As much as 50 percent of all profits made or lost on construction projects can be as a result of managing the contract properly.
As much as 50 percent of all profits made or lost on construction projects can be as a result of managing the contract properly.
September 16, 2015 7:00 AM CDT

Have you noticed me lately?

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Construction is a difficult business, with lots of moving parts. On every project, there are 5,947 chances for things to go wrong. Contractors find themselves at the mercy of project plans, changes, payments, scheduling, weather, labor, equipment, materials and deliveries. So much is out of their control. At the end of every job (when it’s too late to do much about it), the bottom-line reality of what the project manager, superintendent or foreman has or, more typically, has not done, to manage the contract properly becomes apparent. Not paying attention to key contract clauses about notice, documentation and change order procedures is a sure way to watch your profit dwindle.

Contracting is about contracts

Most contractors don’t like paperwork. But, unfortunately, contracting is about contracts, and contracts are paperwork. As much as 50 percent of all profits made or lost on construction projects can be as a result of managing the contract properly. The contract or subcontract defines how you must do business with your customer. Too many contractors and subcontractors sign pre-prepared five-, 10-, 15- or 20-page contracts without reading them or having their attorney review them, or without understanding the specific contractual requirements.

Did you notice?

One of the first things to look for when reviewing your contract is: What requires notice? “Notice” is proper notification to your customer about a change, conflict, incident, omission or problem, within a specified number of days, and in a specified format (usually in writing). Before you start a project, review the contract and prepare a chart listing items that require proper notice.

WIN with no VAs

In the construction business, you must use the slogan: WIN = Write It Now. Phone calls, meetings or meeting minutes are not proper notice or documentation. Another saying we enforce is no VAs = no Verbal Agreements. Verbal agreements aren’t worth the paper they’re written on.

Be complete

Assembling all documentation, paperwork, change order requests, notices and information required by your contract often seems overwhelming. But once you get in the habit of following the contract, it becomes easy and a normal part of your construction routine. In order to get everything you deserve while building a project for your customer, you must be timely in your requests. Missing the notice time requirements may result in a loss of your right to collect for things out of your scope of work or control. When documenting items, take a little extra time and be complete in your description of the event.

By not documenting conflicts or changes in a timely and complete manner, contractors inadvertently shift more responsibility onto their own shoulders and can lose the right to collect. Providing proper notice starts at the beginning of every project. Meet with your customer to discuss the contract terms and what it requires. Review and agree on the project notice and documentation required for every conflict or change. And then, be ready to follow the contract.


About the Author

George Hedley is a best-selling author, professional speaker, and business coach. He helps entrepreneurs and business owners build profitable companies. Email gh@hardhatpresentations.com to request a free copy of Everything Contractors Know About Making A Profit! or signup for his e-newsletter. To hire George to speak, attend his Profit-Builder Circle academy or find out how he can help your company grow, call 800-851-8553, or visit www.hardhatpresentations.com.

 

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