Never contract a family member or friend to do the job. They may be your cheapest and most trusted, but if there is a problem, you lose your valued friendship or kinship and thats just not worth the risk.
Your contractor is probably going to farm out the work. If you are working with the contractor and you have explained exactly what you want, he may farm out the work to another contractor or to a subordinate staff member who will not be party to the "I would like" conversation. Ask if the contractor is the person who is doing the work else get the working party to be present at your meeting, so that the work is carried out exactly how you would expect it to be.
The contractor will ask for a deposit. Try and negotiate that to the absolute bare minimum - maybe 10%. Most contractors have a running account with their suppliers, so they pay for the materials after the fact, not before. Rather ask if you could purchase the materials. Sometimes a contractor will disappear with your deposit and a promise to be back soon - and then the excuses begin.
Please check the contractors last 5 references. Questions to ask should include finding out if the work was done timeously, period of time he took and what the one thing they would have liked the contractor to do. Of course he will probably only give you the good references, so check with them when he completed the job and match his conversation with you, for slip ups and untruths.
Ask how many projects the contractor is working on at the same time. This could be crucial as you may end up being your own project manager while paying him for his services.
It would be a wonderful idea to pop in on his current job to see his work ethic and talk to his subcontractors to see that they are functioning in a happy environment. You can also check how neat his work is and how he commands his business site.
Work out the schedule of work to be done and how the payments are to be made and put them into a contract and do not change them after the beginning of the contract. Never pay in cash, always have a receipt. Once you set the payment plan, stick to it. The first time you give in, will be the downfall to the rest of the payments. Hold the last payment for the final inspection and handover, when contractor and you the client are happy that the job has been completed correctly.
Have a weekly/daily meeting, depending on the size of the project and have a schedule of work to be completed that week/day. Minute your meetings and send a copy to the contractor confirming the conversation.
Do not use a contractor who does not show you his insurance and license. Those who do not have the required documents will often come in with the low ball quote which will be tempting for you to accept. If his offer is too good to be true, it probably is
Research your choice of contractor before appointing him and find reviews on the net. Interview a few and seek recommendations. Use your intuition and look for character flaws.
Remember that I have a great list of contractors that have been my trusted source over the years, please ask me for someone off my recommended list, I could save you time and trouble.