COST PLUS CONTRACT?

8 Essential Things Hawaii Contractors Need to Include in Their Contracts

As someone who’s been in the construction trenches here in Hawaii for over two decades, I’ve seen it all when it comes to contracts. And let me tell you, the standard AIA cost-plus contract often falls short when it comes to our unique needs in the islands. So, let’s dive into the eight crucial elements every Hawaii contractor should include in their contracts to ensure smooth sailing from start to finish. Trust me, these tips will save you a headache or two!

1. Exact Dollar Amount Paid to Contractor from Homeowner

One of the biggest pitfalls of the standard AIA cost-plus contract is its lack of clarity on the exact dollar amount the homeowner will pay. Here in Hawaii, we need specificity! Make sure your contract spells out the exact amount due, when it’s due, and under what conditions. This prevents any surprises or misunderstandings down the line. (Need help working around the specific dollar amount requirment, and still have the flexibility of a cost-plus agreement?)

2. Detailed Scope of Work

Outline everything in detail—no job too small! This includes materials, labor, and any subcontractors you plan to bring on board. A clear scope of work helps manage expectations and ensures everyone is on the same page.

3. Payment Schedule

Break down the total project cost into manageable payments. Include milestones for these payments, like upon completion of the foundation, framing, etc. This keeps cash flow steady and projects on track.

4. Change Order Procedures

Changes happen, but they shouldn't derail your project. Include a detailed change order procedure that specifies how changes will be handled, documented, and paid for. This way, everyone knows what to expect when changes arise.

5. Timeline and Completion Dates

Hawaii weather can be unpredictable, but your project timeline shouldn’t be. Include realistic start and finish dates, and outline what happens if delays occur. A clear timeline helps keep the project moving forward and avoids unnecessary stress.

6. Insurance and Licenses

Ensure you’re covered by including proof of your insurance and any necessary licenses. This not only protects you but also builds trust with your clients. Make it clear that all subcontractors need to be insured and licensed as well.

7. Warranty Information

Offer peace of mind by including warranty details for your work. Specify what’s covered, for how long, and what the homeowner needs to do if an issue arises. A solid warranty shows you stand behind your work and care about quality.

8. Dispute Resolution

Even with the best intentions, disputes can happen. Outline how these will be handled, whether through mediation, arbitration, or legal action. Having a clear dispute resolution process can save time, money, and relationships.

Navigating Cost-Plus Contracts in Hawaii

Now, let’s talk specifically about cost-plus contracts. These can be tricky, especially in Hawaii. The standard AIA cost-plus contract often leaves too much room for interpretation. Lawyers here have a field day picking these apart. So, here’s what you need to know:

Be Specific with Costs

Don’t just list percentages or estimates. Be as exact as possible about what costs will be covered and how much the homeowner will pay. Detail out the contractor’s fee, overhead, and profit margins clearly.

Negotiate and Document Everything

From the get-go, negotiate terms that work for both parties and document every agreement. This might seem tedious, but it prevents misunderstandings and disputes later on.

Manage the Contract Actively

Keep meticulous records of all costs, receipts, and communications. This helps in justifying costs to the homeowner and protecting yourself if disputes arise.

Enforce the Contract Fairly

If issues come up, enforce the terms of the contract fairly and consistently. Being transparent and fair builds trust and keeps the project running smoothly.

Conclusion

Writing a solid construction contract isn’t just about protecting yourself legally—it’s about building trust with your clients and ensuring a smooth project from start to finish. By including these eight elements and paying special attention to cost-plus contracts, you’ll be well on your way to successful, hassle-free projects.

Remember, it’s not just about following the rules; it’s about creating a clear, honest, and trustworthy relationship with your clients. If you ever need a hand or some advice, feel free to reach out. We’re all in this together, building a better Hawaii one project at a time.