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GC Conflicts — Sources and Solutions

“The average construction site,” suggests Charles Antone, a consultant with R.J. Kenney Associates, Inc. in Massachusetts, “reminds me of that old Warner Bros. cartoon with Sam Sheepdog and Ralph Wolf, the best of friends at breakfast up until they clock in, after which it’s flat-out war—Ralph trying to steal himself a sheep, Sam foiling him at every turn—until, at the end of the day the whistle blows and they clock out, again the best of friends, sauntering back into the setting sun for a shared dinner.” (If you haven’t seen that cartoon lately, or ever, search YouTube for “Sam Sheepdog and Ralph Wolf.”)




The cartoon—being a cartoon, after all—paints conflict with cartoon-like and unrestrained exaggeration; however, actual worksite conflict between the general contractor and his or her subs, while a lot less explosive, can be just as damaging when it comes to the project at hand and to future GC/sub relations, as Ralph’s many mishaps are to his health.





As the current economic climate lingers, even long-term GC/subcontractor relationships are put to the test under the strain of immediate survival, and the relationship can even become adversarial—as we reported in last month’s article on “The New Normal” where some GCs in a few areas of the country are, in the name of self-preservation, in effect stealing work from their subs.





However, regardless of economic climate, such conflicts are not unavoidable, and, should they arise, should be resolved both for the sake of the current project and for future relations.
Easier said than done, of course, but not impossible.





An Ounce of Prevention



When it comes to GC/sub conflicts, it seems that an ounce of prevention is indeed worth a pound of cure.




Matt Van Hekken, chief estimator at The Bouma Corporation in Michigan, has no doubt about it: “The best way to resolve conflict is to nip it in the bud by a decent scope of work and answered RFI questions to reach full agreement on what exactly is needed and wanted.”




Gene Cox, president of Custom Drywall, Inc. in California, agrees. “We try to resolve any and all conflicts in advance,” he says. “I know there are subs who look for possible conflicts or omissions in the scope and plans in order to spot potential change orders. We look for these same omissions and conflicts when bidding the job, not to identify change orders, however, but to get ambiguities clarified up front.”




“We do this for a couple of reasons,” Van Hekken continues. “Firstly, it makes for better customer relations. Secondly, we know that we see our profits by getting into a job and finishing it cleanly—A to B in a production line fashion. Conflicts, with their stops and starts, lose us both time and momentum, hurting the bottom line.”




Glen Moore, owner of Builders Plastering, Inc. in California, agrees. “The best way to avoid conflict is to prevent them from arising in the first place,” he says




Chuck Taylor, the director of operations at Englewood Construction Management, an Illinois GC, seconds that: “The best way to avoid conflict is to have everything set out clearly in the scope and contract. As long as the expectations are set correctly, there should be no conflict.”




Stephen Eckstrom, vice president of California Drywall Co., avoids conflict by project-kickoff meetings, where “all concerned, including the GC, go over scope letters and contracts together to make sure we are all in agreement. This makes for a smoother project, one where we make money from sheer efficiency, not through change orders. It’s the ‘no issues’ job that generates profit.”




Auston Janes, estimator/project manager at KHS&S Contractors in Seattle, holds a similar view, “Ironing out issues at bid or contract time will avoid a lot of problems.”




Sources of Conflict


“We see two major areas of GC conflict,” reports Robert Aird, president of Robert A. Aird, Inc. in Maryland: “Scope and schedule.”





He goes on to explain, “Today, we have to bid and build jobs based on drawings that are only 40 percent complete. It seems to me like the architectural firms have let go of all the old experienced designers who knew what they were doing, and replaced them with kids fresh out of college—who are trained to drag and drop boilerplate items but who do not know how to build a building.





“And then they cover this shortcoming by contract clauses such as the one I saw the other day: ‘Subcontractor will perform all work associated with this scope, whether or not it is included in the drawings or specifications, but in accord with the designer’s intent,’ which, of course, assumes that I am a mind-reader. We get around this by submitting our own shop drawings for GC and architect approval, and by generating our own schedule, again for GC approval. At best this gets everybody on the same page, and at worst it shores up our case in case of future conflicts.”





