonus tip: If a task doesn’t directly support a goal, why are you doing it?)

Step #8: Delegate at least three of these tasks.

Evaluation: Determine how effectively each task you delegated was completed and how much time it saved you. Do more of what works! When you can do more of what works and less of what doesn’t, life becomes much easier. Yet many people forget to slow down long enough to think through what is working. Take 10 minutes to check back at the end of the week and ask yourself these questions: Who was a great delegating resource? What tasks were easy to let go of? What tasks do you want to outsource next? Where were the struggles? How can you fine-tune the process?

Congratulations! You have at least three tasks circled. Start delegating and start increasing the number of hours you have available each week to accomplish your goals.

Remember, this process is not a one-and-done kind of thing. To be effective, as your tasks and goals change, the evaluation process becomes more important. Regular process improvement means you are always on task for your Zone of Genius!

How Can Roofing Contractors Protect Themselves if a Project Gets Delayed?

Project delays can have serious financial consequences for both contractors and subcontractors. When such issues arise, one option for affected contractors is asserting delay claims to recover losses. Delay claims, however, must meet several criteria to survive in court, and claimants can pursue them in many different ways. This article will discuss different types of delay claims and the methods for asserting them, as well as what subcontractors can do to protect themselves the next time they encounter a project that is behind schedule.

In simple terms, a delay claim arises when a project is delayed and a contractor or subcontractor needs more time (and possibly more equipment and labor) than originally budgeted to fulfill its contractual obligation.

A delay claim can help a contractor extend an original deadline for completing a job or compensate it for the additional costs associated with the delay, which may include the overtime and additional manpower necessary to keep a job on schedule, as well as consequential damages like lost profits, lost opportunities, and home office and administrative costs.

Some delays, of course, cannot be avoided and do not qualify the impacted contractors for compensation. Examples include weather-related delays and delays arising from foreseeable circumstances. Although, when an owner or general contractor causes or is responsible for a preventable delay—also known as an inexcusable delay—the lower-tier contractor may recover the additional costs to complete the project. Some examples of inexcusable delays include the customer not having the job site ready on time, supplying defective materials to its contractor, giving its contractor insufficient access to the job site, or wrongly interfering with the project schedule.

Before committing to the complicated and risky delay claim process, most subcontractors should seriously consider resolving delay disputes either through informal means or, if applicable, through the “equitable adjustment” clauses within their contracts. Pursuing equitable adjustments can be less confrontational than pursuing delay claims. What equitable adjustment clauses allow varies from contract to contract, and parties are entitled negotiate contract terms to define what constitutes such an adjustment. Generally, however, an equitable adjustment is an adjustment in the contract price to reflect an increase in cost arising from a change in the completion date or duration of time for the contracted scope of work. These price adjustments typically encompass overhead and profit as well as actual costs. (In contrast, a change in the actual scope of work is typically addressed via an additive or deductive change order.)

Some jurisdictions that lack a legal definition of “equitable adjustment” will enforce the parties’ contract terms and, in the absence of evidence to the contrary, an equitable adjustment can simply mean cost, plus reasonable overhead and profit. For example, a recent North Carolina Court of Appeals decision (Southern Seeding Service Inc. v. W.C. English Inc., et al) involved a contract provision stating that unit prices were based upon the project being completed on schedule and that should the contractor’s work be delayed without its fault, “unit prices herein quoted shall be equitably adjusted to compensate us for increased cost… .”

Although neither the contract nor North Carolina law defined the term “equitable adjustment,” the court considered the parties’ intended definitions of the term. Both parties testified that essentially, “equitable adjustment” meant the difference in cost. The court allowed the claimant, Southern Seeding Service, to recover the difference in its actual per-unit costs and the per-unit costs in its bid, plus overhead and profit.

This decision indicates that even in the absence of a contract specifically stating otherwise, contractors can sometimes use equitable adjustment clauses to recover their cost increases resulting from delays. In the case of Southern Seeding, where a “no damage for delay” clause barred Southern Seeding from making a formal delay claim, this proved valuable. One downside to the approach, however, is that it does not necessarily compel upper-tier contractors or owners to speedily compensate contractors for delays. And, unlike some delay clauses, equitable adjustment clauses do not provide for interest accruing on properly noticed claims that go unpaid. Informal methods and equitable adjustments may prove more effective for contractors who have stronger and more positive relationships.

If equitable adjustment claims will not resolve delay issues, delay claims can help—given the right circumstances. One of the biggest hurdles to establishing delay claims is first giving proper notice to the upper-tier contractor or owner. Often, contracts contain notice provisions that restrict the time window in which contractors may present delay claims. For example, some contracts require contractors to submit their claims within a certain number of days—often, as few as two days—of the date that a delaying event occurs or is known to the contractor. Courts generally enforce notice provisions strictly, though there are exceptions.

Additionally, many contracts contain “no damage for delay” clauses that can eliminate delay claims entirely. Under such terms, courts have ruled contractors may only acquire extra time “in the owner’s discretion” and cannot receive damages unless the defending party has clearly breached the contract.

