2010 Is Almost Finished - Are You?
Keep on top of project
deadlines to ensure your business receives the money it deserves.
You can look at your calendar and be assured that 2010 is finished. A quick look at your bank account could show you that your business is also finished! You should likewise look at your accounting to identify exactly what is finished and what should have been completed this year.
I hope you followed the advice in my January and February 2010 columns. January’s column covered getting a full eight hours productivity from your employees and February’s column recommended adding another 20 percent to your bottom line by capitalizing on your employees’ value-engineering abilities. If it doesn’t show up in your books, you’d better look closer at your jobs.
I’m sure you would agree that no job is finished until you have collected all of your money. That means a final check with no retention, and paid in full for any extras or change orders. This does not happen automatically. You need to start with your accounting department to determine what is not finished and then meet with your management team to find out why it is not finished.
Some of your customers will withhold some of your money to pressure you to finish their projects so that they can collect all of their contract. When you are the successful bidder on any project, you need to carefully scan the entire set of blueprints and every page of the specifications, and note every item that must be completed for you to be paid in full. These notes should be listed on a checklist, with every item marked “by who” and “by when,” and passed on to that responsible person on your management team.
You also will encounter devious customers who depend on your inefficiency to use your money to pay their bills. They will wait until you ask for payment and give you one of the deficiencies. This goes on, one at a time, until you finally finish that job. But it is still your fault.
If mechanical repairs or replacement become necessary, the owner
needs to be sure where all the buried lines are located. These lines are not
always installed where they are shown on the contract drawings for many
practical reasons.
These as-builts are especially crucial if one of your own service techs is doing the repairs. You cannot depend on memory, plus the employee who installed that system may not even be available.
If the owner decides to remodel or add an addition to the premises,
he could cause a catastrophe by breaking a buried line that is not shown on his
drawings.
Typically, these as-built drawings are required to be submitted to the building owner by the general contractor (or construction manager), but he cannot furnish them to receive his final check without your accurate input.
Even when there is no requirement or penalty involved, your pride and reputation should demand that you document any installation changes for the owner’s safety. This is especially true with residential and remodeling projects.
Traditionally, the single biggest reason for not getting your money is you didn’t finish completing your punch list. Your accounting staff is screaming for more money and your field crews are busy starting their next project.
We always insist on the jobsite foreman making his own punch list and completing it before the architect and engineer make theirs. Most mechanical contractors turn over the punch list to their service department, which gives it immediate attention. You need that money!
Many contracts require a certificate for test and balance as well as instructions for the owner’s personnel to properly operate and maintain the systems. Failure to complete these requirements provides another viable excuse to withhold your money. You will probably need to furnish a release of liens from your suppliers and any subcontractors.
This list could go on and on. The point here is that it’s critical for you to read and note all of the project requirements. Keep in mind, however, that contract is between the owner and general contractor. Of course, you will have to perform everything that is related to your trade for the general contractor to collect his money. Your biggest problems with cash flow are written in the subcontract language; make sure you read this very carefully and negotiate before you sign.
The worst thing you can do is agree to a “paid when paid” or “pay if
paid” clause. This would be financial suicide.
Eliminate any retention clause or negotiate a reasonable solution.
The general contractor should do the same with the owner. This is sometimes
nonnegotiable on government projects.
Clarify payment arrangements for extras and change orders, such as
who is authorized to issue and ensure collection on the monthly draw that the
extra work occurred.
Establish a due date for submittals of monthly draws and a payment
date. Insist on a late penalty clause, which will never occur if they pay you
on time.
Insist on early payment for mobilization and stored materials. This
will ensure early completion.
You need to insist on a simple and fast resolution on any financial
dispute that cannot be negotiated. This usually involves an agreement for
mediation or arbitration rather than expensive, long-drawn-out battles that
usually hurt your relationship with the contractor - and with others who hear
about it.
