In residential construction, it’s not unusual for your client to have unrealistic quality standards. That’s why you need to establish the standard ahead of time, using the residential construction performance guidelines.
We received this note from a contractor, asking about quality standards.
Hi Michael and Devon,
First, I want to thank you both so much for the two day intensive workshop that you put on a little while back. It was absolutely fabulous and I reference it at least once a day with my team in one form or another.
A quick question for you both. In our contract we currently we reference the residential construction performance guidelines fifth edition from the national association of homebuilders as a guideline for our punch list items. What verbiage can we use in our contract for items that do not fall within this guidebook?
Example being, currently we are working with a client and the client has said that the bead of silicone on the vanity countertop where it meets the tile backsplash is too wide and is requesting to have it redone. Naturally, we aim to please and we want a happy client however there are limitations to anything and in our efforts to try to create a tight bead of silicone during the tooling process it widens.
This is a very minor issue but it got me thinking about specific verbiage in our contract to include areas outside of the performance guidelines especially when it pertains to the clients opinion of how something should look as well as a way to prevent us from redoing items on the job site that would otherwise be considered perfectly acceptable.
He goes on with a few other comments, but his point is well taken. We have all run into the gray areas in our contracts and if you can prepare for those gray items up front, it makes your life and the job run so much smoother.
I’m a firm believer in the Residential Construction Performance Guidelines from NAHB to set the quality standard for your projects. What you’re asking for, addressing how something looks, doesn’t have a standard. It’s subjective because we all see things differently. I wouldn’t paint a house purple but there used to be a purple house down the street from us.
In my opinion, the only resort you have with a disagreement about something not covered in the guidelines is including an arbitration clause in your contract, which it should have anyway.
Here is some language from our Fast Track Proposal Writer software program that covers gray areas. This is one way to handle the wording:
Owner understands and agrees that (CONTRACTOR) will use the book, RESIDENTIAL CONSTRUCTION PERFORMANCE GUIDELINES, version (SPECIFY CURRENT VERSION), published by the National Association of Home Builders, to set the quality standard for this job.
Any dispute over the quality of work in progress or completed will be settled between the Owner and (CONTRACTOR) by reviewing the work and comparing it to the standard as set in the RCPG book. If necessary, a neutral third party with knowledge of the construction practices implemented on this job will be brought in to interpret the standard of quality for the work in dispute and both Owner and (CONTRACTOR) agree to abide with the third party decision.. Owner and (CONTRACTOR) will schedule the site visit by the third party within (No.) days of the quality dispute.
Owner understands and agrees to this procedure to keep the job on schedule and not hinder the job progress by (CONTRACTOR) in any way. Owner will not withhold scheduled progress or final payment while this issue is being resolved.
Now, you can add a name or company as the third party who is essentially participating as a neutral arbitrator. If you are going to do that, be sure you check them out carefully before calling them in to settle any questions of quality or disputes.
That language addresses quality standards specifically. This language addresses arbitration for any issue.
Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by Arbitration through the (SPECIFY ASSOCIATION OR COMPANY) as agreed between parties to this Contract, and under the laws of the (YOUR STATE). Arbitration shall occur prior to any litigation by any party to this agreement. Arbitration shall occur at the place where the project is located. The prevailing party in such controversy will be entitled to an award of any arbitration fees and to it’s reasonable attorneys fees incurred in such a controversy.
If a neutral verdict is found by the Arbitrator, then both parties shall pay their own attorneys fees and split the cost of the Arbitrator equally.
Judgment upon the award rendered by the Arbitrator, shall be final and binding upon all parties to this agreement, and may be entered in any court having jurisdiction thereof.
The arbitrator will be a non-attorney, selected by mutual agreement between the parties involved in this dispute.
You want to specify arbitration, not mediation. I won’t go into details here because that’s covered in this article on our website, “Mediation or Arbitration?”
There are any number of different ways you can cover the gray areas in your contract. Whatever language you chose to use, be sure and review that language with the client before they sign your contract.
You want to build quality jobs and have satisfied clients, but you won’t make everyone happy all the time. It’s just not possible. Accept it as the cost of doing business and move on.
Disclaimer: Nothing in this article is intended to be, or may be construed as, legal advice. I am not an attorney. You must consult an attorney before using any suggested language or any other information contained in this article to determine if it conforms to your state laws or your particular situation.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations.
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