“Some GCs,” offers Antone, “generate conflict as a way of doing business. These are the GCs who work on the assumption that subs are a dime a dozen, and that their job is to squeeze every penny out of the subs. They will always try to get you to perform more work than the contract calls for.




“On the other hand,” he continues, “where you have a GC who keeps a stable of subs from job to job, tried and true, the relationship is totally different—this is a GC who is working on the long-term relationship basis, where conflicts never rise beyond the two owners working things out in a reasonable manner. But if the sub is viewed as a commodity by the GC, you’ll have war from the get-go. This makes for a very fractious project; and they’ll burn through as many subs as they need in order to bring the project home. These GCs treat construction as zero-sum game; in order for them to make a profit on a project, the sub has to lose money.”




Pat Arrington at Commercial Enterprises in New Mexico has this take on the sources of conflicts: “In my experience, most of the problems leading to conflict concern sequencing. When things fall out of sequence, it becomes punitive to one contractor or another, who is now being held up unfairly. This always leads to conflict.”




Long-Term Relationships


When immediate survival is at stake, long-term relations are a likely and unfortunate casualty.




And that is exactly what Cox sees today. He says, “Long-term relationships are at jeopardy right now because the GCs need work, too, and even while we’re submitting lower bids today than at any time in the last seven years, people are still coming in below us, and the GCs, due to pressure from the owners, have to accept the lowest bid. They, too, are being hurt by the market.




“In fact, I thought I had a job lined up to start last January. Then a brand new union drywall contractor came in at 30 percent below our bid, and the GC had to take it. We were second lowest, if you can believe that.




“A few years ago, some of our GCs gave us 75 percent of their projects. This is no longer the case. Today, they’re forced into lowest bidder.”
John Drexel, division manager of Anning-Johnson Company Los Angeles, sees the same thing: “The economy is putting strains on our GC relationships. Money is tight and owners are taking it out on the GCs, who have little option but to take it out on the subs.”




“I also believe that the GCs are being a little more lenient with the owners these days in order to protect future business opportunities.”
Moore agrees: “Of course the downturn puts pressure on the long-term relationships. Everybody has to secure work, GCs included. Although most of our 10-years-and-longer relationships still hold good—we know and like these people—they have to go with the bottom feeders.”




As does Janes: “With the economy the way it is right now here in the Northwest, relationships, unfortunately, do not carry too much weight. It’s all about the lowest bid.”




Taylor offers the GC’s perspective: “Yes, the pressure is on. Now more than ever, I have to take the lower bid. That’s unless I can convince the owner to go with a more experienced subcontractor if the low-bidder, in my opinion, could jeopardize the successful outcome of the project.




“The problem is, however, that these days I’m only successful about 20 percent of the time in convincing the owner. The other 80 percent, the job still has to go to the lowest bidder.”




Burned by Lowest Bidder


If there’s a silver lining here, it is that those GCs who have gone bottom feeder all the way to please owners and secure profits are being burned by shoddy workmanship.





Moore says, “I have seen GCs burned recently. The owner insisted on the low bid, and they could not complete the job.





“Actually,” he adds with a chuckle, “these days, if I lose a job to somebody much less qualified than I am, I see that as a good opportunity for the GC to realize how good we are.”





Arrington is actually starting to see a return to quality and more experienced subs. “The Albuquerque School System is no longer going by price alone. Recently, at an inspection of a completed school project, the owners wondered when they were going to complete the walls in the halls, only to be told that they were in fact complete, albeit shoddily.”





“Owners—and GCs—are having a change of heart these days,” he says. “The GCs are beginning to realize that they need subs who know their portion of the work well enough to anticipate problems and can see what really has to be done to furnish a complete project. GCs realize that they need subs who know how to fill in all the grays in the design and scope.”





Solutions


With so much at stake, and so many varied interests to consider, how do you navigate these issues?





Antone suggests, “Get your shop drawings, manpower-distribution graph and schedule approved by the GC and/or the architect. This will leave far fewer gray areas, and a lot fewer change orders. The moment you see change orders, you have potential conflict.”





