Choosing tradies and builders

Types of building contracts

Full contract

This means the builder is the “main contractor”, so they buy, pay for and (usually) manage almost everything about the building, including:

• supplying materials
• hiring subcontractors
• applying for consents
• liaising with the architect/designer
• arranging inspections by the council inspector
• health and safety onsite – and the consequences of incidents.

Depending on what’s in your contract, you may need to pay for some things separately – such as tiles, wallpaper and light fittings – or these may be covered in the quote as “prime cost sum”. That means you choose them, but the builder buys them. (However, if your choice is more expensive than what’s allowed in the prime cost sum, you pay the difference.)

What this contract type means for you:

• Pros: You play a very small part in the ongoing management of the build, so it’s time-efficient for you.
• Cons: It costs more, as you pay the builder for their time managing the build, buying materials, and so on.

What this contract type means for the builder:

• Pros: They have total control over the supplies bought and delivered, and the selection and availability of subcontractors.
• Cons: They must spend time wrangling the above when they might just want to get on with building.

Labour-only contract

This is where you manage the process around the build and the builder is responsible only for the actual building work, for which they usually charge an hourly or weekly rate, or a set price.

What this contract type means for you:

• Pros: You can have more control over the process and save money. Also, the set price gives the builder an incentive to finish within the time they’re paid for.
• Cons: You are responsible for meeting Building Code requirements and supervising work to make sure it’s not defective, so you must have the skills and knowledge required. This contract type requires a lot of time and energy, as you must hire all the contractors, buy the materials and manage the project. You are also responsible for the site’s health and safety. Basically, your build could become a full-time job.

What this contract type means for the builder:

• Pros: The builder has less responsibility and can just get on with what they probably like best – building – rather than managing and juggling subcontractors.
• Cons: That lack of control over subcontractors means they can’t guarantee subbies – or inspectors – will turn up when they’re required, or that materials and other supplies will be onsite at the right time. All this could hold the builder up, which could cost them time and money if they’re on a set fee. They may end up being forced to take over the build management, which they’re not being paid for. Some builders are reluctant to accept this kind of contract.

Managed labour-only contract

Part-way between a full contract and a labour-only contract, this means the builder manages the day-to-day building, while you are responsible for pricing the job, getting quotes and organising materials and subcontractors. The builder may do some of this for you, depending on what you’ve both agreed in the contract.

What this contract type means for you:

• Pros: You still have some control over the prices and may save yourself some money, because you escape the mark-up builders add to the materials they buy for you. However, they buy at a trade discount, so it may end up cost neutral. You may be able to negotiate your own discount if you buy at big enough volumes.
• Cons: While you might save money, it can still be a huge time commitment as you have to go get the materials yourself and manage the subcontractors. Because the materials are your responsibility, if there are any issues with quality or quantity it’s on you to sort it out.

What this contract type means for the builder:

• Pros: They have more control over the actual build, including the labourers they have working for them, without being distracting by chasing subbies or running off to get materials.
• Cons: Again, their building work may be stalled while they wait for subbies or materials to turn up because you’ve mismanaged something.

Communication is key with a managed labour-only contract. You and your builder must know exactly what each other is doing, who is coming to a job and when, what’s being ordered and by whom. If you both think each other is ordering a delivery of bricks, no bricks will turn up. Conversely, you may end up with two piles of bricks if you both thought the responsibility was yours.

Having set times during the week – or even the day – to meet and schedule upcoming work and supply requirements is a very good idea.

Make the contract clear

Whichever contract you choose, make it clear – and in writing – what your expectations are. Spell out what your duties are, and those expected of your builder. Talk them through and make sure you both understand.

For yourself, know what kind of contract type you’re prepared for and how much work do you want to do. Make the builders you’re asking to tender are aware of what you’re offering. Many builders will fit in with what you ask, but they all have their preference. Being set on a certain type of contract should help you whittle down your shortlist to those who will work to that contract.