In the last article we talked about how to organize your metal roofing business in a way that others will consider your company “lucky”. In this article, we will talk about how to protect that business from external and internal forces. The outside forces include owners, specifiers, contractors, subcontractors, suppliers, governmental agencies, etc. The inside forces include financial controls, technology, and, of course, employees. All of these groups are necessary for a successful contracting organization, but need to be controlled in order to have a reasonable expectation of consistent success and security.
We will talk about these forces individually.
External Forces:
All metal roofing business should include an appropriate contract between the building owner and the contractor which is based on a set of plans and/or specifications that adequately describes the expected work. If you are a contractor that has a contract directly with the building owner, you must do the following with respect to the contract, plans, and/or specifications:
- Specifications: Prior to preparing an estimate for any metal roofing work, you must read and understand the specifications prepared for this work. This document was prepared on behalf of the owner to properly describe what metal roofing work the owner wants. Many problem jobs could have been avoided by understanding the owner’s intentions prior to the job being estimated and started. If the contractor has questions about the intent or details of the specifications, he has the responsibility to talk with the owner or his representative prior to a contract being signed. The contractor looses a significant amount of his negotiating power concerning the specifications after the contract is signed. Don’t skip over the “boiler plate” front end of the specifications and assume that they are like the other specifications that you have seen before.
- Plans: Most projects will have a set of plans further identifying the work associated with the project. These plans will have a roof lay-out and details showing the contractor how the owner and his specifier expect the finished product to be installed, as well as the final appearance of the metal roof. As with the specifications, these drawings need to be reviewed with emphasis on understanding the intent of this project. Do not assume that your manufacturer’s details will automatically accepted by the specifier. If you think you have a better way to perform a detail, make such a suggestion to the specifier, allowing ample time for him to respond prior to the designated bid time. Agreeing upon acceptable details is essential to having a positive expectation for a project.
- Contracts: After the plans and specifications have been properly reviewed and understood, and a successful proposal has been accepted by the owner, it is necessary that a contractual relationship be created between the owner and the contractor. In most cases the owner will provide such a document that will be tied to the plans and specifications. The contractor should have an acceptable contract to use in case the owner does not have such a document. As a minimum, the contract should define the following:
- Owner
- Contactor
- Specifier
- Contract Amount
- Payment expectations and procedures
- Insurance requirements
- Time frame for the worrk (Liquidated damages, Time extension procedure)
- Plans and specifications
Just like the plans and specifications, you must review the contract and make sure that you agree with its terms and conditions prior to signing the document. If a conflict arises between the contractor and the owner, the first document that is reviewed is the contract to determine what the parties had agreed to do prior to any work commencing. At that time, it is too late to introduce verbal understandings, or disagree with the terms of the contract. Don’t merely make sure that the dollar amount is correct before signing a contract. Read the document, understand its content, and agree to abide by its terms throughout the contract period.
- Governmental Agencies: The two (2) most important governmental agencies that affect the metal roof contracting process are the building department responsible for interpreting the applicable code requirements and the local OSHA agency having jurisdiction over the project. Both of these agencies have published requirements identifying their expectations. In spite of how the plans and specifications are prepared and what the contract states, the contractor has a legal responsibility to perform the metal roofing work within the guidelines established by these agencies. Take the time to have a working knowledge of their restrictions and insure that everyone in the contractor’s organization is required to follow these restrictions. While enforcement of these regulations seems random, the contractor that assumes that either agency will not “catch up” with them is recklessly exposing the company to being found outside the boundaries set forth in their regulations. The penalties and/or rework associated with any infractions can cause devastating negative financial results for the company. Don’t treat compliance as something that you will do when you can; rather, something that is a necessary element of every metal roof project.
Internal Forces:
While there are external forces that effect a contractor while completing a metal roofing project that are beyond there direct control, he has many aspects of the process that are internal and under his control. These are the areas of the contracting process that need to be identified and controlled in order for the contractor to be consistently profitable. The most important areas are as follows:
- Estimating: After the plans and specifications are reviewed and understood, there needs to be a written and detailed estimate prepared. This estimate should break down labor, materials, subcontractors, equipment, and other charges. These items and associated quantities and current pricing should accurately reflect the contractor’s expected direct cost for the project. After this process is complete, a mark-up that will cover the contractor’s overhead costs and expected net profit should be added to the direct cost to yield a selling price for the project. Make sure that you do not “fool” yourself into looking at the expected costs to yield a pre-conceived number. Prepare a reasonable estimate or your project is doomed from the start.
- Job Cost Controls: After a contract is secured, the contractor must establish an easy to use job cost system to monitor the project during construction. This is accomplished by taking the final estimate and entering the estimated line items into a computerized method to compare actual costs and man-hours used to estimated costs and man-hours. There are many software programs that do this task, or the contractor can prepare a spreadsheet for this task. Whatever system is to be used, the contract must continuously monitor the relationship between actual and estimated throughout the entire project. Waiting until the end of the project to determine the final actual costs eliminated the contractor’s ability to correct any cost over-runs during construction.
- Subcontract and Purchase Orders: In order to control the direct cost of the material and subcontract items purchased the contractor must have a standard subcontract form and a standard purchase order system. A subcontract should be issued for every company that will be supplying both materials and the labor to install the materials. The subcontract should be tied to the portion of the contractor’s contract with the owner that affects the subcontracted work. It must include the same items that are necessary in the contractor’s contract with the owner, including the necessity for the subcontractor to provide a current workmen’s compensation and liability insurance certificate with the signed subcontract. The contractor should be named as an additional insured. With respect to the purchase order system, all materials purchased from the contractor’s office should require the issuance of a purchase order. In the field, a small purchase order system should be implemented to allow the field foreman to purchase necessary field materials up to a certain assigned spending limit. The combination of these systems allows the contractor to continually monitor materials purchased as well as insure that vendor invoices are matched with purchase orders and paid properly.
Each one of the above areas of concern for a contractor needs to be identified and controlled by the successful contractor. While there is not enough room in this article to adequately explain the intricacies of each individual item, the contractor should identify that these areas are important for his continued success. Merely “working hard” and hoping that negative things do not happen is too large of a risk for the smart metal roofing contractor to take. Watching these areas, whether external or internal to his operations, along with “working hard” will insure the contractor that he has done what is necessary to protect the company. As we all have proven to ourselves throughout our lives, it is always better to do it the right way the first time. Do it and enjoy not only the success of metal roof contracting, but, also, the security that it can be maintained into the future.
For more information about the many aspects of how to prepare your business to be able to take advantage of the metal roofing market, contact Chuck Howard with Metal Roof Consultants (MRC) at (919) 465-1762. You can also get information about MRC at their website, www.metalroofconsultants.net.
