Pulse Reviews and Analysis
How Do I Vet a General Contractor So I Don't Overpay?
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How Do I Vet a General Contractor So I Don't Overpay?
Direct Answer
Get three bids on the same detailed scope, demand line-item pricing, and never hand a contractor more than 10% deposit up front. That combination is what stops you from overpaying. The money move: a vague "design-build, trust me" bid lets a GC pad the general conditions and overhead & profit (O&P) lines, which run 10%-20% of the job and are where the fat hides.
Force every bidder to price the identical drawings and finish schedule, then compare the line items, not the bottom number — the cheapest total often has the thinnest scope and the most change-order traps. On a commercial buildout, expect costs of roughly $50-$200 per square foot depending on finish level and trade complexity.
Verify the GC's license, bond, insurance (general liability + workers' comp), and EMR safety rating, call three recent commercial references, and confirm they self-perform versus sub everything out. Hold 5%-10% retainage on every payment until final completion. Do these and you cut both the price and the odds of getting screwed mid-project.
Get Three Real Bids — On the Same Scope
The number one reason owners overpay is comparing bids that price different things. Fix it:
- Give every bidder identical drawings and a finish schedule. No two GCs should be guessing at the spec.
- Require a line-item breakdown — demolition, framing, MEP (mechanical/electrical/plumbing), drywall, flooring, finishes, general conditions, and O&P as separate lines.
- Compare the lines, not the total. A bid that is $40,000 cheaper usually dropped a scope line you will pay for later as a change order.
- Watch the allowances. Lowball "allowances" for flooring or fixtures ($X per sq ft) are a classic way to win the bid and bill the difference later.
A clean three-way line-item comparison is the single best leverage you have on price.
What to Verify Before You Trust Anyone
Paper and references, every time:
- License — active, in the right classification, in your jurisdiction.
- Bond — a license/performance bond protects you if they walk.
- Insurance — general liability (typically $1M-$2M) and workers' comp. Get yourself named as an additional insured and demand the certificate (COI) directly from their carrier.
- EMR (Experience Modification Rate) — a safety/insurance score; below 1.0 is good, above 1.0 signals a claims history.
- Three recent commercial references — same building type, same size, finished in the last 18 months. Call them and ask about change orders, schedule slip, and final-vs-bid cost.
- Lien history — check for prior mechanic's liens or judgments.
The Contract Terms That Save You Money
The bid is a starting point; the contract is where you lock in protection:
- Fixed price or GMP (Guaranteed Maximum Price) over cost-plus with no cap — cost-plus without a cap is a blank check.
- Cap the O&P on change orders at a stated % (e.g., 10%-15%) so they cannot mark up extras at will.
- Tie payments to a draw schedule keyed to completed, inspected work — never to a calendar.
- Hold 5%-10% retainage on every draw, released at final completion and punch-list sign-off.
- Require lien waivers from the GC and every subcontractor with each payment, or you can pay twice.
- Liquidated damages for late completion — a set $/day that makes the schedule real.
Use a standard AIA or ConsensusDocs contract as the base, not the GC's homemade form.
Where GCs Pad the Price
Know the soft spots so you can challenge them:
| Line | Normal | Padding signal |
|---|---|---|
| General conditions | 5%-10% | bloated supervision, "temp facilities" |
| Overhead & profit | 10%-20% | high end with no justification |
| Allowances | realistic comps | lowballed to win, billed up later |
| Contingency | 5%-10% | stacked on top of padded lines |
| Change-order markup | 10%-15% | uncapped |
If a bidder will not break these out, that is the answer — move on.
Self-Perform vs. Sub Everything Out
Ask what the GC self-performs versus subs. A GC who subs 100% of the work is essentially a markup layer — fine if their O&P is reasonable and they manage subs well, but you are paying for coordination, not craft. A GC who self-performs core trades can be cheaper and more accountable.
Either way, demand the subcontractor list and verify the key subs (MEP especially) are licensed and insured — their failures become your liens.
FAQ
How much deposit is normal for a commercial GC? 10% or less up front, ideally tied to mobilization and materials, not pure prepayment. A GC demanding 30%-50% before work starts is a red flag — your leverage evaporates once you have overpaid.
What is retainage and how much should I hold? Retainage is the portion of each payment you hold back until the job is finished and the punch list is closed — typically 5%-10%. It keeps the GC motivated to finish properly and protects you if they walk near the end.
How do I avoid paying twice when a sub files a lien? Require conditional and unconditional lien waivers from the GC and every sub and supplier with each draw. Without them, an unpaid sub can lien your property even after you paid the GC in full.
Is the lowest bid ever the right call? Rarely on its own. The lowest line-item bid on a complete, matched scope with a verified, insured GC can be — but a low total that dropped scope lines will cost you more through change orders. Compare apples to apples.
Sources
- Associated General Contractors of America (AGC) — contractor vetting and contract standards
- American Institute of Architects (AIA) — A101/A201 owner-contractor contract documents
- ConsensusDocs — standard construction contract forms
- CBRE — commercial tenant buildout cost benchmarks ($/sq ft)
- JLL — project and development management advisory
- Cushman & Wakefield — construction cost and fit-out reports
- NAIOP — development and construction management best practices