1. The Core is the 'BOQ' (Bill of Quantities)
Never sign a construction contract that simply says 'Build a 2-story house for 2 million THB'. A crucial document must always be attached to the contract: the BOQ.
- What is a BOQ?:It is an itemized list of materials and prices detailing exactly how many cubic meters of cement, what brand of tiles, the price per square meter, and the labor costs.
- Benefits of a BOQ:It helps 'lock in specifications' to prevent contractors from secretly downgrading materials. It also serves as a baseline price if you need to add or reduce work later (preventing overcharging for extra work).
2. Work Phases and 'Payment Installments' (Pay by Actual Progress)
The main reason contractors abandon projects is that they have drawn more money than the work they have completed. The golden rule is: 'Never pay large, unnecessary advance payments'.
- Advance Payment:This should not exceed 10-15% of the total project value, acting as initial capital for the contractor to buy materials for the site.
- Progress Payments:Break the project down into many realistic phases. For example, Phase 2 paid when the foundation and structure are done; Phase 3 when the roof is installed. Never let a payment amount exceed the value of the completed work.
- Retention Money:Consider withholding 5% from every installment as a guarantee. This ensures the contractor won't abandon the job (and it is returned after the warranty period expires).
3. Timelines and 'Penalty Fees' for Delays
A good construction contract must have a clear beginning and end, not left to the contractor's leisure.
- Specify Start and Handover Dates:You must clearly state the date the contractor enters the site and the deadline for handing over the completed project.
- Penalty for Delay:If the contractor fails to finish on time, state a daily penalty (e.g., 0.05% - 0.1% of the total value per day, or a flat rate like 1,000 THB/day). This pressures them to meet the deadline.
4. Post-Handover Warranty
Just because the work is done and the final payment is made doesn't mean it's over. The contract must cover after-sales care:
- Structural Warranty:E.g., pillars, beams, floors, roof. This should be guaranteed for at least 5 years, as structural sinking or cracking usually appears years later.
- Architectural and Systems Warranty:E.g., peeling paint, loose tiles, leaking pipes, electrical faults. This should be guaranteed for at least 1 year (to cover a full cycle of seasons, especially the rainy season).
Conclusion
A tight construction contract isn't about finding fault or taking advantage of the contractor. It establishes 'fair rules' so both parties can work together comfortably and transparently.
Don't let 'politeness' or familiarity cause you to neglect putting the agreement in writing. When problems arise, the contract and the BOQ are the only pieces of evidence that will protect your millions.