Contractor Selection Considerations

A key part of the development process will be selecting and hiring contractors and consultants, some of which will play significant roles in your development. As a new developer (or one tackling a larger scale project for the first time), you will have to make this choice without the benefit of previous relationships you can leverage. Interview and thoroughly vet organizations so that you feel confident they can deliver the results you need. This brief provides some related key considerations.

General Recommendations

  • Know what you need. Although you may depend on the contractor to help you navigate the process, having a clear and detailed scope of work written before you start interviewing candidate organizations will accomplish two things. First, it will give you a baseline to refer to as you weigh the options. Second, it will be a helpful piece of information for the candidates to review to ensure their expertise is well-aligned and so they can accurately estimate the cost of their service.

  • Ask more experienced developers. Seasoned developers may have recommendations on consultants to work with or avoid.

  • Solicit bids or estimates from multiple candidates. This will give you more options to choose from and information about different potential approaches and costs to delivering on your scope of work.

  • Investigate references. Talking with past clients of your candidates about their experiences is the best way to understand whether a candidate is qualified and how best to work with them. Understanding what worked well or didn’t in the communication, roles and responsibilities, or relationship management can help you evaluate whether they are the right fit for you and, if so, how you can plan to best collaborate.

  • Investigate candidates’ worst project. Understand how the candidate navigates challenges and how they deal with situations when they did not deliver the results needed. Did they abandon the project when things didn’t go well? Did they work to make it right with their client and, if so, how? Ask your network and research online to see if you can identify a project they were involved in that did not go well. You can also ask the candidate when you interview them.

  • Consider professional credentials. Some contractors you work with will have licenses, certifications, or other approvals that may be required by your funding sources. Even if they are not required, these credentials can be helpful in your candidate evaluation. Organizations typically need to meet minimum qualification and experience standards to qualify for credentials.

  • Understand their cost and fee timing. Can you afford to pay what they will charge? Is the bidder with the lowest fee one who will deliver the result you need? Can you pay their fees with the developer fee? Will this work with your development budget and the timing of capital you have or expect to receive? Consider arrangements that avoid paying the entire fee up front, since reserving at least a portion of the fee can help ensure you get the needed results.

  • Mission and values alignment. Candidates who share your commitment to increasing the availability of affordable housing and other values may be motivated to deliver a successful result beyond their fee.

  • Once you’ve selected a candidate, seek legal help to evaluate the contract. The contract can introduce additional pitfalls and challenges that a contract law expert can help you identify.

Additional Considerations for General Contractors (GCs)

  • Ensure that your GC has experience with the type, scale, and environmental conditions of your development.

  • It is especially important to review references and talk with other developers about GC candidates. They will be a core, long-term partner in your development and it is critical that you work with someone who will lead to your development’s success and with whom you will have a positive working relationship.

  • Evaluate their understanding and alignment with your project vision and goals.

  • If your development will need to comply with special construction-related requirements such as Section 3 or Davis-Bacon, select a GC who has experience with the relevant compliance processes.

  • Because your GC will be responsible for hiring your subcontractors, understanding their process, established relationships, and commitment to supporting local labor or W/MBEs will also be important.

  • In most cases, your GC will be responsible for obtaining construction permits so ensure they have experience doing this and it is part of their scope of work.

  • Contractors are licensed by local governments in Colorado, so ensure that your GC is licensed (or able to obtain a license) to work in the development's jurisdiction.

More information on hiring a contractor for construction on smaller-scale developments is available from the Federal Trade Commission.

Additional Considerations for Market Study Consultants

  • Is there an approved list of market study consultants you need to select from? For example, CHFA maintains a list of approved market study analysts.

  • Many market study consultants have more experience working in urban and suburban areas. Ensure the organization has experience with your type of market. If not, this may present a risk.

  • Ensure that the consultant fee is not contingent on the approval of your development. This would imply that the market study analyst may have an incentive to emphasize your development’s viability, which will be a red flag for funders as the study should be unbiased.

  • In reviewing work samples from candidate organizations, ensure that all data sources and methods are clearly documented.

Additional Considerations for Environmental Study Consultants

  • If you know in advance that your site or funding will require an environmental study (See Chapter 5: Predevelopment), work with the relevant state or local government agency to select an environmental study consultant.

  • If you are conducting your own environmental study process, you will begin with a Phase I environmental assessment. In these cases, ensure that the firm you select can comply with the ASTM E1527-13 Standard Practice for Phase I Environmental Site Assessments. These standards outline a set of scope items and reasonable processes for assessing environmental conditions associated with commercial real estate development and transactions. Many funders accept a Phase I report that is compliant with these standards as acceptable evidence that you have done your due diligence.

  • Note that some funders may have specific requirements beyond these standards that you should ensure are integrated into the consultant scope.

  • Typically, firms that are qualified to complete Phase I environmental assessments will hold some combination of Professional Engineer and/or Professional Geologist licenses and registrations and/or have substantial related academic and applied experience. You can also ask how they work to remain current in their field through continuing professional education opportunities.

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