Gilbert Cost Control Consultants Corp.

I had an interesting discussion with the head of a large Wisconsin-based general contractor today. We were discussing his company’s strategy for getting work in today’s extremely competitive environment when he said “There are some contractors out there who are doing highly unethical things to stay in business right now.” When I asked him to explain he continued, “They tell the owner that they are going to perform the work for 1-2% profit and overhead. You and I both know this isn’t possible. Once they land the contract, the contractor does three things to increase their margin:

1. They push on the low bidding subs to lower their prices even further which forces the subs to either sacrifice quality or what little margin they had in their bid. This endangers not only this project owner but it also puts every other owner and general contractor working with these subs on other projects at tremendous risk because the subs chances of going out of business just increased exponentially.
2. They look for every opportunity to change order as much as they can at as high a rate as they can.
3. They charge ridiculously high rates for their equipment and bill as much equipment into the project as they can for as long as they can.”

When I asked what his firm’s strategy is to compete with this type of behavior he said, “It’s tough. If you tell the owner the truth–that you have to make a reasonable profit on the project, you’ll lose the deal. If  you want to compete, you have to be able to stay at the table.”

A word to the wise from your friends at Gilbert Cost Control Consultants Corp.–if the deal looks too good to be true, it probably is. An informed owner needs to quantify the actual costs and risks of choosing the lowest bidder. For a list of questions you should be asking your contractor, give me a call at 608-516-2414 or drop me an e-mail at gilbertcostcontrol@gmail.com.

Tags: ADA, architecture, BOMA, building, building owners and managers association, construction, construction equipment, construction ethics, construction management, construction problems, Dane County Dental Association, design, design-build, development, facility management, facility manager, general contractor, IFMA, industrial construction, low bids, office construction, owner's representative, risk management, school construction, TEC, Vistage, WALA, WASBO

This entry was posted on Friday, July 2nd, 2010 at 12:19 am and is filed under Blog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.