The lead article in my local Business Journal was on the recession’s impact on our architect community. The author’s sources estimated that 30% of the city’s architects had been put out of work. AIA National estimates that 40,000 positions have been lost nation wide since July 2008.
My heart goes out to everyone who has lost their job, but it especially goes out to our architects. Few in our industry realize how hard an architectural degree is to earn and how poorly they are paid.
I will never forget my first week in college. My dorm floor was flooded with wanna be engineers who were getting settled in to our new digs, getting used to a class load of physics, chemistry, and calculus and figuring out who our new friends were. We had all received a shock at the difference between our college courses and our high school courses. But we had it easy compared to the guy that lived across the hall.
One week into school, literally our first full weekend, this guy was having to pull an all-nighter. And guess what field he was studying?
You got it.
His all-nighters didn’t stop that weekend. He pretty much had to pull them for five years. That degree is crazy. It takes such incredible talent and dedication to earn and when they enter the working world, they get paid peanuts.
The article went on to mention a trend that contractors have been experiencing: even when you make a selected short list, the list isn’t really very short and it is filled with competition that is every bit as qualified.
Guy’s last blog entry mentioned that his show audiences had enjoyed decent years. Those contractors probably represent a very small segment of the industry. The cold hard data shows that the implosion of the banking industry has taken a severe toll on the construction industry.
A lot of great, hard working, salt of the earth people are struggling to get by. Hopefully, the people in D.C. and on Wall Street can get their act together and straighten this mess out.
After much bantering back and forth over the past several months, we have decided to adjust our RISK-FREE offer for club membership. A new membership now has two types of guaranteed satisfaction.
You can sign up for a free 30 day trial membership OR take advantage of our three month or annual membership discounts complete with a 30 day money back guarantee.
Don’t wait too long to take advantage of this most generous offer. As soon as we strike our deal with a third party service provider who shall remain nameless, the $19.98 monthly full access price for new members will go away.
We will still offer a base rate of $19.98 but it no longer give new members access to our presentations and other advanced features. Existing members will be grandfathered as long as they keep their account in good standing.
Act now and gain full access to all of our proven solutions for 30 days absolutely FREE. Click here to join.
We’re pleased to announce that the discussion board on our membership site is now active.
Members can introduce themselves, ask questions, seek opinions, and compare notes. We have created sections for each major business function to keep conversations focused and organized. The board contains all the usual discussion board features with one notable exception: in this case only contractors committed to growing their business will be posting. That’s quite a change from most discussion boards.
If you’ve ever ventured over to a free discussion board, you’ve probably noticed the discussions often devolve into petty little cat fights. We will not allow that to happen on the club’s board.
Guy and I will be monitoring everything and clarifying suggestions that we believe violate sound business practice. That feature is missing from most forum dialogues.
As our series on Construction Bonds draws closer to the end, we’re going to take a look at two big ones — payment and performance bonds.
These are very significant and similar bonds. And are also among the most common construction bonds in existence. In fact, contractors will often see these bonds issued together as one “Performance and Payment Bond.” Their individual and collective function isn’t much of a mystery.
What They Provide
A performance bondensure that a contract will be followed to the letter and that work will be completed — or that appropriate financial compensation will follow if the wheels fall off. A payment bondguarantee that workers, suppliers and other key stakeholders get paid.
These bonds are crucial for most construction projects, especially those that involve public tax dollars. For example, mechanics liens can’t be placed against public property, so payment bonds are basically the only protection available. These key bonds are actually required by law for most public works projects, including all federal projects that cost more than $100,000.
Filing Bond Claims
If a subcontractor or other party hasn’t been paid, they can file a claim on the bond. If it’s deemed valid, the surety company issuing the bond ensures the claimant is properly compensated, either by the contractor or, at last resort, the surety itself. Then the surety company will seek to recoup the damages from the contractor.
Purchasing These Bonds
Performance and Payment Bonds are typically purchased during the period of contract negotiation for the project. Surety companies and surety bond issuers scrutinize an applicant’s financial history, company and work history, management team and other key factors before deciding whether to issue a bond.
Rates for these bonds shift depending on an applicant’s unique financial and credit status. The market has leveled off a bit in recent years, but contractors should expect a stringent, straightforward underwriting approach.
Contractors without solid credit or significant experience may wind up needing high-risk bonding. There are companies that specialize in these types of bonds, although the rates are definitely higher because of the added risk.
Is one of your projects on hold due to funding problems?
If so, we may have found another funding source for the project’s developer. Pass the following onto them (via the General Contractor).
NorthStar Funding Group
877-281-6660 (toll free)
APPARENTLY NorthStar Funding will loan up to 90% of project value.
If the unstable bank situation is holding up one of your projects, give Carl a call to see whether your project may qualify.
If you are a subcontractor, copy and past this information into an email and send it the project’s General Contractor or CM. With the construction economy dragging as badly as it is, aggressive action is in your best interest.
If you’d like to discuss with me before calling Carl, drop me an email (firstname.lastname@example.org) or call 913-961-1790. I’ll share what I know.
Be Forewarned: we are not vouching for Carl or NorthStar. We know nothing about the legitimacy.
Maintenance Bonds are another key cog in the world of Contract Bonds.
They’re also an essential, typically mandatory method of risk management for project owners, municipalities and others.
How They Work
These surety bonds come into play upon the completion of a construction project or some other job requiring legitimate bonding. Maintenance Bonds guarantee that the work performed is up to code, follows the contract and is otherwise without defect or problem. These bonds generally provide protection for project owners against design defects, workmanship faults and other problems that can occur during the construction term.
Project owners, governmental authorities and others with a financial stake can file a claim against the Maintenance Bond in the unlikely event that there’s a problem. At that point, the company that issued the surety bond is responsible for ensuring the issues are corrected or the parties are financially compensated.
