It’s time to stand up for what’s right. As a contractor, you’re required to build per your contract—no more and no less. But often customers demand you do more than you’re contracted for. This can include additional free work, extra move-ins, overtime to meet their delayed schedules, starts and stops which reduce production, incomplete plans which delay installations, slow approval of shop drawings or change-order requests, jobs not ready when you’re asked to start work, and the list goes on!
The old days of “the customer is always right” are over. Most general contracts and subcontractors are awarded based solely on the lowest price for the exact scope of work and terms specified for a project. There are now more contractors than profitable work available to build. This produces an excessive number of low-priced bidders. Therefore, construction customers have increased the project requirements for contractors, gotten aggressive, and taken advantage of the situation. The typical scenario is for developers and construction project owners to solicit as many bids as they can, and then push low bidders to include more than proposed at lower prices to win contracts. The trickle-down effect then permeates down from the general contractor to subcontractors to suppliers, and thus reduces the opportunity for every company to make a reasonable profit.
The results are not great: Low-price contractors struggle to provide the best possible quality when not getting paid appropriately despite providing additional services and excellent workmanship.
So, what’s the solution? In the past, contractors’ bids included a little slop, extra money, and enough profit to take care of their customers while not being too aggressive enforcing their contracts, managing change-order requests, and demanding prompt payment. Without any extra cushion or money, contractors are now faced with an ethical dilemma. Should they continue to put their customer relationships first, even though they’re treated as commodities by customers? Or should they manage their contracts like their tough attorneys would like them to?
EYE FOR AN EYE
It’s time for contractors to take a stand and treat customers as they are treated. This means: “No more Mr. Nice Guy.” 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 you slowly, enough is enough! It’s time to give them the same treatment they give you. The time is now to start managing your contract like a junkyard dog and getting only what you’re contracted for and deserve.
NO SECOND-CLASS CONTRACTORS
Being treated like a second-class contractor is unprofitable. To make any money in construction today, your bid must be complete and lean to win work. Therefore, bids can only include the minimum required by the plans and specifications. Remember, you were hired to do only what the contract says. And you don’t have any extra money to throw in a few additional items to make the customer happy or avoid conflicts out in the field. You must be firm but fair, get tough, and only do what you’ve been hired to do for the money you agreed to charge. You’re only required to do what your contract includes. In addition, most general contracts require timely responses to all requests, prompt change-order approval before you start the work, no verbal agreements, no free work for items not required by the plans, payment by the 15th, a reasonable schedule, a complete set of plans with no errors or omissions, and adequate funds set aside available to finish the project.
If the plans are wrong or incomplete, you deserve more money, no questions asked. (Don’t forget, the project owner probably hired the lowest price architect and engineers, and therefore the quality and completeness of the working drawings likely reflect the fee they got as well.) If you don’t get paid per the contract or don’t get answers to questions and conflicts in a timely manner, you should put your customer on notice, document the situation per your contract, and stop working until you get the answers you need.
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 work. If your customer or another contractor damages your work product, you should put them on notice and get paid to repair the damage, or you should refuse to do the 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.
MANAGE EVERY CONTRACT
Start by getting a complete set of plans. Read the complete specifications, the contract, and general conditions section to clearly understand what’s required to protect your rights and be in conformance with the contractual requirements. If in doubt, put it in writing 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 them happy. Remember, you can’t pay your bills with happy customers. Friends pay, and enemies don’t!
LAWYER UP
Get an attorney who’ll help you understand your rights, be aggressive, and improve your overall success rate. Keep them on speed dial and set aside a monthly attorney budget. Meet with them twice a year to review what contract clauses to look out for, and which you will or won’t sign. Whenever you feel trouble approaching, call to get their opinion and suggestion on how to proceed. Also, have them 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. Don’t be afraid of being tough. Remember, if you do what your contract says, you have the power.
George Hedley CPBC is a certified professional construction business coach and speaker. He helps contractors build better businesses, grow, profit, improve estimating and field production, and get their companies to work. He is the best-selling author of Get Your Construction Business To Always Make A Profit! available at Amazon. For more, visit www.constructionbusinesscoaching.com or contact gh@hardhatbizcoach.com.