Most members interviewed echoed that sentiment. Approved shop drawings and an agreed-upon schedule do much to sidestep conflict.
Also, don’t forget—as Van Hekken suggests, “With the economy the way it is today, you have to be a little flexible, there has to be give and take.”





While subcontractor agreements, as a rule, are tilted in the GC’s favor, there is no need to take this lying down.





Says Brian Mead, president of Commercial Builders, Inc. in Florida, “When it comes to contracts, by Florida law, the GC can take you for everything but your house and firstborn. However, every GC we work with has his standardized subcontractor agreement, which he uses for all jobs. We have copies of these, of course, and we also have a set of suggested amendments to each of them that we always submit at bid time. More often than not—especially if they really want to work with us—the GC will accept these proposed amendments.”





Then he adds by way of warning, “The stuff that’ll get you is usually in the boilerplate. For example, some GCs will include language to the effect that they will not pay you until they have been paid. I rarely agree to that. The point is that as a sub, you have to read and be familiar with the boilerplate, and you have to submit what you consider to be fair language as proposed amendments.”





Another possible solution being offered today is Building Information Modeling, which is making serious inroads. More and more subs are now seeing projects designed in, and managed through, BIM.





The greatest benefit of BIM is not necessarily the great 3D design or smooth clash tests, but the collaborative ground rules that BIM spells out. By these rules, ideally, the entire project team—all trades included—are involved in the project from the beginning, or at least from the point where the initial design has been completed by the architect.





With all the trades in conference, even before plans are finalized, most, if not all, potential conflicts can be spotted, addressed and resolved before ground is even broken.





BIM, then, is a potentially far-reaching solution to GC/sub conflicts.
Says Mead, “We just got a BIM project, and it’s been excellent from a conflict standpoint. We have had a lot of meetings with the other trades, and most, if not all, issues have been addressed and worked out.
“Once this project gets going, I will know more about it, up front, than I have known about any other project in my 30 years in the business.”





Eckstrom echoes that sentiment: “We’re starting to work more and more BIM projects. In fact, we have three going right now. The collaboration between trades is excellent.





“So far we’ve been outsourcing our own BIM modeling, but we now are looking to bring it in-house. Our competitors are.”





Communication



Despite the best-laid plans and firmest up-front agreements, on-site conflicts will still arise on occasion. Be prepared to take them by the horns.




Eckstrom solves conflicts with communication: “When it comes to on-site conflict, we always try to resolve it with face-to-face communication. Should a conflict develop, we first try to sort it out in the field with the GC’s superintendent. Should that fail, we go on to the GC’s project manager. Failing that, it becomes a company owner to company owner conference. This has resolved most issues for us.”




Janes agrees: “Face-to-face communication between the decision makers, whether that be the owners, the directors or even the PMs. This is the best way to resolve issues on the floor.”




Van Hekken does the same thing: “Should an on-site conflict develop, it is always best solved with good communication between the sub and the general’s PM or superintendent.




“It’s also critical to establish good communication with the other subs, to make sure that any sub-sub conflicts are handled between them before it gets to the GC. That’ll save a lot of grief.”




“Now, we’re a fairly tight-knit construction community here, which is why person-to-person communication works well for us, “Van Hekken continues. “When we go out of state we see more of the hard-to-solve conflicts.”




Antone once heard a general’s vice president put it this way: “Once I have a signed contract with the subcontractor, I put it away in a drawer with the goal never to have to take it out again. I firmly believe that field issues can be worked out by common sense, reason and mutual ethics. If I have to take out that contract, I know we’re in trouble.”




Sam and Ralph Revisited


When all is said and done, Sam and Ralph could actually sit down and talk things over, even while punched in.





These are tough times, and most contractors—subs as well as generals—are simply trying to survive to see a better day. The key is that we have to survive together. We must communicate, and we must try to see any conflict from the GC’s viewpoint as well, and so reach an understanding.





That way we will all survive.





Coeur d’Alene, Idaho–based Ulf Wolf writes for the construction industry as Words & Images.

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