Trusting the Craft Labor

January 27, 2012 – 6:00 am

For some reason, some managers believe that always telling the craft labor the project is losing money is a good way to increase the productivity but I don’t see the logic behind this strategy.  I believe being honest to the workers in the field is the one and only way to go. 

Lying does nothing but demoralizes the employees and will not encourage them to increase their productivity.  In general, people want to do a good job and take pride in the work they do.  Telling them how the job is progressing is another way of saying they are doing a good job which can actually make them work harder.  A person will be more productive with a positive attitude compared to being frustrated and negative.

If trust is an issue with the craft, then there are much bigger problems to deal with especially on remodel projects.  The client’s image of the contractor is based on the crews they see all day and every day, not the project manager or anyone else that may visit the site every few days or weeks.  So how can a contractor trust the craft to represent the company but not trust the craft enough to be honest to them?

Unfortunately, not every project is a winner, but after the trust is established between the craft and management, telling the craft the project is behind will carry much more weight.  It’s really no different than the old story of the boy crying wolf.

If a person is going to milk the job, they will milk the job no matter what.  If a contractor can’t trust an employee, then maybe they need to reconsider that employee’s employment.

By markmentele | Posted in Construction | Tags: , , , , , , , , , | Leave a Comment

The Competitive Advantage Nobody Needs – Round II

January 25, 2012 – 6:00 am

My recent blog on The Competitive Advantage Nobody Needs generated some interesting responses on ENR.com.  There were some very insightful comments, even from the one responder that thinks everybody is a crook in the construction industry.

Bidders that short circuit the specifications are taking something of value from the owner of the project.   In the development of the specifications the owner has set forth their expected level of quality with regards to the materials and workmanship.  If they want Product X meeting Specification Y that is their decision.

If contractors desire to have a substitute product considered, there is a mechanism to get it done.  However too short bid periods, pride of authorship and other factors tend defeat this mechanism.  If this happens the contractors still need to bid to meet the specifications.

After the bid, the contractor can then re-approach the designer and owner about the substitution.  This process could involve a savings to the owner in time and/or money.  The owner and architect or engineer need to possess an open mind and have the knowledge to properly evaluate this option in any case.

Oh, By the Way… The successful, long term contractors that make money on construction are the innovative contractors.  They innovate on production and other areas to succeed.

By Don Short | Posted in Construction | Tags: , , , , , , , , , , , , , , | Leave a Comment

Technology is Not a Cure All

January 23, 2012 – 6:00 am

I just had it reinforced that technology solutions are still dependent upon the nut behind the wheel (user).  I recently moved up from a 10 year old vehicle to a new one with interactive computer controls for almost everything imaginable.  The same applies to technology solutions in construction – be it in the field or in the office.

It doesn’t matter if you have an earthwork program that is used for takeoff and then field elevation control.  If you do not set it up in the field correctly you will not get the right elevations.   If you set it up right once, it does not mean it will get set up right the next time.

Estimating software is another big time saver.  The resulting on screen displays and/or prints are impressive.  Because they look good, they must be right.   However if the user does know how to prepare an estimate, the results will be impressive looking garbage.

The same holds true for scheduling software.  If the user doesn’t know the logical relationships between the activities, the schedule is worthless.  Impressive, but not worth the time it took to prepare.

I imagine the same holds true for most software.  I know it certainly does for spreadsheets, word processing and accounting software.

Oh, By the Way… My moment of enlightenment in the car was finding out I needed to turn the heater on after two days of wondering why the temperature was not coming up to the one set on the screen!

 

 

By Don Short | Posted in Construction | Tags: , , , , , , , , | Leave a Comment

Honesty.

January 20, 2012 – 6:00 am

Over the years I have had to be very honest with some of my clients.  I would tell them if the project that they are looking at bidding is a good one for them to go after.  I have told them that whoever is awarded this job will need to be careful due to notes on the drawings that can be a big “gotcha”.  Sometimes it is telling the client that they just need to take the money from a claim settlement and be happy because it will cost way more to try to get more. Sometimes what I have to say may not be what they want to hear – but being honest with clients is the only way to do business.

By Justin Short | Posted in Friday Tips | Tags: , , , , , , , , | Leave a Comment

Let’s Make It Impossible to Sign a Contract

January 18, 2012 – 6:00 am

Have you ever noticed that some companies seem to make it impossible to sign a contract?  This happens a lot in construction.  Whether it is a standard form contract, modified standard or completely customized set of contract documents, some terms can make it not worthwhile to pursue. It recently happened to us.

A major firm needed estimating services.  They wanted the service on an hourly rate basis with established per diem rates for travel and such.  So far this is a doable deal.

The contract agreement documents contained 51 pages of single spaced text.  Considering the contract scope could be for well under $250,000 up to $2 million in value, I suppose this could be considered as tolerable.

The “I gotcha’s” were many. What became the problem was they were requiring locally available personnel for staffing at the various sites located around the country.  The assignments were for undefined time frames and they retained approval rights on the personnel being provided.  If qualified personnel were not available locally they were to be assigned on a per diem basis with the same conditions attached.  Besides these terms, there were numerous other considerations being imposed.

In review of the total package it became apparent what they really wanted was a “job shop” or temporary labor agency, not a consulting company to provide professional estimating services.

Oh, By the Way… In spite of the lousy construction economy, we declined to submit on this RFP since it did not match our methods of operations and untenable contract conditions.  It would have degraded our typically outstanding results.

By Don Short | Posted in Construction | Tags: , , , , | Leave a Comment

What Is The Most Cost Effective Construction?

