Take the stress out of the dairy producer-building contractor relationship
New York dairy producer Ed Gates didn’t see any reason to have a written contract when he hired a local builder to put up the shell for a 110’x200', 200-stall freestall barn addition a few years back.
The building was part of an expansion project that would more than double Gates’ herd size. “We had hired this guy before and were satisfied with his work,” Gates says.
About a week after the new project started, though, the builder failed to show up one morning. “The crew was there, but the boss wasn’t,” Gates says. “They had no idea what they were supposed to do. They were just standing around with no direction at all.”
The project came to a halt for nearly a full week. Gates learned later that the builder had decided to up and leave the area without telling anyone. “Needless to say we were distressed,” Gates says. “It really put us behind.
The builder’s Mennonite crew chief ended up saving the day by arranging to bring in additional crews to finish the job. In the end, Gates was able to move into the new facility within a week of the original deadline.
“The crew chief is the one who really saved us,” Gates says. “If he hadn’t had the kind of moral ethic he did, we could have been in a lot of trouble.”
A one-time, isolated episode involving just one producer? Not necessarily, says Arlin Brannstrom, farm management specialist with the University of Wisconsin’s Center for Dairy Profitability. Brannstrom says that a “surprising number” of the nearly 300 dairy producers responding in a 2006 Wisconsin Dairy Modernization Survey reported “having a poor contractor experience” during major construction and expansion projects on their dairies.
Many other respondents specifically mentioned their positive experiences working with contractors and consultants, Brannstrom says. His bottom line on the survey results:
“It points to the importance of selecting a contractor carefully and then working hard to maintain a good working relationship with that contractor throughout the project,” he says.
Some of the steps you can take to increase the likelihood that construction will go smoothly :
Plan thoroughly. Consulting agricultural engineer Jake Martin of Gainesville, Fla., says having a firm idea of what you would like in a facility before you contact prospective builders or contractors for bids is one of the best ways to avoid problems.
“You want to make sure you’re comparing apples to apples, oranges to oranges when you’re gathering bids,” Martin says. “Telling somebody that you want a cost estimate for a 250-stall freestall barn is a lot different than telling them you want an estimate for a 250-stall, six-row barn, mostly wood, with this kind of stall, head-locks instead of rails along the feed alley and this many crossovers.
“Providing more information up front will get you a more accurate estimate from each contractor or builder and give you a better framework for comparing those estimates,” he says.
University of Wisconsin ag engineer Brian Holmes advises that you also exactly clarify what work is covered by the bid. “We’ve all heard horror stories about dairy producers getting a large, unexpected bill at the end of a major project for things like site preparation or developing a new water supply,” Holmes says. “A lot of times, those problems can be tracked back to the very beginning of the project. Nobody bothered to ask who would be responsible for what.”
Ask for references. Before signing on with a contractor, get the names of two or three producers the contractor has worked with on similar projects. Rather than asking if the reference was satisfied with the quality of the finished project, work from a list of questions that will give you a complete idea:
- Did the contractor appreciate the importance of being on time and on budget?
- Was the contractor on site frequently to super- vise and monitor the progress?
- Did the contractor seem to have a good relationship with the subcontractors?
- Did anything unsettling happen during the course of the project?
- How did the contractor handle change orders?
- Would you hire this person or company again?
If possible, go to several of the sites of completed projects for a first-hand look. Also, check with the state department of agriculture, trade and consumer protection or the Better Business Bureau to see if the contractor you’re thinking of using has been named in any complaints or lawsuits.
Emphasize deadlines. “There aren’t a whole lot of things worse than having a bunch of cows or heifers bred and ready to be milked only to find out the building you were planning to put them in isn’t going to be done on time, especially in winter,” Holmes says.
Writing penalties into the contract for not finishing the project (or parts of the project) on time can give the contractor an incentive to make your project a priority. “All kinds of things can lead to delays-weather, difficulty scheduling sub-contractors, the contractor’s other workload,” Holmes says.
Choose a contractor that is bonded. “If a contractor is bonded and goes bankrupt [or is unable to finish your project], the bonding company can be held responsible for finding someone else to finish the job,” Brannstrom says. “If you’re working with [a contractor] who isn’t bonded, you’re pretty much on your own.”
Asking the contractor or builder’s lender to supply a letter of credit is another option. “With the letter, the lender attests to the financial position of the contractor or supplier,” says John Roach of Roach and Associates in Seymour, Wis. “It gives you some assurances that the person you are working with is financially capable of completing the project.”
Require proof of insurance. At a minimum, the contractor should carry workers’ comp, general liability (property and personal) and vehicle coverage. “If there’s a serious injury at the job site, you want to make sure you’re not the one who’s held responsible,” Holmes says.
Call the contractor’s insurance company to verify the effective policy dates. Also, be sure to verify that subcontractors are insured.
Also ask the contractor about builder’s risk insurance. This insurance protects you from unexpected developments-wind or fire damage, materials theft, vandalism, etc.-that may occur. Many contractors routinely carry this insurance.
If yours doesn’t, check with your insurance agent about adding a rider to your farm policy covering the construction period. “The important thing is to determine who’s responsible for having this coverage on the front end of the project,” Holmes says.
Conduct a final inspection. Payment schedules for the contractor can be structured in all kinds of ways. Roach suggests putting a clause in the contract that ensures you and the contractor will conduct a joint “walk around” at the end of the project. “The idea is to look for things that aren’t quite finished or weren’t done quite right and need to be corrected before final payment is made,” he says. EP
Work the plan
- Develop a detailed bid sheet to ensure an accurate comparison between contractors.
- Ask for references, and do site checks of previous work.
- Establish deadlines, and write in specific penalties for missing those deadlines.
