My own crew built the road and I still paid for it twice

Seven lots on 31 acres, new 1,100 foot gravel road to county standard, cul-de-sac bulb at the end. I've built roads for other people for years, so this was supposed to be the part I did well.

The spec called for 8 inches of compacted aggregate base at 95% modified proctor over a prepared subgrade, with density tests every 300 feet. I bought base material from a pit 9 miles away instead of the one I usually use at 22 miles, because the haul saved me about $4 a ton and there were 1,400 tons. I never asked for a gradation on the material. It came in with more fines than I expected, we got rain on day three, and the tests came back at 91 and 92 percent through the first 400 feet. The inspector failed it, correctly.

We undercut 400 feet, hauled the wet material off, brought in the good pit's stone, and reran the tests. That cost $41,300 against a $138,000 road budget, and three weeks.

Then the second hit, which was worse. The county won't record the final plat until stamped as-builts are in. My engineer's office was slammed and took six weeks to produce them. Combined with the road delay, my recording slipped from late March to early June, which put my lot marketing past the spring window in a market where people shop for building lots in April and May. Two lots that I'd priced at $88,000 sold in September and October at $82,000 each. The other five carried into the following year at $1,900 a month of interest.

My own accounting: $41,300 of rework, $12,000 of price concession, roughly $11,000 of extra carry attributable to the slip. Around $64,000 on a deal I'd underwritten at $210,000 of profit.

What I'd do differently: get a sieve analysis on any borrow material before the first truck rolls, and put the as-built delivery date in the engineer's contract with a specific number of business days after final grade, not "promptly." And I'd stop treating recording as an event and treat it as a chain with three parties in it.

3 replies

3mikeoconnell7SP2APRO6

The as-built gap is the piece I keep hearing about and it's making me think there's a service in it. Somebody whose only job is to run the closeout chain: as-builts, bond release paperwork, county sign-offs, all with dates. Nobody on your job owned that calendar, which is why six weeks was allowed to happen. Would you have paid for that, and roughly what would it have to cost to be worth it to you?

-1devon_pierce Get yoursPRO5

Still building my list, so a question about the shape rather than the mud. How do I find out early whether a county requires a bond or improvement guarantee for the road, and whether they'll record with a bond instead of finished construction? Those seem like the two facts that decide whether I need $138,000 of road money up front or at the end.

3wendy_park48CapitalPRO7

Read your subdivision improvement agreement again, specifically the warranty section. On the ones I've reviewed there's typically a maintenance or warranty period after acceptance, often a year or two, during which a portion of the bond or letter of credit stays posted. Terms vary a lot by state and by county, and by whether the road is being dedicated to the public.

That's real money sitting still. If a bank issued a letter of credit for 110% of your improvement cost, you're paying a fee on that balance and it's likely tying up collateral until release, and release only happens after somebody files the request and the county inspects. Nobody sends you a reminder.

The other clause I'd look at is whether the agreement makes plat recording conditional on final acceptance or on posted security. Those are two very different cash timelines, and the answer is in the document rather than in what the planner says on the phone. Also check the density testing frequency in the spec against what your inspector actually enforces, because the ones I've read give the county engineer discretion to require more tests, and every extra test is billable to you.

My own crew built the road and I still paid for it twice

3 replies