Last month in this space, I reviewed a series of market projections for 2014 from Harvard University as well as the industry’s leading associations.
Successful trade contractor partnerships
Having good relationships with trade contractors is more important than ever. Professional Remodeler’s Tom Swartz talked to remodeler Stephen Hann and roofing contractor Steve Waggoner about making the most of trade contractor relationships.
Having good relationships with trade contractors is more important than ever. Professional Remodeler’s Tom Swartz talked to remodeler Stephen Hann and roofing contractor Steve Waggoner about making the most of trade contractor relationships. Highlights of that conversation appear here.
Swartz: Stephen, define a good relationship between you, as a remodeling contractor, and your trade contractors.
Hann: The first thing that comes to mind, Tom, is that as a general contractor and somebody who has the overview of the project, I rely on my trade contractors to be experts in their particular area; to identify and help solve problems before they catch any of us; and to point out coordination issues that are going to potentially create problems. The biggest thing I want is open communication and someone who’s anticipating the needs of the job ahead of us as a general contractor.
Swartz: Steve Waggoner, how do you define a good relationship?
Waggoner: Before you get a project, you want to bid it correctly. You have to know the scope of work; you have to have the plan. It really helps to visit the job site before you even start. You can’t go in bidding a job over the phone and then have someone give you a set of plans, and say, “OK, I’ll take your bid, now here’re the plans,” and you’re doing something completely different.
Swartz: Steve, what’s the most important characteristic that you look for in the remodeling contractor you work for?
Waggoner: I think it is a little bit of personality — being honest, everyone wants that. But seeing people being friendly, you can watch them get along with the customers, and they get along with you. There’s no yelling or screaming on the job or things like that. You want a nice smooth working relationship.
Swartz: Stephen, what do you think the most important characteristic of a trade contractor is?
Hann: Reliability and open communication. I need people to be their word, to be where they say they’re going to be and do what they say they’re going to do. If they aren’t able to do that — communicate — because it has a domino effect through the job and to our profitability. The bottom line is I just expect people to do what they say they’re going to do, and if they’re not able, communicate that so it isn’t a surprise.
Swartz: Good. I have to note: Steve, with you it’s about relationships: personality, friendly, smooth-working relationships and not price. In other words, they’re not beating down on price and they’re not taking you because you’re the lowest price. And Stephen, again you didn’t mention price: reliability, open communication and giving their word. If anyone gets anything out of this article, it’s that everyone thinks today in this world is all about price. So far, I haven’t gathered that from you two. Stephen, what specific tools do you use to manage the relationship? Do you use things such as trade contractor checklists; guidelines or manuals; trade contractor agreements; detailed plans and specs; and that type of thing?
Hann: The biggest one is a detailed plan from specifications. Back to the trade relations, in pretty much every case, we’re involving trade contractors before the specifications are even finalized. We want to get feedback to make sure we’re not spec-ing something that’s more difficult or doesn’t serve the project. At the end of the day, we have the blueprints and specifications for the whole team to work off of. We do have a master subcontractor agreement we keep on file on an annual basis that gets updated. We have the administrative side where we make sure we track everyone’s insurance. We issue a purchase order for each particular job. Internally, it’s the project manager’s responsibility to review the proposal and the purchase order before it’s issued. The field lieutenant knows that project better than anyone and can make sure that specific scope items, those can be included. We’ve got basically a checklist that we use by trade contractor as a template. When we make mistakes or forget something or miss something, that’s added to the list so that next time at least there’s a reminder. Again, it’s up to the purchasing agent to review if there are competitive bids. Often times there are.
Swartz: Steve, in your dealings with the remodeling contractor, are there any specific tools that you work with to manage the relationship between the two of you?
Waggoner: To be honest, maybe that’s where we’re lacking. I feel like we’re heading to jobs not knowing what we’re supposed to do. You can have the plans, you can have the scope of work, and you can have the agreement. But is anyone always double checking in a residential remodel if it’s what homeowner really wanted, or did he agree to something that you misunderstood? That can cause a huge problem.
Swartz: I appreciate your candidness, because that is a problem. That’s a huge problem sometimes. It sounds like they’re not getting the proper tools that would be good. What are the things that you’d like to see happen that aren’t up to snuff right now?
Waggoner: I agree with what Stephen said about keeping in touch and all the proper paperwork. You have to go back to the old school and say, “You want that color tile? Let’s set 24 pieces up here and see if that’s what you really want.” With the drywall, it’s a certain texture and you do the whole house. The homeowner says, “That’s not what I wanted.” Why not just take a bare sheet, test it in the garage and have them initial it? You can have all the paperwork in the world and it doesn’t make the homeowner happy.
Swartz: Let’s talk about pricing, Stephen. How important is pricing these days?
