Current Economic Trends In Construction and How To Navigate the Rocky Waters Ahead
2020 was an unprecedented, unpredictable year for businesses across the country. What will next year hold for the construction industry?
What we’ll cover:
- Expectations and red flags to watch out for in 2021
- Best practices to ensure timely and complete payments for work performed
- How to secure your ability to get paid in the event of a funding crunch
Our panel will include:
- Adam Handfinger, construction attorney and co-founder and Advisory Board Head of Document Crunch
- Mike Balter, Regional Marketing Partner at Marcum LLP. Mr. Balter focuses entrely on constructon accounting for contractors at one of the largest accounting firms in the US.
- Scott Sherry & Rachel Rosenzweig, CFO and Controller respectively at RCC Associates. RCC is a General Contractor that works all over the US, building high-end retail and restaurant projects.
- Alex Dunn, construction payment expert at Levelset
Alex Dunn: (00:14)
Welcome everybody. Yeah. Good afternoon. And, uh, I guess good morning if you’re on the West coast. Thanks for joining us over here at level-set. Uh, we have Adam hand finger today, uh, from document crunch who I’m going to let, basically run the whole show. Uh, we’re really, really excited to have him and all of our special guests here today, uh, to talk about, you know, the current economy around construction, what we’ve seen this year and really like what are some actionable steps we can take as we go into next year? What are, you know, our guests seeing we have really diverse perspectives and I’m really excited to hear them. So without further ado, Adam, tell us, get, take it away.
Adam Handfinger: (00:53)
Thanks Alex. So first before I get started, because I know I’ll forget at the end, thank you to level-set for putting this together. Um, I’ve done a bunch of webinars with, uh, with tech companies over the last two years, and this was definitely the most organized and well run thus far. Hopefully we won’t hit any snags out now that I’ve said that, but thank you so much, Alex, to you and your team. I mean, this technology doesn’t always want to cooperate with us. So, so the idea of this, um, of this webinar is to get different perspectives on what’s happening in the construction market. What are we expecting for 21 and 2022? Um, and what are some of the red flags that as contractor suppliers and subcontractors, um, you all can look out for to know whether you’re, and if you’re on a project where there might be a problem.
Adam Handfinger: (01:44)
So when we started talking about putting this together, um, the folks that we have on the call are actually the first that came to mind for me is it’s panelists. And I’ll, I’ll hand it over to each of them to sort of introduce themselves, tell us about their company and, uh, geographically, what markets they serve. Um, cause it’s all pretty broad. And I guess, uh, Mike, I’ll start with you, um, for the audience benefit, Mike and I frequently speak together at least two or three times a year. Um, so this is not new ground for us. I always say that he is to construction accounting, what I am to construction wall. So with that, with that, Mike, why don’t you, whatever we’ll know who you are and what your role is at Markham and what Markham is
Mike Balter: (02:25)
Great. Now thank you with Adam. And I guess with all the times that we have spoken together, this is the first time I’m looking at you in a Brady bunch box, if you will, uh, as you see the faces, usually we’d like to see live audience and get the feel of the whole group. So this is definitely a new experience and new uncharted, uh, uncharted territory to say the least. Um, but thank you for the invitation. Uh, again, my name is Mike Balter, I’m the regional managing partner of Markham, uh, but more important. Um, I live and breathe in the construction industry, you know, in terms of, uh, where it’s probably worldwide. We have contractors kind of all over the world, as well as all over the United States. Um, and it’s just kind of what I’ll call our inner fabric, especially at Markham, just helping them from any kind of accounting needs to advisory needs. And we’ll talk a little bit more about just kind of what I’ll call the pulse of what our contractors are seeing. And I guess when I use contractors, I use that term phrase loosely. It could be general contractors, subcontractors, and could also be just service providers, but definitely very happy to be here and looking forward to a good hour, hour and a half.
Adam Handfinger: (03:30)
Great. Um, Scott, I’m going to flip it over to you to introduce yourselves and Rachel and, and RCC associates. Before I do that, I’ll, I’ll say, um, my relationship with RCC associates and some of their affiliated entities goes back, probably the length of my entire legal career, which is almost 20 years now and beyond. And even before that, so tons of respect for this company and watching it grow and pivot over the last decade or so, um, and you know, really happy that both Scott and Rachel kind of give their perspective, but Scott I’ll pass it over to you. And Rachel, to kind of introduce yourselves, let everyone know who RCC is and what you both do there.
Scott Sherry: (04:10)
Okay. Thank you, Adam. And likewise that, like Adam said, we vote that both racial I personally and RCC professionally, if enjoyed a long decades, long relationships with Adam and Michael and, uh, we’re really thrilled to be able to be working with my name is Scott Sherry. This is Rachel Rosenzwieg. Um, uh, I’m the CFO and Rachel’s the controller of RCC associates. Um, we’re a general contractor that we primarily focus on, you know, retail restaurant and hospitality work. Uh, we’re located in South Florida in Deerfield beach, Florida. Um, most of our work is in the South Florida region. However, you know, we, we, we work throughout the country to service our clients. Um, in many different States, we’re licensed in 31 different States. Uh, I mean we have more of a focus in the Southeast portion of the state, but we learned this flood just in the last couple of years, as far as Hawaii and Seattle. So, so we, we really do have coverage all over the country.
