Being a general contractor is a hard way to make an easy living. There are lots of moving parts totally out of your control. On every job we have more than 5,762 chances to make a mistake, miss a schedule or tick off customers. Things aren’t perfect, including the plans, specifications, field conditions, inspectors, subcontractors, suppliers, deliveries, conflicts and payments. Our customers expect everything to go exactly as scheduled, with perfect quality, no hiccups or extra costs. WOW, I am getting depressed just thinking about trying to accomplish this!
The problem with the construction business is every party wants to make more money by providing the minimum. Scope of work is clearly defined, and most contracts are awarded to the lowest qualified bidder based on price. The bidder who offers better service for more money rarely gets the contract. This causes every general contractor, subcontractor and supplier to balance providing great service and exceptional quality while making a fair profit.
I am a general contractor and developer of commercial and industrial projects from $2,000,000 to $15,000,000 in size. On every project we select from our database of more than 3,000 companies to eventually hire at least 35 subcontractors and buy from five to 10 suppliers. The bottom line when choosing subcontractors and suppliers is, all of them are almost the same except for price. Very few contracting companies do anything different than the others. They give you what you pay for—the minimum, no more and no less. Because of this, sadly, we usually award based on price.
The WOW Factor
I have asked hundreds of company owners the following question: “Why should customers pay more for you than your competition?”
Everyone says they’re better than the competition, but can’t point to anything specific they actually do different. Some day I hope to find a team of subcontractors and suppliers who really know how to WOW me.
Until that day arrives, I offer the following “How to WOW” list:
Man the job. It is easy to get jobs you can’t handle: Bid them cheap! When bidding, be prepared to properly man projects with enough qualified trained workers. A larger job may take 15 men to maintain the schedule. If you have only 20 men on your entire crew, don’t bid it and hope you can find enough help when you need it.
I want trained crews lead by jobsite foreman who
• Have ongoing training.
• Speak English.
• Can make decisions.
• Can read the plans.
• Understands codes.
• Knows the contract.
• Run a safe job.
Be well financed. I’ve heard many times, “I’ve got to get paid by Friday or I can’t make payroll.” This is not the general contractor’s problem. All general contracts and subcontracts include payment procedures for every project. Generally when you invoice by the 25th, you will get paid by the following 15th through the 30th of the next month. This is how the construction business works.
Subcontractors and suppliers who are undercapitalized usually don’t have enough working capital or an adequate bank line of credit to handle the work they can get. This causes a cashflow crunch that doesn’t allow them to hire enough help to get their jobs done on time. This creates stress and causes their businesses to run inefficiently. And in turn, this makes everyone upset, including the general contractor, construction manager and project developer, while it hurts the other subcontractors on the job. The underfinanced subcontractor then makes his problem become his customer’s problem, which ends up in lost profits and no repeat work.
To run a successful subcontracting business, I recommend at least 20 percent of your annual sales volume in working capital, plus a bank line of credit of at least 15 percent of your annual sales as a backup. When a subcontractor hits me up for money, I ask him what his line of credit is. When he answers that he doesn’t have one, I know I am dealing with a poor business owner who doesn’t know how to run a profitable business.
Manage the contract. Step one: Read the contract! Most subcontractors never read their subcontracts. Like a dog in heat, they are so excited to get awarded a job, they’ll sign just about anything! I take care in writing specific and complete subcontracts to clearly lay out how I want the project managed.
Most subcontracts include clauses that clearly define how to
• Provide proper notice.
• Get paid for extras.
• Proceed on changes.
• Present a change order.
• Delay the project.
• Keep the schedule.
• Communicate.
• Attend meetings.
• Submit items for approval.
• Get paid.
• Proceed when not paid.
• Handle disputes.
What makes me really upset are subcontractors who ask for change orders 13 weeks after the extra work was completed. I want subcontractors and suppliers to mange per the contract and follow it to the letter.
Be proactive. Typical subcontractors wait for the general contractor’s field superintendent to call and inform them to start work on the project. For example, a superintendent calls the plumbing contractor on Wednesday and says, “Okay, we need you next Monday.” The subcontractor replies: “Gosh, Monday, I can’t start on Monday. I wish you’d called me earlier. I am really busy right now and I don’t have the submittals approved yet.”
A proactive subcontractor is on top of every job for which he has a contract. He doesn’t wait for customers to call. Proactive subcontractors take responsibility for monitoring all their projects by visiting job sites early and staying in touch with project superintendents on a regular basis. When they get the call to start, they’re ready, the materials are approved and available, the foreman is familiar with the project, and they are ready to man the job as required to maintain the schedule.
