Subcontractors have very different goals than you do
I took on a project recently where the owner had hired out his architectural drawings and engineering before he hired me as his contractor. The result has been frustrating so far. It has been far more frustrating for the owner than it has been for me, though make no mistake, I am not pleased with the work of his premium vendors.
As a homeowner it is important that you know that the criteria you use to select an artisan to perform repair or construction jobs around your home are not the same criteria a builder employs to hire an artisan. It surprises all of my clients when I tell them that they can always get a better price for trades work then I do. Notice I didn’t say a better price than I can. I can easily go to the same place the homeowner goes to find the cheapest help. So why don’t I?
The typical home owner’s criteria focuses most commonly on two areas, in this order: Price and availability. Many homeowners believe builders get their materials at a builder’s discount. More often than not this is not the case. Where did the preconception of builder’s discounts arise?
Let’s take the many questions from this section one at a time. You may be surprised at the answers.
The Contractor's Criteria for an Artisan
My most recent client hired me some time last month. During out contract signing he asked if I might be interested in using his long time electrician on his project. I quickly replied that I probably would use my long standing electrician for the job. He responded by telling me how knowledgeable his electrician was and that he had given him a great deal of good advice during the past jobs he had performed for him. He informed me that his pricing was the lowest he had seen of those he had interviewed for the job. He bragged about how he had such a good relationship with the artisan that often the electrician had done small jobs without charge.
I told him, as I mentioned earlier in this article, that my criteria for selecting artisans is much different than the homeowner’s criteria. He again confirmed how knowledgeable the trade was and touted his experience and how large his company was. It surprised him, as it may you, that most of what he told me about the electrician was a red flag in my book.
Retail vs Builder Grade
A competent building contractor will not require a trade to be knowledgeable so as to train the builder on what needs to be done and how it should be done. The builder should know these things or should not be a builder. The larger electrical contractors with the logo vans and uniforms are typically retail focused and have little interest in contract work with a building project. Artisans that specialize in working with contractors see little value in brand advertising. Builders provide so much work that the need for decals, uniforms, and swag are nonexistent.
Any retail artisan who discounts, other than introductory offers, may indicate desperation for work. In today’s economic boom in the building sector, anyone who is not finding plenty of work and has to discount to get the job probably has issues in the market. You don’t want to inherit those issues. My artisans charge more than most of their competitors because that is what top talent does. I don’t pay retail as a builder, but I certainly don’t seek the lowest price. In construction low price is expensive, usually as it results in quality, reliability, and trustworthiness. As a builder, I can predict what an artisan will charge for a job I am bidding. I never send the project out for bids unless it is a non-standard component.
A builder never wants to owe a trade favors or negotiate the project from a position of weakness. Many builders bid a job with a set number then spend the rest of the project wheeling and dealing to get a lower price to increase his margin. This is a flawed business model. The key to success in the building business is to establish long-term relationships with your trades. The quickest way to turn over your labor assets is to beat them out of money. I inform my trades of what I have in the job for their portion and ask if they are willing to accept the job for the price. Often times I offer them more than they may have bid it. This keeps me within budget and increases good will with my trades, strengthening the relationship. This stronger relationship results in shorter wait times when they put me on their schedules, increases their desire to please me with good quality, and causes them to look forward to my call for the next project. My client benefits because his or her project runs smoothly with few delays and no red tags during inspections.
The Builder’s Criteria for Artisans
I had to kiss a lot of frogs to get to the trades and premium vendors I have now. I still have to manage them and their schedules on my projects. I don’t have to watch their quality, nor do I have to worry about them making mistakes. Providing I have done my part with good construction drawings, and my clients have selected their finishes and those are on the job, I am confident that their tasks are completed at a high quality level and correctly at the technical level. When I interview a trade to join my vendor list, I ask specific trade related questions and know the answers I should hear. I look at their tools, what kind of truck they drive, how many employees they have, how busy they are, and with whom they are working. As I often say, trades today are part of a permanent underclass and many of them are unemployable. Either they cannot pass a background check, can’t show up to work on time, don’t play well with others, or have a chemical addiction. I can typically weed those out in the initial interview. Sometimes it takes the first job to see the full picture.
I do little business with Home Depot and Lowes. I find their pricing higher than contractor lumber yards. I have to pay my men to load and deliver materials because the delivery resources for these stores are too arduous with lengthy wait times. They also compete against me in the market, providing many home renovation services. Most importantly, their employees have little knowledge about the products they sell and much of their advice, when it is available, is inaccurate and unhelpful.
Full service contractor-oriented lumber yards are preferred. Although the help is sometimes impatient with novice builders, I find that it is easier to speak with those who are familiar with what I need and operate at that level. By the way, never allow your builder to charge your materials on a retail credit account or personal credit card. Lien laws are specific. You could find yourself with a materialman’s lien on your property if your builder doesn’t pay off the entire balance of your materials on his card.
Builder’s Discounts on Materials
Any builder who has a large portfolio of projects going concurrently has no time for price shopping or price comparing. We tend to stick with the vendors who make our projects run smoothly. A client’s happiness is a direct result of the success of his or her project. Saving a hundred dollars here or a hundred there will necessarily take time and attention away from those critical tasks required to keep the project on track. Only the lowest bidding, desperate contractor does otherwise. Again, in this time of robust construction and high performing economy, why would any builder be desperate?
Material quality is directly associated with the costs of those materials. Cheap materials equal cheap quality. This correlates with higher labor costs and warranty issues after substantial completion. A client asked me to use a stock of reclaimed lumber he had harvested from an old barn to save money on materials. The lumber was weathered, crooked, and ridden with nails. I explained that any savings over new materials would be eclipsed by the labor required to bring the materials to a useful state. Pulling nails, straightening the lumber so it could be used, culling the bad materials from the useful, and double moving the materials from source, to reclaiming, to building pile, all represented a large labor cost. As expensive as materials are, labor is more valuable and more expensive. Many homeowners discount the value of labor because they generally perform tasks on their DIY project at no cost for their time. Labor isn’t paid at a cash register so it is negotiated down to near slave labor rates. Qualified artisans will not work for discounted wages if they are skilled and not desperate.
My trades manage a bottom line. My trades are concerned with satisfying one of their biggest clients, my company. My trades know no other way to do things than the right way. They realize that repairs, warranty work, and unhappy clients hurt their business and their margins.
As a builder, I don’t like conflict and stress. My criteria guarantees that my life is easier. The result is that my clients’ lives are easier and stress free. All of these things bolster my bottom line and reputation as a builder. Saving a couple hundred dollars on a given task will always prove expensive and destructive.
My job is to protect my clients’ money and their project. This is one of the biggest ways I ensure success in both areas.