Courts in most jurisdictions recognize some exceptions to “no damage for delay” clauses, particularly when owners or upper-tier contractors deal in bad faith, unreasonably refuse to provide additional time, or unreasonably interfere with the claimants’ work.

Calculating Damages

Even if a delay claim is allowed by contract, selecting the proper method of measuring and reporting damages from a delay is essential to success. The two primary methods for calculating delay claims are the critical path method and the total cost method.

The critical path method is an analysis of a project’s schedule, which shows the length of a delay and how that delay disrupted the sequence of dependent tasks required to complete a project as scheduled. Ideally, actual records of project hours, materials, and other expenses, as well as agreed-upon schedules, can enable contractors to piece together the contemporary cost of a delay. Although most courts strongly prefer these actual records to calculate damages, contractors without schedule information may also attempt the critical path method by relying on scheduling experts who can retroactively reconstruct the project’s as-built schedule and testify on critical path items to estimate how much the delay impacted them.

If there is no way to collect the information sufficient for the critical path method, the total cost method might be an option for potential claimants. This approach calculates delay damages by subtracting the total anticipated costs of a project from its total actual costs. To use this method, contractors must show (1) the customer is completely at fault for the increased costs from a delay; (2) there are no other ways to measure the damages; and (3) both the bid and actual costs are reasonably calculated.

All three of these points can be difficult to prove, and most courts, regardless of jurisdiction, treat them with a great deal of scrutiny. The New Hampshire Superior Court for Merrimack County, for instance, in the case Axenics Inc. v. Turner Construction Co., wrote “the total cost method is a ‘theory of last resort.’”

One reason why some contractors gravitate towards the total cost method is that it does not require a full account of actual costs, and many contractors can easily calculate the losses themselves. The method also allows them to potentially recover lost profits. An additional approach to the total cost method is the modified total cost method, where contractors use the same formula as the total cost method but adjust it for bidding inaccuracies and/or performance inefficiencies to make their delay claims appear more accurate. The methods using actual costs, though, generally provide stronger evidence for damages, and most courts will only accept the total cost method if a contractor is able to prove there is no other way to account for the actual costs.

Many contractors who hope to recover home office expenses in delay claims use what is known as the Eichleay formula to determine such damages. Like other aspects of delay claims, however, the effectiveness of this method depends on the circumstances of the claim, a contractor’s documentation, and the jurisdiction. Furthermore, more conservative estimates may have greater chances of success. At its core, the Eichleay formula determines the amount of home office damages by multiplying the number of delay days by the average daily rate of home office overhead attributable the delayed contract. This daily overhead rate is calculated by dividing the delayed project’s share of a contractor’s total billings and dividing it by the number of days in the delayed contract (both the on-schedule and delay days). For cases involving government contracts, federal courts have deemed Eichleay claims as “the only proper method” for calculating home office damages provided they meet certain requirements. These requirements are: (1) the government caused the delay; (2) the period of delay was uncertain and the government required the contractor to be ready to resume its work on short notice; and (3) the contractor was unable to seek other work to cover its office expenses during that period.

Outside of matters involving federal contracts, courts treat Eichleay claims with a higher level of scrutiny than critical path claims. In an effort to discredit delay claims, defending parties often claim (correctly) that the Eichleay formula is only an estimate and not necessarily an accurate indicator of damages. To ensure the numbers within the calculation are true, contractors will likely have to provide audited financial statements—information smaller contractors may not be able to provide. Also, Eichleay damages may decrease if many of the office overhead costs were from bidding for the contract or if a contractor already paid most of its office expense before a delay late in a project. Although the federal government prefers the Eichleay formula, some state courts do not accept it and instead use the terms of a contract to determine the costs of overhead. Still, many contractors try to use the Eichleay formula whenever possible because it can potentially yield hundreds of thousands more in recovered expenses than other methods. Ultimately, the jurisdiction of a delay claim is a strong factor for deciding whether or not to use the Eichleay formula.

When project delays are inevitable, contractors have options to recover at least some of their losses. For many contractors, pursuing equitable adjustments will prove to be the most cost-effective and least adversarial solution. Companies that maintain detailed schedule records and give adequate, timely written notice of their delay concerns may successfully assert delay claims to avoid serious harm when a customer refuses to accommodate them (if contract provisions allow). Ultimately, consulting with a lawyer or delay consultant early in the delay process is the best protection from losing a legitimate claim.

Author’s Note

This article is not intended to give, and should not be relied upon for, legal advice. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.

Engage With Potential Customers on the Social Media Platform They Use Most

Social media can be an exciting territory for contractors looking to promote their businesses in a relatively inexpensive, but impactful, way. But it can be equally overwhelming with the abundance of social platforms available, as well as the nuances involved for marketing on each one.

If you’re new to marketing your business socially, Facebook is a great place to start. It’s an easy-to-use platform that provides several features for connecting with potential customers locally and nationally. Or, if your business is already active on the platform but not seeing much return, there are simple ways to begin improving your activity today.

Read on to learn simple tips and advice on how to effectively promote your roofing business on Facebook.

Why Focus on Facebook?

