I would like your input on an issue. I do not know if I am getting old, cranky, set in my ways and over-reacting, or if my frustration is justified.
I have come across a GC/CM, Clayco, who has contracted their pre-qualification duties to a third party and is requiring the subs to pay the fee of $150/year to be pre-qualified.
This same GC/CM has contracted their subs payable to Textura (third party) who charges from $50 to $200 per check to process (Textura process is cumbersome and slows down the payment cycle if information provided by the sub is not entered properly by the GC’s people).
This same GC/CM uses a CCIP (Contractor Controlled Insurance Program) and mandates “light duty” work for all injuries (we pay the salary, get dinged for an injury, but do not get the man-hours on the project for our EMR).
This same GC/CM is requiring Pollution Insurance coverage (for mold) by the drywall contractors, as well as Professional Liability Insurance if we perform engineered shop drawings (even though our third party engineer carries this insurance).
This GC/CM is rapidly growing in our market and others across the country. They are close to being a $1 billion/year company, so they are becoming the 800-pound gorilla in the room.
My questions to all are these: Is this the way of the future? Are you seeing this in your area? And are you OK with it?
—Timothy J. Wies, President
T.J. Wies Contracting, Inc.
Lake St. Louis, Missouri
I enjoy knowing that I am not the only one who is frustrated with all the risk that is moving to the subcontractor base.
If don’t think I had to bid against 10 of my competitors to get the job, I am willing to give a little up front to be a “preferred” subcontractor.
Anytime we can accentuate our position as a company that pays its bills and is a professional partner worthy of consideration, I like to do so. The problem is that so many contractors force us to provide information and pre-qualify for bids, yet they never exclude anyone from the bid process. Why go through this if it does not create an advantage for your firm? That is when it is irritating and irrelevant.
The real problem in this scenario is that we were fine with one or two items, but it is excessive at this point, and it costs real money. We are paying for their credit checks, insurance offset, billings and accounting staff and services, not to mention that some of the general contractor contracts are the most lopsided agreements that you will find. I believe your frustrations are founded to some measure.
—Shawn Burnum, Branch Manager
Performance Contracting, Inc./Dahmer
Grandview, Missouri
You are not getting old or cranky—I sorely miss the old days of construction! The past two years have literally buried my desk under in paperwork.
We also had to sign up for the Textura service, a requirement handed down by one of our general contractors a few months ago. I agree that it is cumbersome—to the extent I wondered if maybe they should be paying me to enter the information instead of the other way around!
OCIP/CCIP has stopped making sense to me. We deduct the cost of the insurance from our bid, yet I spend more time getting offsite insurance coverage for OCIP/CCIP jobs than I do for regular jobs (waivers, indemnities, endorsement, extra forms, etc.). I received notification today that I was approved for a CCIP project, but going forward we are required to increase our GL insurance policy limits—more costs to our company for insurance coverage that is supposed to be covered by the GC/owner.
Another big trend in the OCIP/CCIP area: We have to complete full OCIP enrollments in order to bid jobs. If we revise our proposal, we must submit another OCIP enrollment form to reflect the new bid price. The OCIP managers will not provide us with “type-able” forms. We also have to request and provide stop/loss runs and sales history from our insurance carriers in order to be approved—all during the bid stage. Needless to say, I walk around with a headache most of the time.
Many more examples too numerous to list here, but I hope this feedback has been useful to you.
—Laura Hamilton, Contract Administrator
Island Acoustics, LLC
Bohemia, New York
I hope we take a stand on this.
I can’t believe that the general and owners want us to pay a fee for a prequalification of our companies to bid a project that is actually a protection for them to ensure that they get qualified contractors to bid their project.
We have participated in some OCIP insurance projects here, but we have to make sure that they issue the policy for 10 years to cover the liability imposed by the state of California. If they don’t cover the tail, we just include our own insurance.
In some rare instances we have been required to provide mold insurance, which motivated us to secure a policy for all jobs.
On design-build projects we make sure that our engineer has the proper insurance.
—Bob Heimerl, President
Mowery-Thomason, Inc.
Anaheim, California
I have seen in a number of GC general conditions requirements the provision for a fee to be paid to a third-party agent to processes pay requests. Generally the GCs are “national” contractors or doing work for national account customers. I have not successfully secured a bid in any of these circumstances, so I cannot speak to the efficiency of the system. But it would be hard to conceive that it would not lengthen the payment process.
That being said, I believe it would behoove AWCI to take up the initiative and explore the depth of exposure its members have experienced with the issues you listed. While these fees for prequals, payment and etc. are nominal at present, we all know what happens to these fees as they become embedded as business practices. Before you know it, the $150 becomes $1,500 and the $200 becomes $2,000 and so on.
As to the insurance practices, they don’t really save money, and the adverse effect of the hours versus claims responsibility can be detrimental to the sub’s EMR. I would suggest that AWCI join with other subcontractor organizations and raise awareness to these issues in an attempt to curb them before they become “accepted” practices in our industry. Given the current economic plight of our industry, a crusade, if necessary, should be an easy one to form if that is what it will take to curb these nonessential and needless added costs.
—Bill Gargano, Senior Estimator
Grayhawk, LLC
Louisville, Kentucky
