HOUSING AND YOU: How much should your contractor charge?

Sep 25, 2011 News

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By Leonard Gildarie

Initially, the intent of these articles was to ensure that the right decisions were made and new house lot owners did not end up holding the short end of the stick after spending their hard-earned savings or advances from a mortgage.
However, the many concerns raised by our readers compelled the articles to take on new dimensions, including more recently, the importance of valuation for properties.
A reader asked for us to examine the issue of possible regulations being introduced that will see home construction costs being charged by the square foot. While we have touched on this issue a while back, it is important enough to take a second look.
We will first have to examine what happens in Guyana. You have a piece of land and you want to know based on your ideas what it would cost to build. In most cases, the landowner has a clear idea what he or she wants. Whether it is two or three bedrooms, a porch, five windows or a bungalow roof, that owner invariably would have an idea.
The initial plan, in most cases, is drawn up by the Sanitary or Environment Officer and then passed by the relevant NDC or City Council. In most cases, the landowner will then liaise with a contractor who will work out the materials needed and the labour costs.
The obvious question, for the curious-minded, is how does the contractor arrive at the materials and labour estimates.
The materials part is easy. The roof will take so many aluminum sheets and wood for the rafters. There are so many doors and toilet bowls and kitchen sinks. There are so many door locks.
To arrive at the labour cost, contractors generally would estimate the time it would take to complete the work. They would calculate the daily wages of labourers and themselves, and then add an extra 10%-20% for profit, or to cater for the possibility of falling short or ‘busting’ on the job.
Now, from speaking with contractors and homeowners, it is this grey area of daily wages and 10%-20% that some contractors use to hit their employers. In some cases, the contractors would add extra days of work and more labourers than needed. Then they would sneak in that 20% to estimates. Most contractors hire a full crew at the foundation stage and then immediately scale down, working on the bare minimum. That is understandable.
Now there is also the other scam of deliberately prolonging the work and drawing down on payments. As the work winds down to a close, they would demand more money to complete it.
Never mind that they would have been drawing down their wages and more over the weeks.
Being enlightened as I am now, I have learnt to understand contractors.
What I can’t understand is why nothing has been done over time to offer more protection to clueless house lot allottees and others who would have been suffering from what has been perceived as largely a movement to rip-off landowners.
Now, that brings us to the point of why Guyana does not have a system of where contractors charge by a system of square foot.
I managed to speak to Valuation Officer yesterday. The revelations are interesting, to say the least. The local banks want a valuation of a certain land and proposed property to be built. This property, yet to be built, is evidenced from an approved NDC or City Council building plan. The valuation estimate will most likely be based on a size of the property, and in general, the materials that will be used to construct that property and the labour costs.
The reality is that there are no set regulations to govern how contractors charge. There is nothing stopping them from twisting the arms of their employer, the landowner, and asking for more money.
While the US and other developed countries have contractors offering to build homes on a square foot price, the practice in Guyana has remained in landowners depending on contractors submitting a labour cost. In the US and other developed countries, the recourse system – that is the court system – works.
In Guyana, it is no secret the time it takes for a civil case to be heard and disposed of.
The frustration and heartaches are well known.
The estimates from contractors most likely will not include cost overruns, which is usually the finished cost of a home – more than the original bid price. Cost overruns occur from overspending the allowances, making changes, and encountering unforeseen problems. Proper planning can greatly reduce cost overruns. In general, it is a good idea to allow an additional 10% to cover unexpected costs.
So in essence, unless government implements regulations that will see measures including regulations, contractors can charge what they want. You, as the boss, will have the ultimate decision to decide whether you want to hire that contractor…or not.
Another thing to look for is a suspicious, too-low labour cost estimate. That contractor may just want a job and will use the opportunity of falling short of money on the job to literally blackmail you for more. It’s your choice.
Don’t forget to write us at [email protected] or call us at 225-8491.
Enjoy your weekend.

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