Understanding the Terminology
Before we get started it is important to draw a clear distinction between a single person offering you their skills or talent on a contract basis (independent contractor) for an agreed price and a company (never deal with contracting firms who are not formally registered as such) offering you a full set of services for the construction of your home. Under Philippine law, an individual contractor is defined as follows;
Independent contractors are individuals who offer their services for a fee to a client/principal in the form of a business and thus they are not considered as employees but as professionals, talents, or freelancers
An individual contractor can make up part of a team of privately engaged workers you manage to complete the construction of your home. Individual contractors should not be confused with actual registered contracting firms that will offer you a full service solution for the construction of your home. These lone individuals are not employees but are rather “contracting” you their skills, and you will need to provide them with a simple contract that stipulates you are not paying them a wage, but rather contracting their services.
The section below that refers to private labor, includes the hiring of individual contractors.
Opting for Private Labor
Private labor for building can be relatively cheap in the Philippines, with rates for unskilled workers varying from 350 to 600 pesos a day and skilled workers, masons, plumbers, welders etc, starting at 600 up to a 1000 pesos a day. The more rural you are, the cheaper the labor, but keep in mind, these workers need to feed their families and any wage below 500 a day should be considered a non-starter.
You’ll also be expected to feed the workers. On occasion that we deal with private labor, we tend to increase their wage by 100 pesos a day and get them to bring in their own food. If you have a small workforce of 6-8 people, it will work out cheaper and not require a dedicated cook to prepare meals. If you have 20 or more on-site then do the math, and consider meals.
Filipinos’ have a great sense of humor and should you be the type to muck in alongside your workers, as we frequently do, you’ll quickly be accepted and helped with language and other essential skills you’ll need to fully integrate into Filipino culture. We also make a point of sponsoring a Saturday after work drink with them. The alcohol tends to dull their shyness and in a less formal environment, you’ll often hear of issues they won’t raise during a normal working day.
This may all sound great, and with the right team, it can be, but the process of identifying a properly skilled and reliable workforce can be daunting, frustrating, time-consuming and costly.
The Cons of Private Labor
- Most private laborers want to work they way they are used to working, and if you’re expecting Western levels of work skill, think again. Most Filipino houses are built on a shoestring and the builders become experts at cutting corners and costs. As a result, build quality goes out the window. Why use #12 rebar when #8 is cheaper? Why not mix in more sand and stone with the cement? Again, cheaper. These mindsets are so entrenched that they form a focal point for conflict on the site.
- The above assumes that if you are overseeing the build, you know what you’re doing. Most Westerners have no idea about building a structure to survive severe storms and the occasional earthquake, and if you rely on private labor to advise you on structural issues, you’re on a slippery slope that could end up costing you a fortune. Your architects may occasionally visit the site, but their engagement is costly and infrequent so don’t rely on them for assistance. That isn’t in their job description.
- Some laborers will be able to work off architectural drawings, but to most, these drawings are uninterpretable, and the end result, again, is a building that does not conform to code. Essentially, an unsafe construction.
- Expect absenteeism, often. These are in most part due to hangovers from parties, wakes, celebrations and a host of other reasons. Alcohol is cheap here and it is consumed in frightening amounts. Unless you develop a really good understanding with the people working for you, these no-shows are rarely accompanied by notice and will cost you time and money.
- Expect to spend large sums on tools and equipment for every aspect of your build. Very few tradesman arrive with their own tools, and constant trips to local hardware stores to replenish supplies are required. I’ve owner-built in the past, and have a storeroom filled with every power tool imaginable. I know most men are reading this and thinking, wow, power tools. Trust me, there is literally nothing you can do with a 20K concrete vibrator, post build. Add to this the fact that most of the tools will rendered unusable by the end of the build, and it translates into a large financial loss.
- Yes, I can tile, do plumbing, electrics and paint. While this may be true on a basic level, you will find your tiles pulling loose, your pipes leaking, your lights fusing and the paint peeling off your walls a few weeks after everyone has left. Always try and find skilled laborers or individual contractors by referral, rather than allowing your current workforce to bring friends on-site to fill a skills gap. That is a recipe for disaster.
- For those thinking they can appoint a foreman to oversee construction, this is a viable option and may actually work in about 20% of private builds. Keep in mind though, you will be unable to recoup any losses as a result of equipment and materials theft, good old fashioned building mistakes and non-conformity to plan.
- Employing private labor (with the exception of independent contractors) comes with legal obligations, including the payment of benefits, which can include paid leave, maternity leave, holidays, and a host of other benefits, some of which need to be reported. Injury on site can also lead to claims lodged directly against you.
