Editors Note: This article was adapted from an article written by Levelset CEO Scott Wolfe Jr. for CFMA Building Profits. You can find the full publication, including an extended version of this article, here: CFMA Building Profits (January/February Edition).
Managing a construction project is an art form. Construction managers have mastered this art, and they’re charged with organizing the controlled chaos of a construction project. With this responsibility comes plenty of stress. Construction managers don’t have the same types of fears that those at the bottom of the pay chain do, but there’s plenty to worry about.
- Is the project on schedule?
- Is everyone getting paid?
- Is the customer happy?
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Managing a Construction Project Requires Collaboration and Transparency
These fears are far different than those at the bottom of the payment chain. Most typically, subs and suppliers are worried about whether payment is coming on time and what will happen to their retention. But all of these fears come from the same place. Construction projects take the cooperation of a number of different business and individuals, and keeping everyone happy (or at least happy enough) is a full-time job. Most typically, the best way to do that is to be sure that money is getting to where it needs to be when it needs to be there.
So what can construction project managers do to keep the money flowing and everyone content? They can SET the job up for success.
The 3 F’s Of Construction
No, we’re not talking about the dirty words you mumble when your subcontractors screw up. We’re talking about fears, frictions, and fires – all of which can lead to an unhealthy construction project (and all of which are present on almost every job). Let’s tackle them 1-by-1. Afterward, we’ll discuss how to avoid these 3 altogether.
How often do you know who is supplying materials for every subcontractor? What about their subs? Depending on the state, these parties may be entitled to lien rights. That means if they go unpaid, it can throw a wrench in the entire job.
That’s a scary proposition!
Businesses and individuals you don’t even know could put your professional livelihood at stake. That’s a tough pill to swallow, and it makes managing a construction project a lot more cumbersome.
Fears lead to friction. Due to all of the unknowns that might affect a project, everyone along the payment chain insulates themselves by shifting risk onto others.
Construction project managers, contractors, subs, suppliers – they all do it. They introduce confusing and burdensome paperwork that adds frustration throughout every step of the project. As frustration brews, trust erodes. These frictions create a breeding ground for payment disputes, which leads us to…
If nobody trusts each other on the job, when problems pop up, each party immediately begins shielding themselves and pushing the blame onto someone else. Heated exchanges take place, threats are traded, and if things really get bad, lawsuits erupt and liens get filed.
Disagreements are bound to happen when there are a number of independent businesses who must work together. But fires go beyond these mere disagreements and turn misunderstandings into full-blown battles.
Avoid The 3 F’s By SETting Projects For Success
My caps lock isn’t broken. “SET” is an acronym, and it’s one that will help to avoid fears, frictions, and fires. Managing the relationships on a construction project is as simple as seeing everyone, making paperwork easy, and talking it out.
See Everyone, Reduce Fear Of The Unknown
It’s one thing to be afraid of something you’re aware of, but fear of the unknown can be crippling. On a construction project, the solution is to see everyone. That means creating an atmosphere where information is easily accessible, and everyone on the project is encouraged (if not required) to send informational notices.
Managing a construction project requires a good understanding of who is performing the work. When every project participant has raised their hand and says “Hey! I’m here!”, it’s easier to know where issues could pop up and to prevent them before they even start. On top of that – data and tools are available online to help fill in the gaps in information (ever heard of Levelset’s Scout team?).
Make Paperwork Easy, Reduce Frictions
This can be a tough one, but it’s important. That novel you call a contract is probably overstuffed with all sorts of “requirements” that no one even reads or understands. It’s understandable, construction is a risky industry. But by having your lawyers install failsafe after failsafe, the trust between you and your contractors and subs erodes. Paperwork isn’t for posturing, and those lawyers aren’t writing the contract in a way to avoid disputes.
Using your position as a construction manager to force others to take on risk and responsibility may feel like it helps in the short run. But, at the end of the day, if someone’s going to sue you, they’re going to sue you. When you email your unpaid contractor claiming section 12.3.1(c) of your contract protects your position, they’re still going to be angry, and they will still proceed with the suit or lien that they were going to use anyway. When the dust settles, you might come out on top. But wouldn’t it be better to avoid the whole thing in the first place?
Here’s a better option: Make paperwork clear and streamlined. We’re not saying you should go back to the good ol’ days of handshakes (those were probably overrated anyway). No, we’re simply saying that if your paperwork requires a team of lawyers to perform mental gymnastics, there’s room for improvement. By giving contractors, subs, and suppliers agreements they can understand, they’ll know you’re treating them fairly – not hiding behind a wall of text.
Talk It Out, Reduce Fires
Not every molehill deserves to be a mountain. If left unattended (or worse – if fueled) any given fire has the potential to burn an entire project to the ground. A common dispute with a contractor can lead to them throwing a fit. If that contractor feels stiffed, they might not pay their subs. If those subs aren’t paid, they can’t pay their suppliers – and so on down the chain.
It only takes one lien claim, lawsuit, or stop notice to freeze the funding for the entire job. Try making a draw request with an outstanding lien…
Talking it out, rather than hiding from the problem or summoning your lawyer, can help keep everyone at bay. But talking it out with your contractor isn’t enough. Creating a project where everyone is encouraged (or required) to talk it out can help to nip issues in the bud.
Don’t fall for the trap, though. Communication doesn’t mean shooting one email, sending one text, or even leaving a voicemail – that just looks like communication. Rather, be open and direct. If that means exchanging a few emails, swapping text messages, or taking a phone call – so be it! But both parties should leave every conversation with a clear understanding. It doesn’t have to be butterflies and rainbows – but by avoiding the four-letter words and bringing in the law dogs, most problems can be hashed out before disaster ensues.
Managing a Construction Project Means Managing The “Entire Payment Chain”
It’s not enough to be right. Meaning, you can obey all the rules, do things by the book, and follow industry best-practices – that’s all well and good. But obeying industry-standard norms will get you industry-standard results. Take a look around! The construction industry is overwhelmed with frustrations, distrust, and lawsuits. It’s time for a new “best practices”.
In order to get the most out of your projects, it takes collaboration from everyone on the job. Ask any contractor – the best jobs they’ve done have been a result of everyone being aligned from the get-go. This empowers trades to work together and proceed toward the goal of project completion (rather than solely looking out for their own interests). That can only happen when nobody has to look over there shoulder for the next time they’ll get screwed. By managing relationships all the way down the construction payment chain, payment disputes are prevented before they even start. And, if a problem does pop up, the payment chain will be more inclined to collaborate and work it out.