It’s important to note why it is relevant to establish and maintain a presence for your business on Facebook.

First and foremost, your customers are already active on the platform. Facebook continues to be the most popular social media platform, as cited by the Pew Research Center, where 79 percent of online adults have a profile. In fact, the number of Facebook users is more than double the number of people who use other social platforms, such as Instagram (32 percent), LinkedIn (29 percent), Twitter (24 percent) or Pinterest (31 percent).

Plus, establishing and maintaining a Facebook page can also be beneficial in driving visitors to your website. In fact, search engines tend to reward businesses with a strong social following through higher organic rankings. In other words, the more people who are engaged with your company on Facebook, the better odds your business will show up sooner in a potential customer’s search results for a local roofing contractor.

Further, the platform is also a great way to create a sense of connection with your internal team. For instance, Facebook can be used to showcase your company culture, share news and engage with your own employees—especially if you’re a large contractor with multiple locations.

Useful Strategies to Grow Your Page

Profile setup: Building a solid foundation of followers begins with setting up your profile correctly. Be sure to set up a Business Page instead of a personal Facebook page. This way, current and future customers can “like” your page, or become a fan, and keep up-to-date on the latest news from your company.

Also, it’s important to have a profile image and cover art (the large image at the top of the page), as well as complete details about your business on the “About” page, including a description of your business, location, contact information, services offered, hours, website and more.

Tip:

If you already have an existing account that was set up as a personal profile, you can convert it into a business page at facebook.com/business.

Content sharing: Once your page is set up, it’s time to start sharing content. Begin with one or two posts per week, and then gradually start increasing your posting schedule as you gain a more established following.
Think of Facebook as an extension of your website to tell customers more about your business in an inviting and personal, but still professional, atmosphere.

Looking for content ideas? Think about sharing your knowledge and expertise: your project work! Take before-and-after photos of projects that showcase a new roof installation or repair. Or if it’s a long-term project, document it each day with photos or videos that explain the installation process you’re undergoing, the products you’re using and more. Make sure you have your customer’s consent before posting details or pictures about any project.

Also, do you have a company blog on your website? If so, share out individual posts with a “teaser” on the details the article contains, along with a link back to the specific post. This helps to establish your credibility as a knowledgeable professional, but can also help to drive potential customers back to your website to learn more. If you’re still working to set up your company blog, another option is to publish a “Note” from the left sidebar of your Facebook business page. This long-form Facebook post is a great alternative while you work toward setting up your blog online.

You can also consider sharing links to blog posts from a manufacturer whose products you use. They often provide helpful blog articles with tips and advice for both contractors and homeowners—so you may even find something of value to you in the process!

Lastly, you can use your page as a way to share positive customer testimonials in the form of photos and videos. Again, it’s important to ensure you first have your customer’s consent before sharing their testimonials. Be sure to also encourage your satisfied customers to submit their own Facebook reviews for a job well done. These reviews allow them to share their experiences and rate your performance directly on your Facebook page, which can help facilitate future business and leads.

Tip:

Facebook can also be used as a means to share company promotions, special holiday or seasonal incentives, and events you may be hosting or attending.

Page promotion: As you start to proactively post useful content, you’ll begin to establish a following on your page. However, there are also several paid promotion tactics you can use to increase your page’s reach and engagement.
One popular paid tactic is a pay-per-click (PPC) campaign, which is a form of advertising where you pay a set amount each time someone clicks on an ad you’ve produced. Determine what you would ultimately like users to do, and create a post or simple ad that prompts them to take that action. For example, you can drive homeowners to visit your company website, provide their contact information for a free quote, like your Facebook page, download a coupon and more.

If you have a particularly interesting post that has been performing well on your page (maybe it has received a lot of positive comments, for example) and you’d like it to reach even more people, consider “boosting” or sponsoring that post. This means putting a set amount of money behind promoting a post, say $100, to expand its reach. Geo-targeting, or selecting a specific audience and geography you’d like to reach, helps amplify your message to the right people—your targeted customers.

Tip:

Avoid using text in your images for paid posts or campaigns. Facebook guidelines reduce the reach of these images as the system considers them too “spammy” or ad-centric and cluttered. In many cases, image text could prevent your promotion from running entirely.

Highlighted Contractor Examples

Wondering how to apply some of these strategies? Learn more from a couple of roofing contractors who are part of IKO’s ShieldPRO plus+ Contractor Program and are already successfully using them on Facebook:

Chad’s Roofing, Gilroy, Calif.:

  • Frequently posts project testimonials and before-and-after photos, along with job site videos that explain roofing processes to homeowners.
  • Consistently responds to questions/comments posted on the page.
  • Uses Facebook (and linked Instagram account) to promote business rather than a traditional website.

Able Roofing, Columbus, Ohio:

  • Collects and displays several homeowner reviews on its Facebook page (more than 50 at the time of writing).
  • Shares links to blog posts on the Able Roofing website, which include helpful tips for homeowners related to home improvement, trends and renovation projects.
  • Promotes company news and local events, as well as national holidays.