- Lastly, don’t forget about the weather. Depending on the stage of your construction, rain, and the occasional typhoon, can derail your timeline, bringing building to a complete halt. Your laborers literally live hand to mouth and will find work elsewhere to stay alive. This forces you to pay them while you sit and wait to resume work, or risk having to secure new laborers.
In summation, if you have the patience of Job, experience building concrete structures, are willing to get stuck in on-site alongside your workers in the scorching sun and driving rain, and can sit and socialize with your workers at the end of every week, then definitely go the private labor route. It is frustrating, sometimes immensely so, challenging, and yet, in the end, incredibly rewarding. I have over the years formed firm friendships based on mutual respect with many locals that continue well after builds have finished. It has helped me master Tagalog and the local dialects and has in many ways, helped me feel more at home here.
If you’re not however among the brave or foolhardy, then contracting the services of a building firm is, in our humble opinion, well worth the additional cost.
Contracting a Building Firm
Once you’ve reached the stage of architectural drawings of your future home, you are ready to engage the services of building contractors. Don’t leave this process for last, as most contractors worth their salt will be engaged on other projects and you need to give them notice of a new potential contract. Also, understand that anyone here can open a business, or not, and call themselves building contractors (often with no business registered).
It’s also worth keeping in mind that some contracting firms offer in-house architects and will also process building permits etc. on your behalf. If you want a full service contractor, make sure they have these angles covered.
As with everything business-related in the Philippines, approach the engagement of a contractor with an abundance of caution. We’ve outlined a few pointers below to help you choose a reliable firm if you are not buying and building through Go East.
A brief overview of the Process
1. Research and Shortlisting.
- Check for Business Permits: Ensure the contractor is legitimate by verifying their business permits (Barangay, Mayor’s, DTI, PCAB license if applicable).
- Portfolio and References: Review their past work, look at their portfolio, and ask for references from previous clients.
- Online Reviews: Read online reviews and testimonials to gauge their reputation and client satisfaction.
- Local Reputation: Inquire about their reputation within the local community.
- Insurance and Licensing: Verify their insurance coverage and licensing to ensure they are properly insured and qualified to perform the work.
2. Getting Estimates and Contracts.
- Multiple Quotes: Obtain quotes from at least three contractors to compare pricing and services.
- Detailed Estimates: Ensure the quotes are detailed and itemized, including all costs associated with the project.
- Contract Review: Carefully review the construction contract, understand all terms and conditions, and address any concerns before signing.
3. Communication and Project Management.
- Site Visits: Schedule site visits to discuss the project and ensure they understand your vision.
- Regular Communication: Establish clear communication channels for updates, questions, and addressing any issues that may arise.
- Transparency: Look for a contractor who is transparent about costs, timelines, and potential challenges.
A few extra tips to help you establish a relationship with a reputable contracting firm.
- A drive around your local area to see what is being built will often yield results in terms of contractors. It’s great because you can see the quality of work firsthand, and if you’re struggling in your local barangay (suburb) then head into the town or city. Assuming you’re going to building a proper code based home, commercial contractors may very well be your best bet, as they have the experience and knowledge to erect properly reinforced houses and undertake challenging designs.
- Always ask for referrals. Then, ensure you visit and have a chat with the owners. Ask the relevant questions. Where they happy with the end product? What issues arose the long way? What would they have done differently, given the choice? Try to find builds that are a year or older, as defects will have had time to surface.
- Ask around. Your architect may very well be able to refer you to more than one company and if they have had experience working with these contractors, that is a great help. Do however take the same precautions with these recommendations as cronyism is rampant in the industry.
Once you have identified a firm you feel comfortable with, it’s time to move onto the paperwork or contract stage. The agreement you sign with a firm will dictate your relationship with the contractor moving forward and a well formulated agreement is key to the success of your build and ironing out any hiccups along the way. There are a number of things to consider when entering into a building agreement and we have outlined a number of key issues below.
The advice aside, it is CRITICAL you have an attorney look at the agreement before you sign it. Explain clearly to the attorney what your goals and expectations are in terms of performance from the contractors. The attorney can then vett the contract to ensure it matches your needs.
Your Building Contract
Ensure the following issues are addressed in the agreement you sign with your building contractor.
- Deadlines and completion timeframe
- Dates and goals for release of funds
- Any potential penalty clauses
- Weekly project oversight by a qualified engineer or architect
- Clear, concise billing for the entire project
- Any indemnities, if so advised by your attorney
- Complete inventories of all building materials purchased and relevant copies of receipts issued for these purchases.
This article is for informational and educational purposes only. It neither offers nor constitutes legal advice or legal opinion. Please consult a registered attorney for binding legal advice.