Who you deal with is more important than airtight contract language.

I never thought the day would come when I singled out a lawyer for praise, but that day arrived last Nov. 8. That's when I gave a presentation on contractor business practices at a conference sponsored by Roofing Contractor and Walls & Ceilings magazines (like PM, published by BNP Media Co.).

Preceding me was attorney John Alfs, a construction litigation specialist with the Troy, Mich., law firm of Cox, Hodgman & Giarmarco. He spoke on the topic “Protecting Yourself Through Intelligent Contracts,” and made what may be the most profound statement I've ever heard in a business seminar. Said Alfs:

“It's better to sign a bad contract with a good person than a good contract with a bad person.”

This single un-lawyerly sentence goes a long way toward defining a fundamental secret of success in any contracting business.

Swarming Flies

A construction project nowadays comes attached with thousands of pages of legal mumbo-jumbo whose primary purpose is to shift responsibility from one party to others. But everyone involved plays the same game, and this creates endless opportunity for lawyers to craft disclaimers on behalf of their clients, and dispute the validity of those protecting other parties. All for sizeable fees.

This brings to mind a well-worn joke about a struggling small-town lawyer who suddenly gets rich only after a second lawyer moves into town. It makes a humorous point about the insidious nature of the law business - and make no mistake about it, it is a business.

Unlike most businesses whose fortunes are restrained by demand for the goods they sell or the work they do, lawyers have the ability to create demand for their work. Any legal challenge compels a response from the parties challenged. Before you know it, lawyers swarm around an issue like flies on you-know-what.

Contractors are frustrated by the amount of time they spend dealing with mind-numbing legal documents and trying to abide by their often silly strictures. Most find themselves spending more time on legal nonsense than the productive things they are good at, such as running jobs and applying their craft. Alas, it's hard to get out from under the load of legalities when your own attorney keeps telling you the only way to protect yourself is to erect your own barriers of mumbo-jumbo.

How refreshing to hear someone with the credentials of Mr. Alfs reveal his profession's dirty little secret. (He comes from a construction background.) That is, no matter how airtight the contract language, it's no guarantee of prevailing in a legal dispute. Logic and precedent may or may not carry the day. Rulings are as likely to hinge on who hires the best attorney, or the best connected one, or which judge gets assigned the case, or what kind of mood that judge may be in on the day s/he hears your case.

Litigation has replaced baseball as our national sport, and the attorneys all seem to be on steroids. I've heard tales of certain GCs whose business strategy is to bid jobs at cost or below, and count on high-octane legal staff to turn a profit after projects get underway. The money comes out of the hide of subs and other members of the project team. How would you like to have your signature on a “good” contract with someone like that?

Cultivating Quality Relationships

The complexities of construction invite more disputes than most other kinds of business. Buyers and sellers of merchandise may haggle over whether a broken item was sold that way or damaged after purchase, but it's pretty clear one or the other is at fault.

In construction, if something doesn't work as it should, there's a multitude of potential culprits among the GC, subcontractors, manufacturers, distributors, installers, designers, specifiers and more.

And then we rely on attorneys to straighten it all out, which is like recruiting arsonists to staff the fire department.

There are two basic philosophies of doing business. One is to view it like a poker game, with winners and losers. The other is to seek win-win scenarios where everyone manages to profit from their working relationships. Those are the relationships you want to cultivate.

Most contractors think of projects in terms of plans and specs and bidding procedures. Inexperienced or desperate contractors will take on virtually any job whose blueprints seem doable.

Wily veterans ask as many “who” as “what” questions about a proposed project. They refuse to work for certain GCs or owners under any circumstances.

And sometimes, when dealing with the right people, a handshake can be as binding as any legal document.