Masonry Magazine June 1969 Page. 7
Make Money Move!
Because construction is a low-profit, high-risk industry, because the contractor loses interest on retainers and surety bonds (which combined are a form of duplication), because delayed payments cost a significant portion of profits in lost interest, a new program was born in Milwaukee. It is called "Make Money Move," or the Three M program for short.
Informal talks among construction men about problems of costs and slow payment led to formation of an ad hoc committee in recent months. This was composed of representatives of the Allied Construction Employers Association Industry Advancement Program, the Associated General Contractors of Greater Milwaukee and the Associated Public Works Contractors.
Major concerns were retainers, delays in progress payments and requirements for performance bonds.
Additional problem areas studied include (1) clarification of many statutes and ordinances, (2) reduction of arbitrary and ambiguous contract language, and (3) Necessity for standardized accounting to help determine actual project costs.
It was agreed that everyone suffers when money doesn't move-engineers, contractors, tradesmen and manufacturers. The committee, working with Thomas P. Joswick, an economic consultant, conducted a study among contractors of Milwaukee and came up with several recommendations. It presented its findings and ideas in February, 1969, to a meeting of contractors, engineers and public officials.
A 20-page booklet titled "Make Money Move" has been printed by the 3-M Committee to outline the problems, review facts and present recommendations.
Chairman of the 3-M Committee is A. J. Groh, of Jos. P. Jensen Co., a member of the Milwaukee chapter of MCAA. The Mason Contractors Association of Milwaukee voted unanimously in March to support the "Make Money Move" program. Roger H. Spahr, Secretary, reports the members and board of directors feel that reforms in this area are long overdue.
Attacking the apathy that the construction industry has allowed to slow down payments for work performed, Mr. Groh recenly explained the organized movement, "almost evangelistic in spirit," to make money move.
In a speech before contractors, engineers and public officials in Milwaukee, he recalled a Dun & Bradstreet quotation that in 1966 a general contractor's average profit per dollar of sales was 1.38 cents. He noted that the 3-M Committee study determined that withheld retainers cost the contractor roughly 20% and hidden economic costs of lags in payments chewed up nearly 30% of each profit dollar-a combined drain of as much as 50% of profits.
Major causes of the regressive flow of money in Private Construction he cited include (1) breakdown or gaps in the contractor's information on the buyer's prime source of funds and/or financing; (2) contract language ambiguities leading to payment disputes; (3) poor planning on owner's part, causing wide payment gaps, especially as completion nears; (4) diversion of retainer funds to other areas, causing hardship to prime contractor and then to sub-contractor and supplier; (5) payment delays if waivers of lien are not signed; (6) failure of contractor to familiarize himself with contract language; (7) private owners waiting for a security to mature before returning retainage.
In the Public Construction sector, major causes are (1) Institutional "paperwork constipation," costing much time and money, especially with rising use of federal funds; (2) Slow payments on about 80% of all state, highway contracts, mostly during peak construction, because the resident engineer responsible for final computations, is usually immediately re-assigned; (3) state engineering bureau procedures can require nine major steps and at least as many minor steps, involving three separate governmental bodies, the 3-M study found; (4) Laws and ordinances governing payments and retained percentages vary from one public body to the next; (5) certain public bodies convene at designated times to act on progress payments, and their schedule often creates a payment lag, (6) As the study found, one public works department can have three subdivisions, each autonomous, and one required 18 separate steps before payment certification. If no barriers are raised, collection takes an average of 35 days. (7) As in Milwaukee, the city charter can give the commissioner of public works discretionary power to set payment procedures and retained percentages.
Mr. Groh paid tribute to Milwaukee's Department of Public Works "and its very fine commissioner, Herb Goetsch, and his deputy, Don Roethig, who have taken