If you’re looking to grow your leads and engage with future customers, using these strategies on Facebook is a great place to start. Also, be sure to check out the IKO blog for even more helpful business tips and advice!

Overcome Procrastination in Three Easy Steps

You are a dedicated business owner. I know this because you are taking time to increase your professional development by reading this magazine and this article.

Because you are a business owner who is dedicated to success, it would make sense that you don’t procrastinate—right? You can quickly and easily accomplish all the important tasks and projects that help move your business forward. Your taxes are completed ahead of time. You are never up late at night looking for data to complete an estimate. You never have to redo tasks because you made errors as you were trying to finish by the deadline.

Before you stop reading in frustration, know that according to Tim Pychyl, author of Solving the Procrastination Puzzle, everyone procrastinates. So, you are not alone!

The question really becomes, how do you overcome your procrastination? There isn’t a “one size fits all” solution to the procrastination challenge. However, there is a process you can follow to find your solution.
Use the acronym A.W.E.
A – Awareness. What are some of the tasks you procrastinate on most often?
W – Work. What are some strategies to help put yourself in motion?
E – Evaluation. What worked and how do you do more of it?

The Three-Step Process

Let’s start with awareness. What are some of the tasks that typically cause you to procrastinate? Do you avoid invoicing clients? Or posting on social media? Or sending estimates? Or evaluating employees? Or doing customer service follow-up calls? Or meeting with your accountant? Or creating a marketing plan? Or creating a business plan?

Start to really think about the tasks you put off. Now that you have a good idea about what those tasks are, it’s time to create a strategy to overcome procrastination. This is the work phase.

According to Pychyl, we procrastinate when we find a task unattractive. The more unattractive, the more we procrastinate. Unattractive tasks have one or more of the following traits. They are:

  • Boring
  • Frustrating
  • Difficult
  • Unstructured or ambiguous
  • Lacking in personal meaning
  • Lacking in intrinsic rewards (not fun!)
  • Which trait corresponds to your task? Do you procrastinate when it comes to invoicing clients because you find paperwork boring and frustrating? Do you put off evaluating employees because you find conflict (or perceived conflict) difficult? Have you decided that you’ll do a marketing plan next year (or the year after that) because the whole idea is ambiguous and you don’t even know where to start?

    Once you can identify the trait that’s holding you back, you can create a strategy to help move yourself into action. If a task is boring, make it fun. (OK, maybe paperwork won’t ever be fun, but it can be less boring.) Play music loud, challenge yourself to finish the task in under 20 minutes, and reward yourself when it is done.

    If creating a marketing plan seems ambiguous, add some structure to it. Talk it out with some colleagues. Consult with a marketing professional. Do some reading on marketing plans. Decide what your goals are for the plan. Figure out just one step. Once you’ve identified even one step, it becomes much easier to move into action.

    Finally, evaluation. When you can do more of what works and less of what doesn’t, life becomes much easier. Yet you seldom take the time to slow down long enough to think through what is working! Take 10 minutes to check back at the end of the week. Which strategies worked? Where are you procrastinating less? Where do you still need to problem solve?

    By following the steps spelled out in A.W.E., you will be able to reduce the amount of time you procrastinate and increase your capacity to accomplish more in less time. Which leaves you with a lot more time to do all those things you love to do!

    Residential Selling: Consider Color, Contractors!

    Mina Starsiak (left) and Karen E. Laine started their own company, Two Chicks and a Hammer, to tackle home restoration projects. The duo currently stars in the HGTV series “Good Bones.” Photo: Two Chicks and a Hammer.

    Mina Starsiak (left) and Karen E. Laine started their own company, Two Chicks and a Hammer, to tackle home restoration projects. The duo currently stars in the HGTV series “Good Bones.” Photo: Two Chicks and a Hammer.

    “You can be a more profitable, more well-liked contractor if you talk to your clients about color.”

    Those are the words of Karen E. Laine, the mother half of the mother-daughter team who started second careers rehabbing houses in their neighborhood near downtown Indianapolis. Laine and her daughter, Mina Starsiak, discovered they had a passion for home restoration and started their own company named Two Chicks and a Hammer. Laine and Starsiak also currently star in the HGTV series “Good Bones,” which chronicles their projects repairing and rehabbing houses. They shared their insights on exterior design and the importance of roof color with Roofing.

    Laine and Starsiak note that people have strong emotional connections to color. They often use color to express their personality in both the interior and the exterior of the house. Since the roof is such a prominent exterior component, figuring out how it plays into the home’s color palette is crucial.

    Residential roofing contractors can set themselves apart from the competition if they can help homeowners find the right color combination for their home, notes Laine. “If a contactor can say, ‘I see you have a yellow house and a bright red door. I have some roof choices that will go well with that, and allow you to make changes over time,’ your clients are going to think you are a genius.”

    Karen E. Laine and Mina Starsiak believe since the roof is such a prominent exterior component, figuring out how it plays into the home’s color palette is crucial. Their home in the Indianapolis area is shown here. Photo: Owens Corning.

    Karen E. Laine and Mina Starsiak believe figuring out how the roof plays into the home’s color palette is crucial. Their home in the Indianapolis area is shown here. Photo: Owens Corning.

