The Construction Contractor's Digest

Mr. Stevens -

Let me begin by saying that I am currently a Director of the MN chapter of the American Sub-contactor’s Association, an in-house construction consultant for a law firm, soon to be construction lawyer, and the former National Sales Manager of a large specialty trade contractor.

I would agree that too much risk is being shifted on trade contractors. They deserve a greater piece of the profit in relation to the amount of risk they assume. Your analogy comparing the risk and reward afforded a real estate agent is perfect. However, just being great at performing your craftwork is not enough to build and maintain a great company. Today’s specialty trade contractor needs to be equally as sophisticated as their contractual adversaries and partners, usually a General Contractor or Owner. There needs to be a paradigm shift in how we think about the trade contracting business. The traditional thought was that a trade contractor “performs his craft with a high degree of quality and integrity in return for payment”. The reality is that a trade contractor “manages the risk associated with coordinating a labor force in return for payment.” The traditional view can build profit, the White-Collar view prevents the loss of everything that has been gained.

The good trade contractors build a great project. The great trade contractors build a great project and manages their risks with the speed and sophistication of 21st century business.

Ryan G. Miner
Fabyanske, Westra, Hart & Thomson, P.A.
612-359-7679
www.FWHTLAW.com

Dear Steve,

I think you are right on the money with this one. I have spent a good number of years in the building process. Taking Projects from the ground up, and sub-contracting work. In this day and time. There has been a trend forming that is great cause for concern for me and others who are in this business. The cost of building is going up, and the cost of property is going up, and the number of projects are going up. You would think that, that being the case our profit margins would be going up. Then you add on top of that the increased energy costs, lots of times my overhead isn't covered in what I put in the job. The ones I personally seeing making the money in the business is the developers. They start each venture with a certain dollar amount that they want to achieve in profit for each job, and then work the contracts for GC's into that number.

They don't take into any consideration the money that a GC or sub puts into their projects. Then on top of that, many of them spec. the insurance coverage into the projects...Then throw idealistic schedules on the project which does not take into account any of the basics such as wheather delays, un-ripable rock discoveries etc...

My question is, How do we reverse this trend?

Sincerely,
James L. Ingalsbe
CFO/OM Ingalsbe Enterprise, Inc.

James,

Good evening.

Thank you for your comment about the White Collars.

I don’t know if I can answer your question. However, People are tiring of lawyers and real estate agents. There is an anti-trust case against the NAR for keeping the commissions high on real estate transaction when we have a disproportionate share of realtors. .

Additionally, legal work is being done in India and continues to grow. They practice British Common Law and so it is useful to US firms. The cost is $5,000 for the same work that cost $60,000 in the US. American Corporations and Law firms are using their service. (See Wall Street Journal of the last year.

There is a trend the right way. Market forces are at work.

Hope all is very well with you.

Sincerely,

Matt Stevens