A Short-Term Solution
Project owners need to remember that a maintenance bond is a short-term solution. They are only effective for a limited time to cover any problems that may stem from faulty work. Once they expire, any problems or defects are the responsibility of the owner. These are not a substitute for insurance or some other type of property or site maintenance plan.
It very is beneficial to find a agent who specializes in construction bonds as they will be able to help streamline the process for you. You will also be expected to give the same information required of bid bonds, including the application, owner’s resume, business financial statements, and the owner’s personal financial statements. The contractor will also have to sign an indemnity agreement so the surety won’t have to worry about financial loss, so any claims from the bond will eventually be repaid by the contractor.
The contract bonds series is courtesy of SuretyBonds.com, a nationwide surety bond agency.
Kevin Kaiser is a principal with Surety Bonds.com, a nationwide surety bond agency. Please visit surety bonds to learn more about contract bonds or request a quote.
Thought we’d pass on a few stories that have come our way recently. They really demonstrate the magnitude of the melt down.
The first comes second hand from a local saw mill owner. He opened his mill in the mid-60s. He recently told a mutual friend that he has NEVER seen the economy this dead. That’s saying something considering the number of recessions he has personally survived including the horrible 1982/1983 recession when no one was building anything.
The second story comes from a paving maintenance contractor. He went out to price a simple pot hole repair and was stunned to discover that an asphalt plant offered to fix the pot hole for about half the price. To put that into perspective, asphalt plants usually chase road work and only drop down to installing NEW parking lots when times get tough. Them doing a patch is unheard of. Their overhead alone would be more than the price of the job.
Our third story comes from an electrician I know. He went after a new project very aggressively. The project was prevailing wage so nobody had a wage rate advantage. He assumed his production would be quite a bit higher than normal, and his crews are already incredibly fast. He slashed his margin…and he was more than 10% above the low bid! The winner has NO CHANCE of getting out of the job with his direct costs being below his price.
Our fourth story comes from a large, regional multi-family remodeler. He has built an amazing business over the last two decades but, as he just discovered, no great strategy goes unpunished. He had focused his business on a highly specialized niche and at a size that served large, publically traded property owners. He owned his niche. Unfortunately for him, his clients have cut their spending by 80%. 80%! They have no money so this contractor, who has done everything right for over 20 years, is forced to slash staff and overhead costs just to survive.
Our final story comes from a mechanical service contractor. Here is another contractor who excels at keeping clients happy and loyal. One of his previously SUPER LOYAL clients was planning on expanding part of his mechanical system and had always just handed the job to this contractor because they did his work on a time and material to a GMP basis. This time the work will be bid by eight (8!) other contractors – all at the advice of the design team. Stupid design team.
These stories came from coast to coast, North to South. It’s not just in your area. It’s happening everywhere. Dig in and get everybody inside your company giving their all. Their future depends on it.
After three years of content generation and six months of site set-up, the www.FilthyRichContractor.com Private Club’s doors have official been thrown wide open. New members are joining daily to access our set of integrated business systems for organizing and growing a construction business.
All of the systems and solutions are field proven. They work in the chaotic and challenging world that is our beloved construction industry.
The club is for the Do-It-Yourself business owner who is looking for a solution to a pressing problem, validation that he or she is on the right path, or simply is ready to build a business that will produce the riches and freedom ultimately desired.
To see the vast amount of content we’ve stored in within the club, click here.
Just finished my three week preparation for the LEED AP test. Pretty much had to put everything aside, including launching our new private club, to take my shot at the last opportunity to become a full LEED AP “easily.” I got lucky and passed. Not sure how.
Never have I heard of or experienced such a difficult test that so many people have passed with no intention of putting their certification to use.
Hundreds, probably thousands, of contractors have passed down the edict that their staff shall earn their LEED AP. For the most part, they are using them as a marketing tool as most of the certification processes will probably be led by design consultants.
I plan on putting my certification into action at first chance just to stay ahead of the game.
LEED is going to bring tremendous new opportunities and challenges to your business.
The last few weeks I’ve been cramming for the LEED Commercial Interiors AP exam. It’s a bear of material to memorize. It’s also turning out to be information well worth knowing.
Rest assured, over the next few years green building construction as defined by the LEED certification process is going to be a Tsunami of change crashing upon the construction industry.
A huge chunk of public work is going to require LEED construction techniques. I’ve been hearing rumors about pressure being applied to Fortune 500 companies who receive government contracts. Don’t be surprised if several of the techniques work their way into building codes.
No trade is going to be left untouched. My former trade is one that is suffering some of the most dramatic impact.
Prior to jumping sides, I was a consulting mechanical engineer who designed, commmissioned, and retro-commissioned many a mechanical system. I often went into the field to take performance data on existing sytems, designed retro-fits, verified system start-up, tested control systems, and tuned control loops. Many of the services our select manufacturing clients valued – and no commercial clients ever were willing to pay for – are now being required by LEED.
To say that I am shocked and delighted would be a grand understatement. The positive impact on mechanical engineers, mechanical contractors, test and balance contractors, and operations and maintenance staffs is almost mind-boggling. Finally, buildings and their occupants will receive mechanical systems that operate as they should to maintain comfort and health with minimal energy consumption.
Your trade will be touched. Bank on it.
Your costs will rise as productivity drops, materials cost more. material handing consumes more time and the volume of paperwork sky rockets.
My recommendation is:
1. Learn the LEED requirements that apply to you.
2. Take on a couple of small LEED projects to get a feel for the change in job costs.
3. Build your strategy to take advantage of competitors who fail to respond to the rapidly changing landscape.