    Laine urges contractors to make the most of expanded color choices in shingles available today. “If you are contractor, carry samples with you, walk outside the house and show them how the shingle is going to enhance the exterior appearance and the color of the house,” she says. “Because it’s not just one-dimensional color; shingles are multi-dimensional. Some of them have red, and brown, and yellow. Some have blue and brown and yellow. Looked at from a distance, you might not see those distinct colors, but they inform the color spectrum of the roof and how it looks with the house.”

    She also recommends using a paint fan to help determine colors for other elements of the home. “There are usually six colors on each blade of a paint fan,” says Laine. “The top one is the lightest and the bottom one is the darkest. If you’re not secure in your color choices, you can just pick the medium color in the paint fan for your siding, the darkest color in the paint fan for your door, and the lightest color for your trim. Then you are guaranteed that they are all going to coordinate, and you’re not going to have something in the end that clashes.”

    Others might want to consider contrasting colors. “If you are feeling a bit more adventurous, then pick out a different color for the door,” says Laine. “For each homeowner, it’s a very individual opportunity to be creative and see how color feels to you. And the great thing about the colored roofs out there is because of the way they are made, they complement a wide variety of color combinations on a house.”

    Taking the time to explore different roof colors gives the contractor the opportunity to connect with the customer and build trust. Starsiak recommends that contractors take advantage of online tools that can be customized to demonstrate the ways different colored shingles will look on the house. “You can scan in a picture of your house and see how different paint colors and roof colors would look in just a few minutes,” Starsiak says. “If you were thinking of painting your house a different color, you can see which roof would go with it. There are online tools for everything now.”

    The right color combination can also make a home easier to sell when the time comes. “From a real estate perspective, there are a lot of things that go into the first impression of the outside of the house, including the siding and the landscaping or lack thereof,” notes Starsiak. “A huge part of that initial impression is the roof, so you don’t want to miss that opportunity.”

    Laine agrees. “A prettier house is going to be easier to sell, and the dimension that a colored roof adds to a house makes it prettier,” Laine says. “Aesthetics are important. You have to consider color, all you contractors out there. Look at all that alliteration—consider color, contractors! That’s your title, right there. I’ll give you that for free—it’s not trademarked.”

    Karen E. Laine (left) and Mina Starsiak were on hand at the 2017 International Roofing Expo to offer design advice to show attendees. Photo: Chris King.

    Karen E. Laine (left) and Mina Starsiak were on hand at the Owens Corning booth during the 2017 International Roofing Expo to offer design advice to show attendees. Photo: Chris King.

    Mobile Technology Is Changing Online Marketing for Roofing Companies

    It seems like the Internet is changing every six months, doesn’t it? The moment you have a marketing strategy worked out, it is thrown into flux by another Google update or market trend.

    Right now, that market trend is toward mobile technology. This shouldn’t come as a shock. In fact, I bet you’ve checked your phone since you started reading this article, and we’re only four sentences in!

    Mobile technology has significantly changed the landscape of online marketing. More homeowners are using their mobile phones to search for roofing services than ever before. But between the rapid changes in homeowner behavior, the explosion of mobile devices and the intense local competition most roofing companies have, keeping up with the mobile world can seem daunting, if not impossible.

    Fear not! We are going to tackle the five ways mobile technology is changing the residential roofing business, and discuss how each one is going to help you win more business from online homeowners.

    1. MOBILE is no longer a millennial phenomenon. It was only a few years ago when we were shrugging off the mobile movement. Mobile obsession was primarily a thing for teens and twenty-somethings, right?

    Not anymore. Since mobile devices have become more affordable and accessible, homeowners of all ages are turning to their phones when they have an urgent need, such as a repair or roofing emergency. In fact, that is the first device they turn to.

    For homeowners over 50, mobile phones are the central device in their daily lives, and they are likely using them to make phone calls and submit web forms. And while home ownership among millennials is rising, a hefty number of leads tend to come from the 50-plus crowd. Adapting to mobile technology is going to help you drive leads across all demographics.

    2. GOOGLE has welcomed mobile with open arms. Google tells us that more than half of the queries on their search engine now come from mobile, and it is only going to increase. As a result, they have revamped their pay-per-click (PPC) advertising to reflect the immediacy of mobile searches. Folks at the top, as they say, get the best fruit.

    In PPC campaigns, roofing companies need to optimize for mobile. This requires more than checking the “Mobile” box in your ad campaign. You will want to use extensions that make it easier for homeowners to call from their mobile devices and determine how close you are to their location.

    Simply stated: homeowners are making their roofing choices at the top of Google’s mobile search pages. To get to the top, you need to have mobile-optimized ads that appeal to mobile users. Being at the top of the page is one of those lead drivers that growing roofing companies cannot do without.

    3. TAP-TO-CALL is exactly what homeowners are looking for. In the time-constrained world that we’re in, Google offers homeowners a number of specific roofing choices immediately. However, being at the top of the page means nothing if a person can’t get in touch with you.

