There seems to be a pre-occupation with getting the cheapest quote... that's natural in some aspects of life but in my experience it is totally irrational where building work is concerned. Your choice should be based on quality and meeting your expectations and not simply getting the cheapest quote.
Its tough though... most trades are subbed out.. so... even though a friend using a local builder might make a recommendation it doesn't mean that the same people from the same company will do your job. Its a good place to start though.
Attention to detail from the start, before work commences is what will produce a smooth job usually. Know what you want from the finished job and tell the builder what you expect... don't leave it to chance.
Site supervision during the work is the next thing. Keep on top of it, especially at critical stages. Once it's plastered, you'll have no idea what they have done.