Getting a contractor’s license is a complicated, time-consuming process. As a result, many large construction companies wind up relying on a handful of qualifiers for licensing across a substantial operating territory. In fact, it’s not uncommon for a company to have a single qualifier in a dozen states or more. That’s an efficient solution to the complexity of multi-state contractor licensing, yet it can leave the firm in a tough position if a qualifier suddenly departs or needs a leave of absence. In many states, firms have 30 to 60 days to appoint a replacement, which is not a lot of time considering the many steps that go into the contractor licensing process.
A qualifier contingency plan is a simple, low-cost effort that mitigates those vulnerabilities. It also provides the added benefits of developing your qualifier pipeline and facilitating business development. You can develop a plan for your company by assessing your licensing footprint, auditing qualifiers, addressing deficiencies and creating the plan. Once you’re done, you’ll have all the information you need to respond quickly and effectively to loss of a key staffer.
1. Assess Your Licensing Footprint
The first phase of planning requires assessing your current and near-term operating footprint. Map out all the states where you’re currently licensed, and then layer in attractive geographies where you might benefit from obtaining licenses over the next 2 years. Then research the licensing classifications, requirements and timelines in these new states. What licenses will you need to work in each state, and how far in advance should you begin the process when it comes time to pursue them? Do you need specialty licenses in any of those jurisdictions? Be sure to include the steps in each state for providing notice and appointing a replacement when a qualifier leaves your company.
2. Audit Your Qualifier Force
Once you’ve mapped out your current and near-term licensing needs, the next step is to do the same with your cadre of qualifying professionals. Identify your qualifiers in all of your existing states and document their license information. Then for each state, consider what would happen if your qualifier left today. Could you appoint a replacement within the time allotted by the state? Do you have any staff in that office who could step up and obtain a contractor’s license? Do they have the required experience? Is it documented according to state requirements? Documenting experience is one of the more challenging aspects of contractor licensing, leading to many rejected applications. It’s always easier to work through tasks of this complexity when you have the luxury of time.
Now look at the new states you identified in step one as promising targets. Do you have staff who could qualify for licenses in those states? How about backup qualifiers in case those staff members are unavailable when the time comes to enter that state?
3. Address Deficiencies
For any states where you lack a qualifier and backup, create a development plan for staff who could step up to qualify. Invest in training your “B” team, if needed, and encourage all interested staff to carefully document experience with an eye toward state requirements. Again, these steps are easy to manage when you’re working far in advance and have plenty of time to devote to the paperwork.
4. Create the Plan
Through the preceding steps, you have assembled the pieces of the puzzle. Now it’s just a matter of evaluating the results and putting together a plan of action.
First, assess the depth of your bench. Ideally, you should have at least two staff members who are either already licensed or qualified to obtain a license for every jurisdiction you included on your list. Wherever you lack a backup, identify staff members in the pipeline who have the potential to move into a qualifying position. What steps would it take to prepare them for licensure? Can you take those steps now, proactively, to fully qualify them?
You should also carefully consider the licensing spread of individual qualifiers. Do you have qualifiers who are licensed over wide territories? If they left, what would that do to your operations? Even with careful planning, it is difficult to obtain licenses simultaneously in a dozen states within 30 or 60 days. It may make sense to license a second qualifier in certain states to avoid overreliance on a single staff member.
Your final plan should contain all of the following:
- Detailed licensing information for all of the states in your plan, including license classifications and specialty licenses, licensing steps, and estimated timelines
- Detailed instructions and time frames for notifying the state and appointing a replacement following loss of a qualifier
- A primary qualifier and backup qualifier in each state, including documentation of experience and other information required to obtain a license
- A staff development plan, where required, for addressing any deficiencies
Your plan should be shared with more than one staff member to further protect your firm from unnecessary disruption. Once you have created it, your plan can be maintained with annual updates so it is always ready to deploy.
The key benefit of this planning is that your staff will have all the resources they need to respond quickly should you lose a key staff member. In addition, your “B” team will appreciate your investment in them as you help them prepare for future licensure, and your company will be in a better position to pursue new opportunities.
Harbor Compliance is not an accounting or law firm and does not provide tax, financial, or legal advice.