    Homeowners with roofing needs want to resolve the issue as soon as possible. That’s why it’s important to have a tap-to-call option on your website pages and ads. But, that is only half the battle.

    In home improvement, excellent phone work is still necessary. There is nothing more frustrating to homeowners than going to a roofing contractor’s website, liking what they see, dialing the number … and then getting no answer. Or a long hold time. Or going straight to voicemail. Or not getting a prompt call back.

    All of these non-responses drive the homeowner to do the same thing: call your competitor.

    Mobile has made it easier than ever to go down a list, contacting company after company until they get a response. Roofing companies that want to grow and scale need to have tap-to-call options and strong phone practices to make the most of their mobile presence.

    4. RESPONSIVE WEBSITES are more than the future—they’re the industry standard. Mobile is now a fact of life for roofing companies. And if your company’s website requires customers to zoom in on teeny tiny letters, they’re going to get frustrated and move on.

    At the very least, every company needs to have a responsive website that accommodates all sizes and models of mobile phones. Responsive sites are Google-friendly and they display in ways that are easiest for homeowners to navigate and understand.

    If you’re not sure if your website is responsive, try to access the URL on your mobile phone. Can you see the words at a glance? Do you have to slide around to find a phone number? If so, you probably need to upgrade to a responsive design.

    Having a responsive website boosts your site’s usability, making it more likely that you’ll be there when a homeowner searches for roof replacement. Plus, customers in the 50-plus bracket will sincerely appreciate text that is easy to read.

    5. MOBILE WEB FORMS are your key to connection, so get it right. Homeowners are embracing web forms in greater and greater numbers. And it’s easy to see why. With busy routines and packed schedules, many homeowners simply have limited time to solve their roofing issues. A web form shows the homeowner how responsive you are and how much you value their inquiry.

    That is why more and more roofing businesses are turning to online appointment scheduling in their web forms. Letting the homeowner select an appointment time has a number of benefits. First, homeowners who can schedule their own appointments are far more likely to complete a web form. Second, it gives you a competitive advantage over other forms that do not offer scheduling. It’s simply more convenient and gives the homeowners a greater feeling of control.

    Also, self-schedulers are much less likely to become no-shows. As we all know, no-shows are frustrating, costly and a big headache. Letting the homeowner commit to a time that works also shows that your easy to work with and responsive to their needs.

    Lastly, web forms are a big hit with Millennials. The 35 and under crowd loves to schedule everything online— haircuts, spin classes, restaurant reservations, vacations, hotel stays. You name it, they are reserving it online. This, too, is becoming an ingrained behavior among the next generation of homeowners, so optimizing your web forms is going to become even more important in the years to come.

    Dominate the Mobile Market

    Many roofing companies are frustrated with the online world. Roofing is already a very local business, which makes it challenging to grow and expand. By embracing the mobile world, roofing companies can stand out and beat the competition. And for roofers looking for replacement leads, it’s 100 percent worth the time and expense to do it right.

    While the mobile world is complex and somewhat confusing, so is the rest of running a business. And I’m guessing your company is already doing that well. If you embrace these mobile trends, you’ll learn how to master them and drive more leads–and more business–to your company.

    Work Experience Is A Factor in Leadership Development and Diversity

    Corporate values. Leader behaviors. Diversity and inclusion training. Hiring goals. High-potential training programs. Affinity groups. Mentoring. While these are all important practices for developing leaders and increasing gender diversity, they are not a substitute for one of the most important, but frequently overlooked, contributors to leader development and leadership diversity—ensuring that women in the pipeline are assigned to the high-impact, highly visible, challenging roles and project assignments that will prepare them for executive management.

    EXPERIENCE-DRIVEN DEVELOPMENT

    The Center for Creative Leadership (CCL) points to experience as a critical factor in executive development. In the introductory chapter to Using Experience to Develop Leadership Talent, the book’s editors, Cynthia McCauley and Morgan McCall, define “experience-driven development” as “identifying people with potential, giving them challenging assignments, and holding them accountable for both results and growth.”

    CCL has devoted an online publication exclusively to the subject titled Experience Driven Development. The organization states that despite being the most important element of the learning process, experience-driven development often gets scant attention in the workplace: “Individuals broaden and deepen their leadership capabilities as they do leadership work. In fact, there are good reasons to believe that learning from experience is the number one way that leader development happens. Yet this number one driver of learning gets the least attention in our leader development systems.”

    Experience-driven development reflects the familiar CCL 70-20-10 framework for leader development stemming from the original Lessons of Experience research of the late 1980s. This model states that roughly 70 percent of development can be attributed to challenging on-the-job experiences; 20 percent to mentoring and other developmental relationships; and 10 percent to formal coursework.

    The challenging job experiences can include such assignments as:

    • Starting something from scratch.
    • Turning around a failing or struggling business unit or initiative.
    • Special high-visibility projects.
    • Roles reflecting increases in scope and scale.
    • International assignments.

    Ann Morrison, co-author of The Lessons of Experience and author of The New Leaders: Guidelines on Leadership Diversity in America, states that “such assignments involve autonomy, visibility, access to senior management, and control over considerable resources.”