January 16, 2012 – 6:00 am

Recently I was asked if design-bid-build yields the “least expensive market” factor in change orders and/or any subsequent claims/litigation.  It is my belief this is a resounding “Yes.”, to the question.

By its very nature the design-bid-build procurement process is a competitive one where all of the competitors are bidding on the same scope of work.  This scope is fully defined in the plans and specifications, etc.  On a design build basis, this may not be the case.  Each bidder may have a different basis for the pricing.

The competitive nature of the design-bid-build market is such that the prices are the “best” each contractor, subcontractor and vendor can develop in order to win the job with the lowest price.  With each bidder quoting the same scope, it is a relatively straightforward process to determine the successful firm on the project.  On a design build basis, the lowest price may not be the best price because the scope has to be evaluated in conjunction with the pricing.

Change orders and litigation can be considered as a part of the cost.  On the design-bid-build projects we have observed change orders percentages can be quite low, in the range of one to three percent of the bid amount.  However we have a client where their change orders were in excess of twelve percent on firm price projects.   This high rate was due to their internal practices (and yes we did show them how to reduce the change orders and they did).

On design build projects it is not uncommon to see change orders or changes to the initial bids far in excess of the amounts stated above.  Whether it is an unforeseen scope (another discussion point), owner directive or another of a host of reasons, design build by its very nature is more costly when it comes to changed values from the initial bid amounts.

Litigation is a project gone wrong.  The projects we see in arbitration, litigation, etc. have been the result of owners, designers, managers, contractors, subcontractors and/or vendors that do not uphold their responsibilities to one another.  This applies across the board to design-bid-build and design build contract formats.  The sky is the limit when the project hits this stage.

Oh, by the Way… If an owner wants the cost effective solution I recommend design-bid-build.  If they want design-build I show them how to get the best value for the money they spend.

 

By Don Short | Posted in Construction | Tags: , , , , , , , , , , , , , | Leave a Comment

Is Theft in Your Bid?

January 13, 2012 – 6:00 am

Construction site thefts are always a problem, but I have noticed a significant increase in news media coverage lately.  This led me to thinking about how these thefts affect the estimate for the projects. 

Even if the thefts results in an insurance claim, there is still a deductible for the claim.  If your company views losses due to theft as an overhead cost, this will raise your overhead cost during the bidding process.  No matter how you look at it, thieves have a direct impact on the cost of a project.

There are several different types of thieves from the obvious person that sneaking onto the site and helping themselves to the employee or other trade on the project “borrowing” tools or material.  Another form of stealing is an employee padding their time cards.

One way or another an estimator has to increase their bid to compensate for the loss whether it’s decreasing the productivity rate (compensate for time card padding) or increasing line items in the estimate such as small tools allowance, overhead, or material costs.   In order to help keep these additional costs down, everyone at your company needs to take an active role in loss prevention.

By markmentele | Posted in Friday Tips | Tags: , , , , , , , , | Leave a Comment

Who And What Is BIM For?

January 11, 2012 – 6:00 am

If I were an owner I would love Building Information Modeling (BIM). I love looking at the nice 3D modeling, watching a fly-though on the computer screen.  BIM is great being baffled with the brilliance that is pretty pictures.  I would like to get a feel for how my project is going to look I would want to have BIM utilized.  I am not an owner – I am an estimator and during the bidding phase of the project I could care less about how pretty the fly-though looks and I would just be happy if the design firm would be able to put out a decent set of drawings on time and with no addenda.

By Justin Short | Posted in Construction | Tags: , , , , , , , , , | Comments (1)

Cheap, Not Inexpensive, In the Construction Market

January 9, 2012 – 6:00 am

Is there room in the construction market for cheap? After all, cheap really has a couple of meanings.

How about when cheap is low in price and worth more than its cost?  This has a place in the market for the buyer.  The phrase, “I bought it cheap!” can be thought of as bragging when this occurs.  While the buyer is happy, what about the competitors that lost out?  Did the cheap result from the low bidder making the biggest mistake?  Did it result from the low bidder cutting vendor and subcontractor prices with the intent of bid shopping after getting the job?

When cheap is low cost and shoddy the buyer may have the same thoughts on buying it cheap.  However, did they consider how it became cheap and the ramifications?  Did the cheap seller adhere to the specifications?  Does the buyer know that this may cause extra costs to be incurred in other areas?  What will the maintenance and operations associated with this version of cheap?  Perhaps quality and useful life didn’t enter into the selection process.

In both of these situations the competition to win the work suffers.  In the pre-2007 “normal” market this may have occurred from time to time without too many lasting ill effects.  The bidder that was usually goofy or unreasonably low would disrupt the market and then go out of business.   Since 2007 the “cheap” bidders have been far more prevalent in the construction market.  We are going to see some long lasting problems due to this.  It will not just be the contractors that suffer from these consequences.  It will be the buyers of construction projects that feel the effects too.

 Oh, By the Way… I am an advocate of competitive bidding and pricing.  However when less than astute business practices overrules basic sound bidding principles, it then degrades the entire industry.

 

 

By Don Short | Posted in Construction | Tags: , , , , , , , | Leave a Comment

Float Debate

January 6, 2012 – 6:00 am

I was reading the article on ENR about the Float Debate.  I have been told over the years that the float on the project belongs to the project not just one entity.  The owners and contractors both get to utilize the float, if any, on the project.  In the article there are some great points that counter the shared float of the project.  I do think that the float on the project should belong to the party that is assuming the risk of the project. What do you think?

By Justin Short | Posted in Friday Tips | Tags: , , , , , , | Leave a Comment
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