George Hedley works with contractors to build profitable, growing companies. He is a professional construction business coach, popular speaker and best-selling author of Get Your Construction Business to Grow & Profit!, which is available online at hardhatpresentations.com. To sign up for his free monthly e-newsletter, get involved in a BIZCOACH program or get a discount for online classes at hardhatbizschool.com, email firstname.lastname@example.org.
Twenty years ago, most contractors had a group of repeat customers, and price was not always the determining factor in the majority of projects awarded. Now, most general contracts and subcontracts are awarded based solely on the lowest price for the exact scope of work and terms specified for a project. As the economy has leveled off, there are now more contractors than work available, producing an excessive number of contractors bidding at high margins. Customers have taken advantage of the situation and increased the project requirements pushed onto contractors.
Currently, developers and construction project owners must solicit as many bids as they can and push the low bidders to include more than proposed at lower prices to win contracts. This has a trickle-down effect, from the general contractor to subcontractors to suppliers, reducing the opportunity for every company to make a reasonable profit.
The results are often not pretty, as these low-price contractors now struggle to provide the best possible quality of service without getting paid appropriately for providing excellent professional workmanship. In the old days, contractors' bids included a little slop, extra money and enough profit to take care of their customers and not aggressively enforce contracts, manage change order requests or demand prompt payment. Without any extra cushion, contractors face an ethical dilemma. Should they continue to put their customer relationships first, even though they are treated as a commodity by customers who award solely on the lowest price?
Eye for an Eye
It's time for contractors to take a stand and treat customers as they are treated. When customers ask you to cut your bid, lower your price and throw in a few extras at no charge, do they deserve to be treated like royalty? When they don't approve legitimate change order requests promptly, delay getting back to you on requests for information, ask you to change your schedule or work overtime for free or pay slowly, enough is enough. Now is the time to start getting what you deserve.
Stop Being Second Class
To make any money in construction today, your bid must be complete, but lean. Therefore, bids should only include the minimum required by the plans and specifications. Remember, you were hired to complete only what the contract says. You don't have any extra money to throw in additional items to make the customer happy or avoid conflicts in the field. You have to be firm, but fair.
Get tough and only do what you've been hired to do for the money you agreed to charge. In addition, most contracts require timely responses to all requests by both parties, prompt approvals of change orders before you start the work, no verbal agreements, no free work for items not required by the plans or specifications, pay by the 15th of the month, proper coordination and supervision of other trades, a reasonable schedule, a complete set of plans with no errors or omissions and adequate funds available to finish the project.
If the plans are wrong or incomplete, you deserve more money. If you don't get paid according to the contract agreement, you should stop work per your contract terms. If you don't get answers to field questions and conflicts in a timely manner, you should put your customer on notice, document the situation per your contract and stop work until you get the answers you need. If your customer expedites the schedule to make up for other slow, nonperforming contractors, you should document the claim and receive overtime pay or additional time to complete your work. If your customer or another contractor damages your work product, you should put them on notice and get the funds to repair the damage. If you submit a claim and do not receive a prompt, fair answer that meets your approval, you should proceed under protest and demand mediation or arbitration.
Manage Per the Contract
Start by getting a complete set of plans. Read the complete specifications, the contract and general condition section to clearly understand what you must do to protect your rights and be in conformance with the contractual requirements. If in doubt, put it in writing and document more than you think is necessary. Take photos of every field condition that is in conflict or doesn't match the plans, and forward them to your customer with a notice or demand. Make written requests. Don't give in just to appease the other side or make the conflict go away.
Get an attorney who will help you understand your rights and improve your overall success rate. Keep that attorney on speed dial. Set aside a monthly attorney budget amount for contract situations.
Meet with your attorney twice a year to review which contract clauses you should look out for and which you will or will not sign. Whenever you feel trouble coming on, call them to get their opinion and suggestion on how to proceed. Have your lawyer take a look at any new clauses that you don't clearly understand prior to agreeing to them.
Do not be afraid to stand up for what is right and protect the work you were contracted to complete. Be cautious of customers who treat you poorly and keep in mind the work you're doing is part of an agreement. Remember, if you do what your contract says, you have the power to finish first.