Again, one of the many questions I’m asked, “How do I find the best contractor?” My most superficial response is the usual litany of common sense: ask your friends and neighbors, check references (don’t bother checking Yelp or Angie’s List), be very specific with what you want, bid the job to at least three firms, don’t always take the cheapest price, use a hold-back when you pay them (you pay 80 – 90 percent of each bill with them getting the remainder once the job is complete) etc., etc. None of that is particularly new information.

Finding a Contractor

University of Salford Press – CC BY 2.0

So instead of going down that road, let me throw some light on the internal workings of the world of contracting, with the thought that as a more knowledgeable customer you’ll be able to better manage the process of finding and working with a contractor. As I former real estate developer and having run a small job contracting firm for three years, I think I know from where I speak. But I also know this isn’t an exhaustive list, and it is just my perspective. Also, I am going to refer to all the actors in the world of contracting as males, which is only for convenience; if you’ve read BTW, you know there’s quite a world of female contractors. (In fact, I’ve always wanted to do a study on who gets paid more for the same job–a male or a female. My experience has been that female tradespeople get a premium on their services.)

In this series of blogs, I will try to pull the curtain back on the world of contracting to give you a sense of why things work the way they do. So here we go: You generally deal with a general contractor (GC). This is the person/business in charge of the overall project, and makes sure the project comes in on budget and on time. The GC pulls all the pieces together to make the project happen, including the framing, finish carpentry, electrical, plumbing, tile-work, cabinetry, appliance installation, countertops, etc.

Dollars

dollars-401(k)2012 – CC BY 2.0

When starting a project (including during the estimation process) the GC flips through his Rolodex to actually put the job together. A good GC is like the producer of a movie: he has a network of subcontractors who actually do the work (affectionately known as “subs”); he knows who’s good at what, knows who prices high and who prices low. That network filled with loyal workers who have fed each other for years. The GC reaches out to them for bids with the expectation that each has about a week to get back to him. When they do, they look like this: the tile guy will come back and says, I can do this job in ten days, for $10,000, and I’m available the first weeks of June. Depending on what the GC is hearing, how busy the GC is, and how big the job is, he may get multiple bids.

So here’s the first piece of the problem: As a general contractor, you’re at the mercy of many different moving pieces, both in terms of how much they cost and their timing. And really, it’s the latter and not the former that’s the bigger problem. Generally, price is price. Unless the scope or the complexity of the project has changed, the sub has to hit that price. If he doesn’t, he’ll no longer be in the Rolodex. Both sides understand that, so the sub will hit the price. In real terms this means that the sub at times may even take a loss on a job; something that only happens, umm… every day. On any job, there will always be one subcontractor who will work for free. And that sub is not happy.

Calendar

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In contrast to that, the schedule is not always the schedule; schedules are far harder to manage, despite the best of intentions. For example, if the foundation is supposed to be dug starting March 1, but the ground is still frozen on that day, you wait for two weeks, and that means the excavator can’t start on time, so the concrete can’t be poured on time, so the framing can’t start, so the roof can’t go on … and the mouse ran up the clock, and the little boy said achoo, etc, etc. And of course, there are times when mistakes are made which also delays the schedule, but between delays that are unavoidable and delays that are avoidable, it’s the unavoidable ones that dominate.

So to accommodate these delays, “slush” or flexibility is built in to the schedule… which works perfectly, until it doesn’t. And then the house of cards starts falling down, and generally it is no one’s fault. So while your tile guy could have come a few days later on to the job and pushed ten days of work into seven (to help the schedule catch up), he can’t come ten days later and he can’t push ten days of work into three. But the customer never sees this. Instead they see a late job and even worse: jobs that may have NO ONE working on it! And no one ever tells the customer, you, why. So the result is a delayed schedule, to the point that the sub who’s supposed to get there next can’t, so everything shuts down until he can. And you know what you or the GC or the sub can do about it? Not a lot.

The usual response at this point is, “We’re paying so much money! Can’t they do something about this?” The answer is: You ain’t paying that much money, so no, they can’t do something about this. And here’s where a discussion of the economics of contracting may help shed some more light on things, but that will have to wait until tomorrow.