|Building Your Dream Theater: Step 2 - Homeowner's Guide to Construction Contracts|
|Home Theater Feature Articles Other|
|Written by Brian Kahn|
|Monday, 01 August 2005|
Page 2 of 3
Getting To the Details
There are two methods of determining how much to pay your installer when building a home theater. The possible contract types are projects with a fixed price or contracts based on work to be performed on a time and materials basis. With a fixed price contract, the contractor agrees to perform a certain scope of work for a set price. Under a time and materials contract, the contractor agrees to do the work for the price of materials (usually with an agreed-upon markup) and time or labor at a certain rate. There is a variation on the time and material contract, known as the G-Max or guaranteed maximum. As the name implies, it is a time and materials contract with a lid on the price.
Each type of contract has its advantages and disadvantages. In a home theater, you might expect to see a T&M deal for a prewire, which sometimes is done before the main theater or multi-room installer is hired.
Most home theater installation contracts will be fixed price contracts. You and your contractor will decide what the scope of work is going to be, whether it is installing the wiring and components for a single theater system or a whole house audio/video and control system. Make sure the scope of work is set forth clearly and in detail. For example, is the equipment included? If so, make sure you specify who is providing exactly which equipment and the exact specifications of any particular components to be installed. The most common dispute arising from a fixed price contract is whether or not something was included within the scope of the contracted work.
Fixed price contracts are usually the way to go with a home theater install. Your scope of work must be clearer than “install XYZ brand plasma screen in living room” or “install whole house audio control system.” How should the screen be installed? What type of mount do you want? Should the wires be hidden within the walls? What type of control panels do you expect? Are you thinking wireless touch panel screens while your contractor is thinking wall-mounted keypads? Make sure the description is specific enough to keep everyone on the same page. Does the scope include programming and after-install instruction? What advanced or custom features are going to be programmed into the control system? The more trick you get, the more time it takes. The more time it takes, the more your system costs. If you want your entire CD library pre-ripped into a music server like a Sonos for multiroom use, make sure you get that bit of labor clearly written in your contract. It can save you a lot of time and trouble.
The contractor may and should include language in the contract to adjust the price if he runs into unforeseen obstacles, such as shear walls where none are specified in the plans. If your contractors are forced to do extra work through no fault of their own, they fairly deserve to be compensated for it. If multiple contractors are on site and the extra work is caused by another contractor, you should consider contractual provisions to back-charge the responsible contractor. The fixed price provision has recently protected one of my clients, who had a whole house control system installed. The contractor has had to come back numerous times to get the control system working. With a fixed price contract, the homeowner didn’t have to pay additional fees every time the programmer had to come back out to correct programming problems.
With either of the above type of contract, there is much more to the contract than just the scope of work and price. There are many other clauses to consider that will govern how the project progresses and how to resolve any problems that may arise. Specific insurance requirements should be spelled out in the contract for both contractors and subcontractors, including the types of insurance, amounts, additional insured endorsements and insurance requirements for subcontractors. On large projects, the homeowner should be named as an additional insured and obtain a Certificate of Insurance, showing the endorsement with the homeowner’s name on the document. This may seem paranoid, but it is not. Home theaters can cost $500,000 and way beyond. Asking an installer to add you as an additional insured is a very fair request if the scope of your work gets up there where the air is rare.
Another type of protective clause is an indemnity provision. An indemnity clause is where one party agrees to accept liability for another by agreeing to reimburse the second party for damages that may have to be paid to another if certain conditions are met. For example, your contractor may agree to indemnify you for any damage he/she or his/her subcontractors cause to a neighbor’s property. Contractors can also be protected by these clauses and should consider using them in their subcontracts. For example, if your home theater installer hires a high-voltage electrician who causes a fire, the indemnity agreement can protect your home theater installer. The important thing to remember is that it shifts liability, so if you see an indemnity provision, make sure you know what liability is being shifted and to whom Change Orders
During the course of the project, it is quite common for the plans to be modified. You may want to add something or make a change to accommodate a new piece of equipment or circumvent an unforeseen obstacle. Changes to the scope of work, including changes of equipment selection, should require written change orders signed by you the homeowner or your legal representative. This will protect you from having the contractor come to you at the end of the project with a bill, claiming verbal approval for “extras” you never knew about. Try to get a fixed price negotiated for each change order before you authorize the work, so you know what you are getting into. Often a change that appears simple is more complicated that it seems. For example, you may want to change out a component that hasn’t been installed yet to help you save on your overall budget. You won’t know until you discuss it with your contractor what type of work is involved. It is quite possible that the rack has already been built for the original component and the control system programming is already done. A general guideline is that a five to 10 percent increase in price will require a change order. This way, you don’t have to sign off on an additional volume control for zone 11 in the garage. However, if you want to upgrade from a $3,500 video projector to one that is $7,500, you will of course need to sign off before being charged. On larger jobs, this method of doing business is extremely common and protects both sides from potentially expensive misunderstandings.