Hann: It’s more important than it has been, in my opinion, in the last decade, both for us to get the jobs and be able to run the jobs profitably.
Swartz: Steve, do you feel the same way?
Waggoner: Yes. For us to take a job and not make any money, sometimes it’s better to stay home and work on your own house if you’re going to work for free.
Swartz: Stephen, do trades quote each job or do you have unit prices for certain things?
Hann: The answer is both. But I think the clear answer is that they actually bid each project, because projects tend to be larger and more complicated than what we have broken down on unit prices. We do have some unit price agreements for things that get added in; I’m thinking of the electrician. We walk every project with our clients before we start pulling the wire. We have kind of a menu of things that we all know: how much is a plug, how much is a switch, how much is a three-way. We have that in some of our trades; I don’t have the depths of that I’d really like.
Swartz: You make sure that you get each job because it’s probably a higher-end design/build where they’re unique. The question always comes in when they say, “I can’t give you a unit price because each project is different,” when in fact there are some similarities and just a little difference but everyone wants to take a look at it. So that’s how you do it on that. Steve, how do you generally do a price on a project?
Waggoner: I’m old-school. I’ve got a little chart I keep current on what I can do tiles and shingles for. And then I have what I input the difficulty factor — the pitch or if it is a cut up roof, and access is the No. 1 issue.
Swartz: Stephen, I think you mentioned that you get competitive prices within your trade contractors for a project. Talk to me about that; when do you get a competitive price for your projects?
Hann: Again, we do design/build, but in probably 20 percent of the projects I do during the year, clients just bring you plans and specifications. The answer varies a little bit by the type of job and how it develops internally. It depends on the complexity of the job. Normally, yes, I bring in probably two just to get different perspectives. They tend to see different things, which just makes for a better project and makes for a better steadied preliminary.
Swartz: Steve, you say you’re getting more competitive prices. What happens when there are competitive prices, especially at remodeling contractors you’ve worked for, for a long time?
Waggoner: Stephen brought up a really good point that I don’t usually get to hear very often. Competitive pricing is one thing; shopping is another. I guess shopping irritates me. You have what you bid it for, and when someone beats you by about half and they get it, you think, “Why am I in this business?” I feel like I’ve gone too far and I’ve been in this too long to be beat like that. In the past they’d say, “Maybe they know something you don’t know,” and it’s the other way around. A lot of the jobs are being done incorrectly.
Swartz: Therefore, they’re comparing apples to oranges and just taking them on price only.
Waggoner: From what Stephen says, comparative pricing I understand. But just shopping a price without looking at what you’re getting … I almost feel that they’ll take the low bid and then if something goes wrong, it’s the subcontractor’s fault. Because if his bid is wrong, we’ll just dump it on you. Which is counter-productive again because you could be almost done with the project and an inspector or even a fire marshal could say, “Let me see your receipt.” If it’s the wrong material, it looks bad for the roofers and it looks bad for the remodel contractor. Everyone’s watching the project, it’s almost done and then it goes backward all of a sudden.
Swartz: Let’s go on to cleanup. Who does the cleanup in each trade?
Hann: The trade contractor is responsible for getting the house clean. Theoretically, they clean up. I can’t tell you how much I spend cleaning up our projects — a lot of time.
Swartz: I could emphatically say our trade contractors clean up. I also know that our project managers clean up and just don’t tell anyone.
Hann: That’s part of the computation when you’re looking at value for price. How much waste? How much do I have to run around behind this guy? Is he going to show up and do what he says he’s going to do? All that comes into that analysis. For us, it isn’t necessarily about the bottom-line number. Obviously we’ve got to stay in business for everybody’s benefit. But that is part of our analysis. We have those discussions internally.
Swartz: Stephen, do you evaluate the trade contractor? If you do, how do you evaluate and how often?
Hann: That’s a great question. It just pointed out a gap to me operationally. I told you about our Tuesday operations meeting; that does come up there. We also have a staff meeting about once every three weeks to talk about what’s going on in the business, what we’ve signed up. That’s also a time to talk about the “heroes and heels,” as we call it; Who’s really doing what needs to be done above and beyond for Hann Builders? And on the other side, is there somebody who’s dropping the ball? It’s a way for the project managers to talk among themselves to find out we’re all having a problem with the same guy or if he’s working us against each other. The only real feedback they get is if they hear about it through the project managers if they’re not performing on a job-by-job basis. We also do what I call an autopsy, or review, at the end of every project. Those key players are in the room internally in Hann Builders so we can look at the profitability.
Swartz: Does that information routinely get back to the trade contractors?
Swartz: That’s our problem. We say we evaluate them, but I think our evaluations sound similar to yours.
Hann: You’re right. The way he gets feedback is if he doesn’t get the next job and then he’s going, “What happened?”
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