How to Avoid Your Contractor Going Bankrupt!


Whether a designer or client, in these hard economic times, you can’t have failed to notice more and more small businesses going to the wall. 

Whether they are nurseries, landscaping or building firms, it’s hard to make a living right now, jobs are scarce and margins tight.

A worst case scenario, is for the contractor to go under, halfway through a job, potentially costing the client $1000’s as well as designer a monumental headache, trying to find another firm to finish the work.

A designer may even be held partly liable, swept up in any legal action. So you need to be doubly careful when selecting contractors to tender and don’t skimp on the due diligence.

Taking a contractor’s word, that they are financially solvent is no longer adequate. Before signing the contract, bank references should be taken up and the client should be advised in writing to to do a credit check with a firm such as Dun & Bradstreet.

However even this may not be enough.  On larger jobs, lasting several months, the contractor could still run into difficulties. Either through poor management, or if one of  their suppliers goes bankrupt and takes them down in the process.

There is little you can do about the latter, but the designer can help manage the contract and at the same time protect the client from paying too much up front before work is completed and materials are on site.

The first and most important document you should insist on, before work starts on site is a daily work schedule. This is a day by day breakdown of what work will be carried out, to include in what order the jobs are to be completed and the number of man days involved.

Man Days

Small contractors are sometimes reluctant to provide these, as they involve hours of preparation, but I make this a contractual requirement and won’t let a project start before the client and I have both received a copy.

This document allows all parties to monitor the progress of the job.  The designer and client can see at a glance, that the work is on schedule and the contractor can also plan when materials and plant should be ordered, so the work is not delayed due to material hold ups.

In fact, once the contactors see the benefits of this document they will continue to prepare one for each and every job they do.  Not only will this help protect your clients by keeping the job on schedule it will also likely improve the contractors profitability.

Secondly the designer can protect the client by ‘Project Administering’ the contract. Note the word ‘Administer’ NOT ‘Manage’ Most designers are not qualified to ‘Project Manage’ a site, as this implies quality control and would require the designer to be onsite throughout the build.

At the Oxford College of Garden Design  our students are taught to project administrate jobs. ‘Project Administering’ a contract, involves weekly site meetings to assess the works progress.  The designer can remind the contractor to order materials in good time to avoid delays and is also in charge of signing off the weekly/monthly invoicing.

This involves making sure that the contractor only invoices for work completed and for materials on site. An agreed % is then held back (usually 5%) until the penultimate invoice when only 2.5% is withheld until the final certificate of completion is issued (usually after a defects liability period of 6 months)

By going through this process the designer is ensuring that the client never overpays before work is completed onsite.  In the event that the contractor does go bankrupt, then the client should still have enough funds to bring in a second contractor to finish the job.

Some professional bodies guarantee their members, so it would be worth looking carefully at these and maybe choosing contractor.  Organisations like SPATA (Swimming Pool and Allied Trade Association) in the UK guarantee that if one of their members goes under part way through a job another member will finish the work for the outstanding agreed contract cost.

Finally a last piece of advice is to split large contracts down into smaller ones. Consider different contractors for different parts of the job to spread the risk.

Ground workers for excavation, drainage and contouring; Pool contractors for swimming pools; pond and lake specialists for water features; Stone and masonry specialists for hard landscape features such as paving and walls; Turf/Sod contractors for lawns; Irrigation engineers and lighting technicians; and finally soft landscape specialist. 

I have always preferred women contractors to do my planting, as I consider them more conscientious and careful with young plants.