Maintaining Profitability in Your Construction Business Workshop Series

Never before has the earth been so built upon. As the oldest industry in the world, construction has seen enormous developments in its 10,000-year history. New materials and methods have created a revolution in the way we build. The progress of this technology, however, often overshadows the vital importance of managing the “business” of building. A thorough mechanical knowledge of the trade is no longer enough to build a successful contracting business. In a climate of reduced home sales, elevated litigation activity and unrealistic consumer demands, builders and contractors are recognizing the frailty of this industry’s profitability.

As the largest industry in this country, construction requires company owners collectively to manage billions of dollars and millions of man-hours within the confined environment of a rigid budget and a tight schedule. Often the skills that are dominant with small contractors are the trade practices that set them apart as talented craftsmen and women. But by far the most critical aspect of the contractor’s business is the one most often disregarded: sound business management practices.

Bill Dexter, of W.F. Dexter Risk Management, leads an in-depth discussion on creating specific solutions to the obstacles of maintaining a profitable operation at every level. Participants will be able to take a hard look at every aspect of the management of information and documentation that directly robs their company from their hard-earned profits. Starting with the construction contract, the group will explore the importance of thorough and detailed agreements between owners and subcontractors. Discussion groups will focus on the considerations given to owners and contractors, as well as the advantages and disadvantages of different delivery systems.

Loss of profits often arises from loss of time and production. This workshop will offer sound guidance on dealing with delays, differing conditions, changes to the work, and unauthorized communication on the job site between sub-tier contractors and owners.

Project information management and policy can be the sieve that leaks profitability from every possible source. Learn how to spread the concept of preventing waste and increasing income to every member of your team and to every subcontractor on the job.

In Part 1 of this three-part program the coaches will guide participants through the maze of creating effective contract language by thoroughly discussing the basic components of construction agreements.

The construction contract will refer to the scope of work as described and specified in the plans and other construction documents.
The plans will state that all work must be performed according to the codes and the owner's project manual.
The project manual describes all equipment to be installed.
The equipment manufacturer publishes absolute requirements for installation.
By the time this trail of documents is complete, the contractor has agreed to abide by thousands of pages of very specific details referenced within the contract. Participants will develop a strong understanding of all of the peripheral provisions included in the contract merely by referring to them. There will be an exploration into the risks of nebulous and vague terminology written into agreements that can potentially strip the project of its profitability.

The participants will then turn their attention to the examination of the various project delivery systems and the associated risk to all of the parties. Finally the group will discuss the pros and cons of Delays and Changes and the possible unforeseen consequences. Profitability is drained from the project through the course of casual and seemingly harmless oral changes between subcontractors and the owners. Numerous case studies will amplify how quickly and easily a contractor can lose control of the cost and scope of a project.

Learning Objectives

• Gather new information on using contract language to safeguard profitability
• Learn how to identify historical risks and address them in the contract
• Learn to establish internal policies to spread the culture of profitability to every member of the firm.
• Discover the risks and rewards of various project delivery models.
• Learn to document modifications to the contract after the job starts

In Part 2 of this three-part program, the instructors will focus on managing the risks associated with code compliance, specifications and the nebulous term of "Industry Standards." Additionally, managing all communication and documentation will be explored so that the contractor is never confronted by the irate owner who lost track of how much the project was going to cost.

Avoiding the confrontation of the final invoice will be presented in detail with suggested formats to keep the owners fully apprised of the budget and progress of the job. The challenge of accomplishing the work within the confined environment of a budget and schedule may pale in comparison to the challenge of getting paid. The presenters will discuss the available remedies for collecting funds due during the course of construction and after the job is complete. Although substantial diversity exists from state to state regarding the application of mechanics lien laws, a detailed discussion of the pros and cons will attempt to bring clarity to this extremely powerful body of laws. After the job is finished, paid for and occupied, the issues of warranties may rise up to once again rob the contractor of earned profits. Indemnification language from the contract may be the lifeboat to save the builder's profits.

Learning Objectives

• Examine the pitfalls of implementing the work
• Learn the difference between industry standards vs. contractual duties.
• Learn to establish internal policies regarding job site conversations and the possible duties and warranties they impose on your company.
• Discover the risks of failing to monitor costs and charges.
• Be able to evaluate material specifications for future problems.
• Develop the skills to manage warranties and subcontractors' ongoing duties.

In Part 3 of this program the panel of experts will guide the participants through the benefits and techniques of utilizing a strong and effective alternative dispute resolution policy. Once provided for in the contract, the "Disputes" clause between the parties will eliminate the possibility of litigation. However, this alone does not guarantee a smooth road through disputes. The presenters will emphasize the need to develop good oral communication and negotiation skills to keep the project and all the participants on speaking terms and moving productively toward the completion of the project.

Learning Objectives

• Gather latest information of alternative dispute resolution
• Learn the benefits of appointing a project neutral before signing a contract
• Learn to establish internal policies regarding dispute negotiations
• Discover the technique of transferring costly risks away from your company