A View from the Other Side

Ulf Wolf

June 2008

What keeps the subcontractor up at night?

You probably have your own answer, but truth be told, you could probably multiply it by a factor of five and arrive at what keeps the general contractor up at night.

Consider this: What wins the bid is a team. It is a team consisting of the GC and his subs who, together, say, "Yes, we can build the proposed project on time, within budget, and so darn well that you’ll come to us with your next project as well.”

The guy who bids the project—and who hopes that not only will he perform satisfactorily, but that his subs will, too—the guy who actually lands the job, is the GC, and it might be informative to learn how the construction world appears when viewed through his eyes.

Dog Eat Dog
It is a competitive world; and it is as competitive for the GC as for the sub, at least.

Dirk Squire, owner of Squire Construction of Newbury Park, Calif., is a general contractor specializing in large tenant improvements. He has been in business for more than 17 years, and has a wealth of experience to share.

But why would he want to?

"When all is said and done,” Squire says, "it is about communication. So the more we understand each other, the more we can see things from the other side’s perspective, the better we will understand each other, and the smoother things will run.”

And as for dog eat dog: "It is very competitive out there. When I walk a potential job site, I’m usually walking it with four or five other general contractors, each with one goal in mind: to underbid the others and land the job.”

So, how does the GC land the job?

"With the help of my subcontractors,” is Squire’s immediate and sincere answer.

Communication and Honesty
If subcontractors are that important, what makes for a good relationship between the GC and sub?

"The most important things, to me,” Squire says, "are communication and honesty.”

"I am in business to make money, and at the same time I want my subs to make money. That’s what I tell them. I’m very up-front about it.

"I’ll give you an example: A few years back I discovered that one of my employees was beating up our subs on price, while at the same time withholding vital information from them. There would be items on the plan he knew about but wouldn’t tell the subs, while later holding them to those items … to lower the price, I guess, to ensure we won the bid so he could boost his commission.

"As soon as I discovered what was happening, I fired the employee and I have since ensured that no such a thing ever happened again. We have to be totally up-front in our dealings with not only our subs, but also with all our business partners.

"Of course, if our subs don’t have all the data, they can’t bid profitably. And if they don’t make money, we don’t make money. Bottom line.”

So, how does the GC land the job?

"Through subcontract loyalty and expertise,” he says.

Loyalty and Expertise
"One of our biggest challenges nowadays,” Squire says, "is poor architectural drawings. Only one plan in 10 is anywhere near complete, and even they require an RFI or two. That’s where the subcontractor’s expertise comes into play.”

How so?

"He has to be expert enough to know what’s missing from the plan: If the light fixtures do not show detailed specs, he has to know what they will involve, specifically, or he cannot bid the job properly. Of course, this places a lot of responsibility on the subcontractor’s shoulders.”

"The electrician, as an example, may receive a ceiling plan that shows the light fixtures—existing or new—but does not spec them out. Now, most of our owners or landlords have their own specs; they have a standard light fixture, so we’ll have that, but the electrician who walks the job has to spot any potential code violations and come up with a design that includes fixing that as part of their price.

"Sometimes they even end up doing their own electrical drawings.

"In this scenario, I have to trust my sub knows what he’s doing, that he will bid the job properly and to code. Once I find a sub who does, I will stay loyal to him, and I expect him to stay loyal to me.”

To what extent?

"Even if on a given bid he’s a little higher, I’ll give him a last look,” he says.

"Trust is everything. I know he’s going to do the job well; I know he’s going to deliver what he says he will, and that he’s not going to come back to me with a bunch of change orders. In a relationship like that I’ll always give him the benefit of a last look.

"Mostly, though, I don’t like receiving second bids. I prefer just to give the job to the sub I’ve come to trust, without going to his or her competitors. But if he or she starts becoming a little pricy, then, just to make sure I can afford to do the job, I may have to look at more than one bid. But I’ll always give my loyal sub the last look.”

Schedule and Responsibility
As a cynical salesman once put it: "No sale shall go unpunished.” Cynical or not, it smacks a little of the truth, for once you’ve won the bid, and the rubber is hitting the road, problems have a habit of crawling out of the woodwork.

Dirk Squire has had plenty of time to smooth out the process.

"It took me five years,” he laughs, "to discover what I was doing wrong. Since then we’ve been very successful. We complete our projects on time 99 percent of the time, and when we don’t, it’s usually because of unforeseen lead times for some product or other.”

