March 2012: Business Building

March 2012

Business Building

No More ‘Mr. Nice Guy’

By George Hedley

The old days of working with your customer are over. In the old days, most contractors had a group of loyal customers with whom they worked and often negotiated the final terms and price for construction contracts. When work was busy, construction customers used to have to beg contractors to bid their projects and, often, just received one or two bids for each trade or scope of work. Therefore, price was not the determining factor in a majority of jobs awarded.

Most general contracts and subcontracts now are awarded based solely on the lowest price. Customers have gotten greedy and taken advantage of the situation and extreme competition. The typical scenario now is for developers and construction project owners to solicit as many bids as they can get, and then work the low bidders for even more blood out of their proposals. The trickle-down effect then permeates from the general contractor to the subcontractors, ruining the process for every business involved in building projects.

An eye for an eye It’s time for no more “Mr. Nice Guy.” When your customer asks you to cut your bid and lower your price, he doesn’t deserve to be treated like royalty. When he doesn’t approve legitimate change order requests, delays getting back to you on requests for information, or pays you late or never, enough is enough. You deserve to get timely responses to all requests, prompt approvals of change orders, no verbal agreements, no free extra work orders, payment on time, proper supervision of other trades, a reachable schedule, a constructable and complete set of plans, and adequate funds set aside and available to finish the project.

If the plans are wrong, you deserve more money, no questions asked. (Besides, the project owner probably hired the lowest priced architect and engineers, and, therefore, the quality of the working drawings likely reflects the fee he got as well.) If you don’t get paid per the contract, you should pull off the job per your contract terms. If you don’t get answers to field questions and conflicts in a timely manner, you should document the situation per your contract and stop work until you get answers you need to move on with your work.

If your customer expedites the schedule to make up for other slow, non-performing contractors, you should document the claim and get overtime pay or additional time to complete your project. If your customer or another contractor damages your work product, you should put him on notice per the contract and get paid to repair the damage, or don’t do the extra work. If you submit a claim and don’t receive a prompt answer that meets with your approval, you should proceed under protest and demand mediation or arbitration per the contract.

Stop being a second-class contractor The days of being treated like second-class contrators are overrated and unprofitable. In order to make any money in construction today, your bid must be lean. Therefore, bids only include the minimum required by the plans and specifications. Remember, you were hired to do what the contract says, no more and no less. Get tough. And, get paid what you’re worth and do only what you were hired to do.

Manage every contract per the contract Start by getting a complete copy of and read every contract, all specifications and the general conditions to clearly understand what you must do to protect your rights and be in conformance with the project requirements. If in doubt, put it in writing. Document, document and document – even more than you think is necessary. Take photos of every field condition that’s in conflict or doesn’t match the plans, and forward them to your customer with a notice or demand. Be quick to make written requests, and don’t give in to make the other side happy or the conflict go away. You can’t pay your bills with a happy face!

Pay the man, or get taken to the cleaners Get an attorney who’ll help you be aggressive and improve your overall success rate. And keep him on speed dial. Set aside a monthly attorney budget amount as an investment in your bottom line. Meet with him twice per year to review which contract clauses to look out for, and which you will sign or not sign. Whenever you feel trouble coming on, call your attorney to get opinions and suggestions on how to proceed. And, have him take a look at any new clauses you don’t clearly understand before you agree to them.

Don’t be afraid to stand up for what’s right. Remember, if you do what your contract says, you have the power. So go out and make more money than ever by doing the right thing to get what you deserve.