    She continues, “They are often used as tests and rewards for the people judged to have high potential; they constitute the ‘fast track’ in many organizations.”

    Morrison stresses that to be effective, these developmental challenges need to be balanced by recognition (including pay, promotion, autonomy, resources, and respect) and support. She notes that organizations need to be aware of additional sources of challenges experienced by diverse leaders (for example, unconscious bias, higher performance standards, and family issues).

    The sample in the original Lessons of Experience research, upon which the 7020-10 model is based, was made up almost exclusively of white males. Followup CCL research concluded that men had access to a greater variety of challenging job experiences than women.

    THE CATALYST RESEARCH ON HIGH-POTENTIAL EMPLOYEES

    Recently the Catalyst Organization has undertaken a global longitudinal study of 1,700 post-MBA high-potential employees in companies such as General Motors, IBM, Ernst & Young, McDonalds and UPS. In the research summary entitled “Good Intentions, Imperfect Executions? Women Get Fewer of the ‘Hot Jobs’ Needed to Advance,” authors Christine Silva, Nancy Carter and Anna Beninger refer to the critical job assignments for development and advancement as “hot jobs.” They conclude: “Highly visible projects, mission-critical roles, and international experiences are hallmarks of ‘hot jobs.’ They predict advancement, yet our findings show that women get fewer of these hot jobs than men.”

    The authors point out that most global companies have embraced the cause of gender diversity and virtually all of them have established formal leadership development courses. “Despite these efforts, women remain under-represented at senior levels, indicating that these programs may not be paying off equally for women and men,” they note. “And past Catalyst research shows there is typically little accountability in place to ensure women’s equal access to development opportunities.”

    The Catalyst study explored three of the most potent sources of experience-driven development: project leadership, challenging roles and international assignments. The results show that women lag behind men with similar education and organizational tenure in terms of their access to fasttrack development opportunities. The study found the projects that men worked on typically had budgets twice the size of the women’s projects, and the men’s projects had three times as many employees assigned to them.

    SHARED ACCOUNTABILITY FOR DEVELOPING LEADERSHIP DIVERSITY

    So, if high-potential, post-MBA women are getting fewer of the high-visibility and high-impact roles that are essential for their development and for increasing gender diversity in the executive ranks, who is accountable for changing the status quo?

    According to experts at CCL, experience-driven development should be viewed as a shared responsibility involving the CEO and senior leaders, human resource executives, the immediate manager, and the individual employee. In their conclusion to Using Experience to Develop Leadership Talent, editors Cynthia McCauley and Morgan McCall comment on the critical role of the CEO: “The potential contribution of the CEO cannot be overstated. We’ve seen how important the chief executive is in making leader development a fundamental part of the business strategy, in modeling expected behavior in developing others, and in holding managers accountable for the development of their people.”

    McCauley and McCall point out that senior leaders have development accountabilities similar to those of the CEO and must also “make sure that the boundaries among their parts of the business can be crossed for developmental as well as business reasons.” The authors point to immediate managers as an important focus, as they are the gatekeepers to challenging work assignments and often play a role in identifying high-potential talent.

    Finally, they comment on the individual’s role in their own career development: “Ultimately, individuals are responsible for those aspects of development they can influence, most immediately taking developmental opportunities when they arise and proactively seeking them when they don’t, being open to learning from these opportunities, and taking actions (such as seeking out feedback and building in accountability) that increase the likelihood of learning.”

    KEY QUESTIONS TO CONSIDER

    Experience-driven development. Hot jobs. Fast track. To increase leadership diversity, it is critical that the résumés of women reflect a variety of challenging, visible, high-risk, high-impact roles in preparation for top management positions.

    The research project by the Catalyst Organization echoes early research at the Center for Creative Leadership and concludes that post-MBA, high-potential men are more likely than their female counterparts to be assigned to larger, more visible projects. The men are more likely than high-potential women to have profit and loss responsibility, as well as supervisory responsibility. Significantly more men than women are selected for international assignments.

    The questions below may stimulate your thinking about leadership diversity and professional development in your organization:

    • Are you placing women in high-visibility, high-impact positions?
    • What role does “unconscious bias” play in the development of high-potential women?
    • Are women required to demonstrate greater readiness for a challenging role than their male counterparts?
    • Do your organization’s diversity metrics reflect experience-driven development?
    • What role will you play in bringing about needed change?

    Three Types of Contracts Offer Different Benefits and Risks

    For the first time in years, construction material costs are rising. In March, the Bureau of Labor Statistics reported numbers showing a 4.8 percent rise in material prices between February 2016 and February 2017.

    For contractors who have been working on long-term projects, the price increases could mean lower profit margins, or even losses, as they complete their work. Contractors who are in the estimating, bidding, and contract negotiation stages for new projects will want to ensure profitability and manage risk where possible. In particular, selecting the best pricing system for a project and properly drafting the contract to reflect it is essential, especially during periods of material cost increases.

    Three prevalent pricing mechanisms are fixed-price contracts, cost-plus contracts, and guaranteed maximum price contracts. Here’s the lowdown on each type and the benefits and risks with respect to cost changes.

