Owner-Builder as Prime or Main Contractor
Many property owners are not aware
of a construction process available to them that can save them thousands
of dollars, lots of time, and allow them to achieve ultimate project
control.
The term for this process is Owner-Builder and under certain conditions
the Owner-Builder is exempt from the California Contractors License
Law, which allows work on his/her own property pursuant to the following
Owner-Builder Declaration found in local Building Permit Applications:
In general, the first option permits the property owner or his/her
employees to perform construction work so long as the structure
is not intended or offered for sale (Sec. 7044, Business and Professions
Code reads: The contractor license law does not apply to an owner
of property who builds or improves thereon, and who does such work
himself or herself or through his or her own employees, provided
that such improvements are not intended or offered for sale. If,
however, the building or improvement is sold within one year of
completion, the owner-builder will have the burden of proving that
he or she did not build or improve for the purpose of sale); and
The second option permits the owner to hire the various licensed
specialty contractor(s) directly to construct the project thereby
eliminating the need for a General Contractor (Sec. 7044, Business
and Professions Code reads: The Contractors License Law does not
apply to an owner of property who builds or improves thereon, and
who contracts for such projects with a contractor(s) licensed pursuant
to the Contractors License Law). By contracting directly with licensed
specialty contractors the Owner-Builder can:
1. Save money because the general contractor marks up the specialty
subcontractors actual bid price and then adds other fees such as
overhead, profit and general conditions. All of these fees and mark
ups can be substantial. Unless you have a cost plus contract with
the general contractor and entitled to see actual subcontract agreements,
material receipts and actual labor time sheets you never know how
much a project really costs; and
2. Have direct control over the specialty contractors costs, schedule
and work quality because you will see and approve actual invoices,
schedule results, and work in place quality before releasing any
payments.
By answering YES or NO to the following questions could determine
if this Owner-Builder process is right for your next construction
or alteration project:
1. Do you understand the scope of the work necessary to begin and
complete your project?
2. Are you capable of preparing a written scope of work or performance
specifications?
3. Do you have the ability to qualify contractors?
4. Do you have the time to schedule, coordinate and inspect your
project?
5. Is your project absent of structural alterations or improvements?
6. Will all activities in your project scope or performance specifications
allow for the respective specialty contractors to supply and install
all materials, labor and clean-up without you having to do any leg
work?
7. Are you able and willing to have the necessary building permit
documents prepared, submitted and obtained for the project?
8. Are you willing to assume full financial responsibility for
your project?
9. Are you capable of setting up, reviewing and approving contractor
progress and final payment requests?
10. Do you understand the importance of securing certificates or
insurance and lien releases from contractors?
A YES answer to all of these questions probably makes you a good
Owner-Builder candidate.
However, those who can't answer YES can still take advantage of
this Owner-Builder process. The owner can still have ultimate control
over schedule and costs by hiring a Construction Manager for fee
who basically acts as his/her agent. Some Construction Managers
will help set up a project and/or work on an as needed consulting
basis. This gives the owner the best of both worlds because Construction
Managers are required to be licensed by the Contractors License
Board and Construction Management fees are generally substantially
less than a General Contractors combined specialty contractor mark
ups plus his/her over head and profit. Also, the Construction Manager
for fee, acting as the owner's agent, owes a client a "Fiduciary
Duty" (Trust). Where as, a General Contractor is an independent
contractor who is free from the influence, guidance, or control
of another or others and does not owe a "Fiduciary Duty".
Using the Owner-Builder process can prove extremely beneficial.
Here is an example of a group of sub-trades easily coordinated and
their scope of work defined without risk of conflict.
Painting and Decorating
Roofing (Usually subs out Sheet Metal)
Fencing
Landscaping
Earthwork and paving
Concrete (Usually subs out Reinforcing Steel)
Swimming Pool
Masonry (Usually subs out Reinforcing Steel)
Carpentry Contractor
Every construction project is unique and as such must be evaluated,
planned, implemented based on the owners budget and scheduling objectives.
The Owner-Builder process is one way of achieving these objectives.
By W.
Gary Westernoff, Founder and CEO, Constructionplace.com, Inc. in Moraga, CA.
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