Unfortunately, mostly due to our recent recession, we have many good contractors whose business is finished. Thankfully, the individual contractor is not finished, because he will have an opportunity to start another business. His chances for success will be greatly enhanced by carefully reviewing what went wrong in his previous business.
No one knows what will happen with our economy in 2011. But you can be certain that your business is not finished by continuously checking with your accounting department to identify any critical project item that is not completed. These items need top priority with your entire management team.
Good luck in 2011!
You can look at your calendar and be assured that 2010 is finished. A quick look at your bank account could show you that your business is also finished! You should likewise look at your accounting to identify exactly what is finished and what should have been completed this year.
I hope you followed the advice in my January and February 2010 columns. January’s column covered getting a full eight hours productivity from your employees and February’s column recommended adding another 20 percent to your bottom line by capitalizing on your employees’ value-engineering abilities. If it doesn’t show up in your books, you’d better look closer at your jobs.
I’m sure you would agree that no job is finished until you have collected all of your money. That means a final check with no retention, and paid in full for any extras or change orders. This does not happen automatically. You need to start with your accounting department to determine what is not finished and then meet with your management team to find out why it is not finished.
Some of your customers will withhold some of your money to pressure you to finish their projects so that they can collect all of their contract. When you are the successful bidder on any project, you need to carefully scan the entire set of blueprints and every page of the specifications, and note every item that must be completed for you to be paid in full. These notes should be listed on a checklist, with every item marked “by who” and “by when,” and passed on to that responsible person on your management team.
You also will encounter devious customers who depend on your inefficiency to use your money to pay their bills. They will wait until you ask for payment and give you one of the deficiencies. This goes on, one at a time, until you finally finish that job. But it is still your fault.
Overlooked Requirements
I will give you a short list of contractual requirements that are frequently overlooked by subcontractors. Most of them require very little time or effort. Let’s begin with a very critical document that you should initiate at the beginning of your project and accurately update every week on your jobsite. It is called an “As-Built DWG.” The information you put on that drawing is very critical for the owner of that building:These as-builts are especially crucial if one of your own service techs is doing the repairs. You cannot depend on memory, plus the employee who installed that system may not even be available.
Typically, these as-built drawings are required to be submitted to the building owner by the general contractor (or construction manager), but he cannot furnish them to receive his final check without your accurate input.
Even when there is no requirement or penalty involved, your pride and reputation should demand that you document any installation changes for the owner’s safety. This is especially true with residential and remodeling projects.
Traditionally, the single biggest reason for not getting your money is you didn’t finish completing your punch list. Your accounting staff is screaming for more money and your field crews are busy starting their next project.
We always insist on the jobsite foreman making his own punch list and completing it before the architect and engineer make theirs. Most mechanical contractors turn over the punch list to their service department, which gives it immediate attention. You need that money!
Many contracts require a certificate for test and balance as well as instructions for the owner’s personnel to properly operate and maintain the systems. Failure to complete these requirements provides another viable excuse to withhold your money. You will probably need to furnish a release of liens from your suppliers and any subcontractors.
This list could go on and on. The point here is that it’s critical for you to read and note all of the project requirements. Keep in mind, however, that contract is between the owner and general contractor. Of course, you will have to perform everything that is related to your trade for the general contractor to collect his money. Your biggest problems with cash flow are written in the subcontract language; make sure you read this very carefully and negotiate before you sign.
What Should You Negotiate?
You can only negotiate if they need you. Your bid may be low or you could enjoy a good reputation for quality work ahead of schedule. However, you should always ask for what you want and negotiate a reasonable compromise:Unfortunately, mostly due to our recent recession, we have many good contractors whose business is finished. Thankfully, the individual contractor is not finished, because he will have an opportunity to start another business. His chances for success will be greatly enhanced by carefully reviewing what went wrong in his previous business.
No one knows what will happen with our economy in 2011. But you can be certain that your business is not finished by continuously checking with your accounting department to identify any critical project item that is not completed. These items need top priority with your entire management team.
Good luck in 2011!
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