Most of us in the concrete business really enjoy it—the material is fascinating, the design and construction keep advancing, and we have great pride in the finished product. But few would voluntarily do the work for free. A recent article in Time magazine showed that money doesn't necessarily make a person happier— but poverty definitely makes a person unhappier.
Unfortunately, many concrete contractors seem to be working for free or close to it. Nearly every day I see something to confirm this:
- The Associated General Contractors recently released their “Quick Facts” showing that the entire construction industry produced a net profit margin of only 3% on total revenue of $1.1 trillion.
- AGC also reports that only two-thirds of U.S. construction companies are profitable and that nearly 75,000 of 608,000 construction firms went out of business in 2001.
- A study by Clemson University found that most owners think that the standard 10% retainage is fair and doesn't increase the bid price on construction. But subcontractors reported that they get paid their full retainage less than 90% of the time and that the average wait is 167 days.
- In the first quarter 2005 issue of The Contractor's Compass, from the American Subcontractors Association, there is story about an Arizona concrete contractor who accepted a pay-if-paid clause in a contract and was therefore unable to collect against the GC's surety bond when the owner didn't pay.
- The American Society of Concrete Contractors just published “Position Statement #22” arguing against the validity of reverse auction bidding. It argues that this insidious practice almost surely forces a contractor to cut corners and look for change orders rather than working cooperatively with the GC and owner.
- Finally, I received an e-mail from Bobby Sweeney of National Concrete Services in Channelview, Texas, commenting on his company's experience building concrete floors for a large retailer. The floor was installed under a construction change directive (CCD), but despite the fact that it submitted the price change prior to doing the work, that it installed the floor according to the specs, and that it had to pay its suppliers, the company has never been paid. The customer claims the cost is too high. Sweeney notes that he has heard of other contractors who have been unable to collect on a CCD from this customer and wonders how the industry is dealing with this issue.
As a contractor, you aren't just a builder; rather, you are running a business, and a business can't survive without cash flow and profits. How do you get around held retainage, pay-if-paid contracts, and an owner who won't pay on a change order? It's your right to make a fair return on the money and risk you put into a project. Write or call and tell me how you make that happen (firstname.lastname@example.org. 303-823-8284).
William D. Palmer Jr.
Editor in Chief