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How to negotiate with a potential GC

Florida

We are in the due diligence period for a vacant property, in which we plan on building a new facility for our existing business. The due diligence is going well, and we have a good relationship with a GC who has previously assisted us when we looked at other properties- and subsequently did not buy. We're 2 weeks into our due diligence out of our 60 days when money goes hard. We've never built anything from the ground up- and from our perspective, it's a pretty big job- we're estimating build cost to be between 1.75 and 2 million, give or take (more than likely give). Our credit is good- so the financing isn't an issue. This is build cost alone- not including the real estate. My question is- how does the GC get paid on a project of this size? We are fair and reasonable people- and want everyone who is involved to make a reasonable profit. But we want to make sure we're being fair, but also protecting ourselves from being taken advantage of- and that we're getting the best value possible. For a project of this size and cost- I'd like to know the best way to negotiate with potential GC's. Your time and input is appreciated in advance.

1 reply

Aug 14, 2021

For a project of this size, I would make two suggestions. First, you need someone with construction experience (a retired GC for example) to act as an owner's representative to review your contractor's proposal and advise you on where it may be high (or low!) for the work proposed and give you a comfort level that you are getting quality and value. Second, I recommend you retain a construction attorney to review your GC's contract to make sure it builds in adequate protections against cost overruns and time delays. Time is money, as they say, and that is never more true than when you are building a new facility for your business. You may be under lease and need to get out of your existing space by a date certain, or your financing may dictate when you need to be finished. Your contract with the GC needs to build all that in.

I would be happy to assist you if you would like.

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