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When the Contractor Is Way Over Budget

Miguel A. Brizuela, P.A.  Aug. 30, 2023

All across the country, construction projects continue to be on the rise and Florida is no different. In fact, in 2022, construction contributed $71 billion to the state’s GDP according to data put out by The Associated General Contractors of America, Inc. This is an essential industry, and one that both residential homeowners and private companies in Florida participate in. 

But what happens when construction projects don’t go as planned?  

In some cases, the finished product may not be what you wanted, or you end up spending way more than you anticipated. If this has happened to you and you’re concerned about how to manage a contractor going over budget, consider speaking with a construction law attorney.  

Our team at Miguel A. Brizuela, P.A. is ready to listen to your story and help you find a productive path forward. We serve people throughout Miami, Florida, and across Southern Florida including Fort Lauderdale, and West Palm Beach. 

Estimates vs. Quotes

Knowing what to do when your contractor is over budget is key to successfully managing your project. While it’s not uncommon for construction projects to become more expensive than intended, knowing what to expect and how to set up your contract ahead of time can be a crucial factor in how you’re able to respond to increases.  

One key distinction to understand before any work gets started is the difference between an estimate and a quote. Both estimates and quotes give you an idea of your total costs for a construction project, but you can typically only hold a contractor accountable for overages with a quote.  

An estimate is non-binding, meaning if you do end up hiring a contractor based on that estimate and they go substantially over it, you have little legal recourse.  

A quote, on the other hand, can be legally binding and is essentially the first stage of entering into a contract. You should always get a quote in writing or else you won’t have the required documentation to hold them accountable should they go over budget. 

What to Do When the Contractor Is Way Over Budget

  1. Review the Contract: Your contract is the most important document in these instances, and you and your contractor should both be familiar with it. Some contracts may have specific language in them to address overages. 

  1. Identify Reasons for the Cost Overrun: Your contractor should be able to tell you exactly why the project is over budget and what the new costs are related to. Often, this is the result of surprises that they find only after they’ve begun the work such as mold, rotted wood, or water leaks. In other cases, it could be that the contractor simply missed a component of the project and forgot to factor it in. 

  1. Reevaluate Project Scope: Once you have a good idea of why the contractor needs to spend more money, review the entire scope of the project to see how these changes will affect the overall cost and timeline.  

  1. Negotiate With Contractor: Depending on the cause of the budget increase, you will then have to negotiate with your contractor about how much you’re willing to increase the budget and what additional work you’re willing to sign off on. 

  1. Seek Expert Opinion: In some cases, you may wish to consult with another contractor or expert in the field to see what other options you have or if the newly proposed budget is reasonable. 

  1. Implement Change Orders: If you need to add more money to a construction contract this should be done through a change order. Until this is signed and in writing, your contractor will not take any further action or spend money you haven’t agreed to. 

  1. Rebid the Project: In the rare case that you want to change contractors altogether, you’ll want to rebid the project 

Your Options

If possible, your best option is to investigate the problem and renegotiate a budget with your contractor to move forward with your project. However, there are some unscrupulous or under-experienced contractors who struggle with budget management for construction management, continually coming in over budget and you may need to fire them and find someone new. This will mean more work on your end, but depending on the scope of the project it may be worth it. 

Mediation and Dispute Resolution

In cases where you can’t come to an agreement with your contractor, or if you’ve fired them and they’re demanding more money than is reasonable for the work they’ve done, you may need to pursue mediation. Mediation is a common approach for breach of contract claims which can help resolve disputes without resorting to litigation. Many contracts may even include language stating that mediation must be used before anyone can file a claim.  

Taking Legal Action

When mediation nor negotiation has not resulted in a compromise, you may need to resort to a construction breach of contract claim. This should only be done with the assistance of an experienced lawyer. Your attorney will ensure you have the documentation and standing you need to bring a solid claim as well as addressing your concerns with the state’s Department of Business & Professional Regulation (DBPR).  

Helping You Understand Your Rights Surrounding Construction Contracts and More

If you’d like help in the Miami area addressing issues with a contractor who’s gone over budget, reach out to our attorneys at Miguel A. Brizuela, P.A. We offer experienced legal counsel and, when necessary, fierce construction litigation representation for Floridians involved in disputes with their contractors. Give us a call today to schedule a time to talk.