What’s the secret? "No secret really,” Squire says. "Each problem or challenge does have an optimum solution, and I’ve simply documented these solutions, very clearly, as company policy and a process to follow when these situations occur. "Then I took the next logical step and compiled these solutions in a manual for my project manager and superintendents. "For example, we use a pre-construction checklist that covers all the steps the superintendent needs to take before construction even begins.” Such as? "Such as making sure that we have the city approved plans before we start the project. I know this may sound a little too basic,” Squire says, "but I’ve seen the mess you can find yourself in when using bid plans that have yet to be approved. It often comes back to bite you, hard. "We also, always, have a pre-construction meeting with all of our subs in which we give them a published job schedule and discuss it in detail to ensure it’s understood and agreed to. "Really, it again comes down to communication—and to agreement and acceptance of responsibility for each part of the job, as well as the schedule.” But there are always change orders, right? "We try to avoid them altogether by thorough estimates and experienced subs. But when they do occur—and they will, from time to time—we again follow our written procedure. "The key to properly handling a change order is to establish its source: It will either originate with the owner or tenant, the city inspector, the architect, the subs, or by some oversight of our own in the estimate process. "Once we know the source of the change order, we can handle accordingly.” Per your published procedure? "Yes, per the Superintendent’s Manual. It’s sort of the procedural bible. "By the way,” adds Squire, "a great incidental benefit of the manual is that I don’t get personally involved with every little detail. If the superintendent or project manager has a question about a job situation, he or she can refer to the manual, and the answer is usually there. "This allows me to focus on new business,” Squire adds, with a smile. "Which is where, as the owner of a company, I find my attention should be.” Subcontractor Challenges
When asked to list his Top 10 subcontractor challenges, especially as he encountered them during his five-year learning curve, Squire laughed, and then came up with this:

• Not receiving the sub’s bid in a timely manner.

• Subs with insufficient credit to purchase or supply needed material.

• Subs who make bid mistakes, and who then don’t own up to them (these mistakes sometimes masquerade as change orders).

• Subs not committing to the project timeline—normally because they’ve taken on more work than they can handle.

• Inattentive subs who miss things on the plan: this usually makes the job unprofitable for them and for us.

• Uninsured subs. If we discover this once the job has started, we have to replace them, which is always a headache.

• Unorganized subs: this usually means we receive their bills late and so cannot submit our bills to the owner or landlord on time.

• Subs who don’t provide qualified workers for the job.

• Subs who don’t man the job according to our contract.

• Subs who don’t order materials (especially those with long lead times) on time—this is a big one.

"These are the things that the subs we now work with, and who we have come to trust, never do.”

Keys to Success
And here’s another list.

When asked for the Top 10 reasons for his success, Squire came up with the following:

• Having a passion for what we do.

• Maintaining high integrity and honesty.

• Having great clients.

• Always taking care of our clients ... always—which is how we keep them.

• Delivering a great product, every time.

• Finishing our projects on time, every time—or at least 99 percent of the time.

• Establishing statistics with which to closely track job progress.

• Taking good care of our employees.

• Having company policies and procedures in place, so that we can run a smooth company—such as the Superintendent Manual.

• Training our employees.

"Anyone can succeed in this business,” Squire says. "In my experience most subs are excellent craftsmen, but not always also good businessmen. That’s why I’ve decided to put together a free business overview seminar to help train both GCs and subs to be more successful in business.”

Teaching what?

And here comes another list:

• How to choose the right clients.

• How to take care of clients.

• How to establish and document company policies and procedures.

• How to train employees.

• How to establish and manage by correct statistics.

• How to discover what the competition is up to.

• How to find more business.

• How to bid in the construction world and beat competitors.

• How to choose the right project.

• How to identify projects you want to steer clear of—and there are some jobs you are much better off passing up.

"These,” says Squire, "are points of business that if overlooked, or not known about, can drive any construction business into the ground, no matter how skilled one may be as a craftsman.

"I’ve run into these things, and I’ve worked out how to handle them. It’s a good thing to share.”

Bottom Line
At the end of the day, it seems that a good GC/sub relationship boils down to only a few fundamentals.

"Trust,” says Squire. "Once you know you can depend on both the word and the expertise of your subcontractor, half the battle is won. You’ll more than likely win your bid, and you’ll bring it in on time.

"Everybody wins.”

Los Angeles-based Ulf Wolf writes for the construction industry as Words & Images.

Anyone interested in Dirk Squire Seminars can reach him at Squire Construction: (805) 376.2290.