Hi-Tech Housing’s Contract
When arriving at the point of entering into a formal contract, there are several routes from which to choose.
Long-Term Contract Covering Multiple Projects
Some HTH clients purchase multiple structures during the course of a year. In such circumstances we often enter into a long-term contract which covers the basic framework of the relationship, then issue individual sales orders which address the plans, specifications, scope-of-work and performance time of specific buildings. You can download a template for such a contract from the resources section of this web site.
For large, complex projects it often makes more sense to enter into a contract specific to the project. Again, there are choices:
- We’ve developed a project-specific template that reflects our experience over many years. You can download a copy from the “resources” section of this web site.
- We can use a standard document developed by trade associations like the National Association of Homebuilders (NAHB), the Canadian Home Builders Association (CHBA), the American Institute of Architects (AIA) and Royal Architectural Institute of Canada (RAIC) and their state and provincial chapters.
- If you have developed your own contract document set, we can work with you to amend it to accommodate the unique characteristics of off-site construction.
Scope-of-Work and Sequence-of-Work Coordination
Particularly for projects involving architects, general contractors and sub-contractors who have not had prior experience with off-site construction, we strongly recommend investing time before contract execution in acquainting everyone involved in coordinating their respective scope-of-work. Because of the coordination of on-site fit with other structures, inter-module mechanical connections and connections to municipal and project utilities, the on-site framing and mechanical sub-contractors are vulnerable to two kinds of errors. First, we want to avoid duplication where HTH and an on-site sub-contractor have built in a cost for doing the same thing. That obviously raises total cost unnecessarily. Second, and more serious, we want to avoid something “falling through the cracks” where no-one has built in the cost to complete a necessary task. Other trades benefitting from advance review are on-site finishing and furnishings for which some work is installed in out factory, but other related work must be completed on-site where modules connect to each other and to on-site structures (e.g., flooring). A pre-contract meeting of the general contractor and key sub-contractors is often very effective.
Off-site construction inevitably involves a sequence and pace of work that is quite different than strictly on-site construction. The site must be completely prepared for the arrival of cranes and modules as soon as the foundation is ready. In tight urban settings it may be necessary to arrange for a site where modules can be marshalled, than shuttled to the building site rapidly. The site-work schedule is greatly compressed, and those sub-contractors involved in closing up the inter-module connections must be ready to deploy and complete their work quickly. For example, for large projects with flat roofs, the roofing contractor must be prepared to install the roofing system as the roof-level modules are installed, not a leisurely month later.
All of these scope-of-work and sequence-of-work details should be memorialized in the contract documents of all affected sub-contractors.
A helpful way to think about the financial arrangements for your project is to try to visualize the stream of progress payments when 60% to 80% of a project’s costs are delivered and installed within a few days rather than three to six months. Your financial institutions and investors may or may not be familiar with this dramatic compression of the building cycle. We are probably building your project in our factory simultaneously with site preparation, excavation, and foundation installation. Then, suddenly, you have a four-story building on your property and we’re asking for payment.
Traditional contract progress payment provisions rarely work with on-site construction. We can suggest terms that work, and you will want to make sure that your construction financing source is prepared to respond.
Deposits and Building Permit
As a condition of starting work, our sub-contract will require a deposit related to the amount of unique and special materials.
Depending on the plan for obtaining a building permit, we may have already obtained through a deposit to prepare sufficient drawings to obtain federal, state or provincial design approval even before we execute a sub-contract. If not, the initial deposit will also be our signal to prepare the “permit set” of drawings and obtain the government approval of our product, which you need to obtain the local building permit for your project.
Depending on the size of the project, the next progress payment is required upon the arrival of the modules at your building site. If the project involves several buildings, we will typically invoice for payments on a building-by-building project. For very large buildings, we may need one or more interim progress payments while we are producing the project, in which case, we will work with you on whatever inspections in our plant are requested by your financial source.
For US projects in which we are installing the modules with our “rough set” crew, we will include the installation cost with the same payment request occasioned by the arrival of the modules, if the installation will take place within a few days. For larger projects involving installation over several weeks, we will invoice for the installation separately, upon completion of our work.
With your financing and building contract in place, with our receipt of a deposit and the successful procurement of a building permit for your project, we are ready to move to the next phase. For our part, we need one last thing – a formal notice from you to us that we should begin.