Friday Rant: Maintenance, Repair & Rehab Contracting Visibility is Possible

Gregg Brandyberry contributed a great story yesterday about how the condo association board for his building of residence saved nearly 75% over what the property management company had proposed for brick pointing maintenance. While I'm sure Gregg was the architect of the subsequent bidding process, he credits the board with the savings and for firing the property management vendor. The following comment to the post is also enlightening and provides some fodder for this Friday rant: "We've also learned that scope creep is alive and well in the condo repair world. I'm sure that even if the low bid ends up doubling (they always seem to find more problems than what they bid), you will be better off. It's amazing how little price transparency exists in these types of building construction trades!"

Gregg's account clearly elucidates that outsourcing property management does not necessarily include financial responsibility. But whether the property owner(s), condo board or management company designs the bidding process for work to be performed, there are a number of elements to be considered before we acquiesce to the apparent opaqueness of dealing with construction trades.

First off, consumers and trades people do not speak the same language. A trade is a skill, developed over years of hard physical work that cannot be easily described or legitimately commoditized. Add to this that most trades people are not typically the best business communicators and prefer to just "put a number on the job". The way to break through this conundrum is to maintain respect for the skills required to perform the work and clearly specify the quantitative and expert information desired in the RFP by requesting the following:

- In the case of large ticket projects, hire an experienced (perhaps retired) GC to thoroughly assess the scope of work and provide trade specific vocabulary for the RFP. This will also put bidders on notice that you know precisely what the project requires.

- Establish a clear pricing structure for bid submissions:
1. Material - exact specifications, contractor's cost and transportation cost
2. Labor - Number of workers required by trade, including levels of skill required (laborer, journeyman, master etc.) and associated hourly rates. A variable estimate of min/max number of hours to completion can also offer savings. If a firm bid is preferred, it will be higher as the contractor will need to hedge risk on the max end of the spectrum.
3. Overhead and Equipment - Specify operating overhead % as well as equipment day rates: owned, leased or rented
4. Profit - Contribution margin as additional percentage of total actual cost

Second, non-nefarious scope creep results from all construction projects being custom by nature, especially maintenance, repair and rehab -- no two jobs are ever alike. By asking the bidder to declare their perception of how the job will progress along with factors that could arise in process, will not only provide "scope creep transparency" but also indicate bidders' comparative experience with similar projects. Contractor's almost never provide this information (unless asked) for fear of scaring the potential client and losing the contract.

And finally, as with all suppliers, nurturing open communication will facilitate far more transparency into future required projects and even truncate future cost through early detection and intervention. No one likes to be the messenger or bearer of bad tidings. A painting contract, for example, seems simple enough -- but you also want to encourage the painting contractor to disclose rot and other deterioration that you wouldn't otherwise be aware of before they caulk and patch it up. "Scope creep" -- thanks Lisa, I love that phrase -- is inevitable and will be far less costly when the specific risk of it occurring is stated in the original contract.

William Busch

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