    FIXED-PRICE CONTRACTS

    Fixed-price or lump-sum contracts are contracts where the parties, sometimes through extensive negotiation, agree upon a fixed sum for the labor and materials to be furnished. Typically, the contractor will prepare a schedule of values where portions of the work correspond with a certain percentage of completion, and pay applications are submitted for the appropriate percentages (often, minus an agreed-upon amount of retention). If the parties want to change the scope of work, a signed change order will be required, and the parties must negotiate and agree upon the change order pricing before signed.

    Fixed-price contracts offer contractors limited protection—and in some cases, no protection—in the event of material price increases. Indeed, “the normal risk of a fixed-price contract is that the market price for subject goods or services will change.” (See Seaboard Lumber Co. v. U.S., a 2002 Federal Circuit Court opinion.) Many contracts contain force majeure provisions that excuse or absolve parties from performing their contractual duties in the event of unforeseeable circumstances that are beyond their control and that make performance impossible or commercially impracticable. Examples of such events include “acts of God” like floods, tornadoes, and earthquakes, as well as events such as riots, terrorist attacks, and labor strikes. However, force majeure clauses can be difficult to enforce, and most courts, like the Federal Circuit in Seaboard, view cost changes as a normal, foreseeable risk and not an event that will excuse contractors from further performance. Therefore, when negotiating a fixed price, contractors generally should plan to be held to that price.

    However, properly drafted fixed-price contracts can give contractors options to mitigate potential losses arising from cost increases. One strategy is drafting the contract to read that the fixed price is based upon material prices as of the date of signing and that significant increases in material prices will or shall (not “may”) entitle the contractor to an equitable adjustment of the contract price through a signed change order.

    Contractors should also be entitled to adjust the contract price or time of completion to account for other problems—like delays, material shortages, or other difficulties acquiring materials—that can occur when costs increase. Such provisions will have better chances of being enforced if the contract specifically defines what constitutes a “significant” percentage increase in price. Additionally, contracts should include provisions protecting contractors from liability associated with delays and shortages. Some fixed-price contracts also provide that in the event the parties cannot agree on a price for change orders, the change order work shall be paid for on a time-and-materials basis including overhead and profit. If contractors are unable to negotiate an equitable adjustment provision, a time-and-material measure for change orders can provide some protection.

    COST-PLUS CONTRACTS

    For contractors, while the above revisions to fixed-price contracts may be helpful, cost-plus contracts will provide the maximum protection against material cost increases. Cost-plus contracts—also known as time-and-material agreements—are agreements whereby contractors bill for the cost of the labor and materials, plus a fee that is either a percentage of the project costs or an agreed-upon flat fee. When invoicing, contractors include documentation of their payment to subcontractors, vendors, and material suppliers to provide proof of the cost. They then invoice for the cost plus the agreed-upon percentage of the cost.

    Unlike fixed-price agreements, cost-plus agreements place the risk of cost overages and increases on the owner. If the contractor’s fee is a percentage of the labor and material costs, these arrangements also create potential for contractors to benefit from cost increases. However, they eliminate the need to negotiate a fixed price, they make change orders much simpler to implement, and in periods of cost decreases, they can benefit owners.

    GUARANTEED MAXIMUM PRICE CONTRACTS

    While some owners will be wary of cost-plus agreements—especially when material prices are on the rise—guaranteed maximum price (GMP) contracts may serve as a compromise that could help both contractors and owners mitigate risk. GMP contracts are a modified cost-plus option in that they function like cost-plus agreements—contractors invoice for the labor and material costs, plus their fee—but the contracts establish a maximum price for the entire project. Contractors invoice in the same manner they would for a cost-plus agreement, but once the owner has paid the maximum agreed-upon amount, the remaining costs are the contractor’s to bear.

    Often, parties to GMP contracts also agree that if the sum of the cost of work and the contractor’s fee total less than the guaranteed maximum price, the difference in the cost and the agreed-upon maximum fee reverts to the owner or is split between the two parties. This makes some owners more amenable to these agreements than they would be to traditional cost-plus agreements, which can make project costs very unpredictable.

    Whether parties decide that a fixed-price or cost-plus agreement is best for their needs, they should take care to draft the price terms clearly in order to avoid ambiguity and confusion. Generally, courts enforce contracts as written if they are clear and unambiguous, but if an ambiguity exists, courts will must look to extrinsic evidence to determine what the parties intended, leaving the fate of the dispute to a jury or fact finder. For example, in Rosa v. Long (a 2004 N.C. Court of Appeals opinion), a homeowner and contractor entered into a contract stating that the contractor would build a turnkey dwelling for the “sum of $193,662.60” but later stating that contractor would receive a commission in the amount of 10 percent of all materials, subcontracts, and labor obtained and expended by the contractor. Because these terms suggested that the contract was both fixed-price and cost-plus, a jury decided what the parties intended instead of a judge enforcing the terms as drafted. Clear, proper drafting is essential to increasing the parties’ chances of a predictable outcome in the event of a dispute.