Be proactive rather than reactive. Go see the general contractor, sit down and ask how you can make the job run perfectly for him. (This almost never happens.) Visit the job site, walk the job with the superintendent one or two months before you’re supposed to be there. Stay in touch with the project manager or field superintendent on a weekly basis to monitor progress. Ask: “How can we help you meet your project goals?”
Manage the job site. It would be really special if subcontractors and suppliers treated our job sites like their own homes. In your home you don’t leave trash all over the place. You don’t leave a project unfinished. You don’t borrow your neighbor’s phone, power or toilet without asking. You don’t damage other people’s work and sneak away without telling someone you’ll fix it. You don’t create unsafe conditions and leave them exposed for your family members to encounter.
Why do I have to do a final walk-through and make a punch list for all the subcontractors to complete? Can’t they see what’s wrong with their work? This drives me nuts! I expect subcontractors to be professional.
Here’s a jobsite management WOW checklist:
• Hold weekly safety meetings .
• Provide ongoing, everyday cleanup.
• Haul your own trash away.
• Provide temporary facilities.
• Protect materials from theft.
• Keep your tools locked up.
• Do your own punch list.
• Keep your own set of plans.
• Do your “as builts” as you go.
• Protect finished surfaces.
Check in with the project superintendent every day before your crew starts work and discuss schedule, priorities, manpower, conflicts and issues. Before you leave the job site, again check in with the superintendent to discuss what’s left and what’s next. Never leave a job when you think you’re finished without a walk-through to inspect your completed workmanship.
Help me! My working relationship with subcontractors and suppliers is a continuous, ongoing push-and-pull versus give-and-take. Today, we are nearing completion on a 12-building project. Each building has been sold, and the occupants are waiting to move in. It is obvious we need the subcontractors to finish and get their final inspections. It is such a hassle to get them to perform as they have countless excuses why they can’t complete their work and man the job properly. This poor attitude and unacceptable business practices should not be the norm in the construction industry.
I want subcontractors and suppliers who care about the overall project goals and will do whatever it takes to make it happen. I am not asking them to lose money or go beyond the call of duty—just do what they are contracted to do. This includes meeting the schedule, caring about their customer, and the ramifications of not finishing projects on time. On the project I described above, we have a $14 million loan clicking along at $2,300 per day interest. Plus, there are 12 building buyers trying to schedule their move-ins. When subcontractors miss their deadlines on this project, more than 100 people are affected, plus the associated costs. Subcontractors: Please give me some help!
More WOW ideas. You may want to consider using the following ideas to help WOW your GCs:
• Send a thank-you note to the GC when the job is done.
• Bring leads and referrals to the GC.
• Get bids in on time.
• Give me value-engineering ideas to the GC.
• Don’t overcharge on change orders.
• Send product literature to the GC.
• Keep the GC informed of new ideas.
• Help the GC make a profit.
• Train the GC’s superintendents.
• Get an e-mail account—and use it.
• Carry a handheld e-mail device.
• Carry a digital camera
• Use your digital camera
• Take the GC to dinner
• Ask the GC: “How can we improve?”
When we’ve got a choice to hire Joe’s Electric vs. Ed’s Electric on a project, we weigh lots of variables. Consider our choices: Joe’s Electric has five electricians, is a pain to deal with, and generally asks for non-reimbursable change orders. Ed’s Electric has 30 trained electricians, is always there when you need them, and is fair and timely on change order requests. If the two bids are only 1 or 2 percent apart, we are going to award it to Ed’s Electric every time. I don’t need the hassle. Life’s too short, and construction is too hard.
How subcontractors and suppliers can WOW general contractors is to be more proactive and less reactive. Help project managers anticipate problems, get the job done properly, provide enough qualified trained field help, finish ahead of schedule and suggest better ways to save money. To WOW a general contractor is easier than you think. It doesn’t take a lot to set your company apart from the pack. Try a few of these tips and you will get more work, make more money and have more fun.
George Hedley owns Hedley Construction and Hardhat Presentations. He is the author of “Everything Contractors Know About Making a Profit” and is available to speak at your organization on the “Business Success Blueprint,” his step-by-step system to build profits, people, customers and wealth. He conducts Profit-Builder Circles for construction company owners on a regular basis.
To receive a free copy of his book, signup for his free management e-newsletter, visit his online bookstore, or receive more information, call (800) 851.8553, visit his Web site at www.hardhatpresentations.com or e-mail him at [email protected].
