There is a school of thought that suggests that the Construction Industry is broken. Several times lately I have heard or read such an assertion. People point to labor, material, design, software and many other areas where there is chaos in the marketplace.
Yes, material prices are unpredictable to put it charitably. If material prices are predicable, it is that they go up not down. The unpredictable part is by how much. The big dragon in
Labor is scarce. Craftsmen and operators are not being produced in great numbers. No one wants to be in our profession. We are lucky to have a loose immigration policy. Hungry immigrants who grew up farming make for good field people. To have an American (second generation) pursue a construction career is a rare thing. Not withstanding, the work ethic is dying.
Others say that current contracts are flawed. They shift more risk to the contractor than ever before. Contracts today are written by increasingly cunning lawyers who number more than ever.
Design drawings are less complete than ten years ago. Savvy architects and engineers are under the same time pressure that contractors are and the quality of plans and specifications show it. This leaves room for interpretation, conflict and eventually, litigation.
Yes, it is true that troubling events are occurring. I agree that many of these things are problematic. They do increase the risk for contractors.
Again, some insiders and outsiders to our industry state loudly that the industry is broken and we need to overhaul it. However, there is a population of people who don’t agree and I am one of them.
Our industry is not broken. We may have a harsh industry but, it is one that has many more positives than negatives. We cannot find a better one in the
The business of construction has gone through this change steadily over the last decades and certainly it has arrived at an unfair place. Contractors did little to deserve the lot they have but, this is the situation we are in. In response, profitable contractors have simply taken the attitude that they, themselves must change.
The change that consistently profitable contractors have undertaken is limited to two focuses. We have witnessed these two attitudes in many of our clients and other contractors we know. The two focuses that a successful contractor must have regardless of size, region, type of work or any other attribute are:
• Disciplined Approaches
• Financially Conservative Standards
Disciplined approaches keep the risk factors minimized or eliminated:
1. The quality of their construction work is high
2. Safety practices are emphasized and demanded
3. Dealing with clients they know well
4. Pursuing work they are excellent at
5. Finding and staying in a niche which is difficult for others to enter
6. Many others
Overall, good contractors know what they want. There is little ambiguity. These contractors work hard at creating and standardizing good business and construction practices.
Financial conservatism is not a new concept but, it might be forgotten as one reaches a level of success. Remember, we haven’t had a real slowdown in the construction economy since the early 90’s. Financial conservatism is valuable on the cost side as a contractor employs labor, manages overhead or buys material, but it also applies to the revenue side. The profitable construction firm charges market pricing for work including change orders. They don’t discount their proposals unless there is a compelling reason to do so. Additionally, they insist on timely payment and use increasingly aggressive tactics to collect unremitted billing. The smart contractor knows that if you run out of cash it takes you out of the game. Money is oxygen, you can’t survive without it. Also, it is insurance against bad luck.