Speaker 2: (05:09)
Scott it’s, it’s actually, um, a little bit hard to hear you. I don’t know if you could maybe move a little bit closer to, yeah, we just got a chat, a comment from someone that it was hard to hear. Um, before I introduce myself, I’m going to, uh, flip it over to Alex. A lot of people on the webinar, um, registering lists are likely familiar with level-set, but I happen to know that a good number aren’t since we all kind of promoted this. So it may make sense just to take a minute, Alex, if you know, what’s a level set, high level overview, and what’s your role there? Oh, you’re on mute, Alex.
Speaker 3: (05:42)
How about that? Um, thank you very much. Yeah. So at level seven we have, uh, our core mission and purpose is to empower contractors to get what they’ve earned. Um, and that’s all about, you know, managing and working through the complexity of construction payment. So we help in,
Speaker 1: (05:58)
You know, a handful of different ways. We have a software that helps you manage your lien rights and deadlines, pay applications, things like that. We have a couple thousand blog posts and articles written about managing and getting great at your job and being a confident, you know, AR professional or credit manager or whatever that may be in your role. We have payment profiles that allow people to see the payment history of different contractors and make sure that they don’t start working with someone who, you know, may slow pay them and wait 90 days to make a payment. And we have a great, amazing attorney network. Um, folks like yourself, Adam, um, who are on the level-set website, answering questions of our anonymous users that are having, you know, payment issues, um, that, that are stressing them out and causing a lot of pain in their, in their business. And, uh, they’re able to come to us, ask the question and have our attorney network help them, um, manage through those, those hard times. So at the core we, uh, we find as many ways as we can to produce really helpful content and really helpful solutions to get people paid in construction.
Speaker 2: (07:00)
Okay. Thanks Alex. So, um, I’ve been speaking a bunch, but I haven’t really presented who I am. So my name is Adam hand finger. Um, I run the Miami office of a national construction law firm with offices all over the country. I’m board certified on the state of Ford and construction law, but I really cracked is national. And, um, and even, and even beyond, um, about two years ago, I founded, um, a technology platform with, with some consistent, um, visions, uh, as far as, uh, with level set it’s called document crunch. Um, and what it is is it’s basically a way for contract documents and insurance policies to be reviewed quickly. Um, we have artificial intelligence algorithms and I’ll circulate this PowerPoint afterwards. We’ve got, um, artificial intelligence algorithms that will find over 40 provisions in your contracts. Um, we’ll find provisions in your insurance policies and the policies of those you’re working with.
Speaker 2: (07:58)
You can make sure that they comply. Um, and we’ll also find hidden risks in plan notes and technical specs. So it’s a very good tool to, um, help folks who don’t necessarily have the resources to pay for outside counsel or in-house counsel to get the benefit of some of, um, our, our thought leaders. Um, you know, what’s important to them in the contract and to help you find it, um, at the end, I’ll give a discount code, um, to use at the site and, um, as well as some contact information for this study, if you’re, if you’re interested, um, with that, I’d like to jump into the actual discussion that we’re here for. Um, we had a very robust, uh, prep session. Um, so I know everyone’s got a lot to say. Um, the first thing that I liked that we were talking about, and then I often get asked by clients is, what am I seeing nationally? Um, what am I seeing in the markets that folks are currently working in a, what am I seeing in some of the other markets? So I’d like to start that off probably with Mike and asking him that, you know, particularly over the last eight or nine months, what have you seen from a high high-level market perspective as far as, uh, how things have changed and where do you think they are right now?
Speaker 3: (09:14)
And it’s interesting, um, you know, throughout it’s really not so different region by region. When I think about the Southeast compared to the Midwest or to the Northeast, I think everyone more or less was hip to the same impact in the construction industry. Um, I think a lot of our contracts are tractors out in Florida. I know our state was a little bit different than maybe some other States where they really never, ever closed down. And so the jobs really kinda kept going. Um, and in fact, if I had to kind of take a pulse, many of our contractors probably are having one of the best years they’ve ever had, and we could talk about reasons why that is. Um, but, but I think more importantly, it’s really a lot about where they’re looking to in terms of going forward. And, you know, it seems like every year I always use the same two words, which is cautiously optimistic.
Speaker 3: (10:03)
It seems like every time in the construction industry, there’s another reason for an angst. Um, and then somehow it always seems like they’re always able to overcome it, uh, from an overall market perspective. Uh, you know, everyone was very worried about what the election impact was going to be. Um, if you would have told me we’d be having COVID and, and had to have that discussion with our contractors. Um, and again with that, of course, there are a lot of inefficiencies, you know, you think about even just with a skyscraper and limiting the number of people that could go into an elevator to do the building on a condo and work, you know, all these types of inefficiencies that it’s just creating, you would think there’s no way, uh, people could be having some of the best units they’ve ever had. Um, but at the end of the day, I think with technology and, you know, it’s funny, we talked about this, I think on our call, you know, to me, the word of 2020 is really pivot.
Speaker 3: (10:55)
I think everyone always used the word of pivot. I think more contractors and everyone in that space has been able to pivot become more flexible than ever before, and they’ve grown through it. And, and now the reason why, again, I’m using those same two words, cautiously optimistic, they’re now looking out to 2021 and saying, look, I’ve come across. I’ve realized now we do have a, uh, a new political presence in place, but how much is that going to impact my business now that it looks like, you know, depending on what happens in, in Georgia, uh, with the Senate, but it looks like might not have much of an impact in terms that, uh, things are looking pretty good. And they’re taking a look at today and saying, my backlog looks pretty significant. So I know for sure, the first two quarters of 2021, I’m fine, but it’s the typical mindset going.
Speaker 3: (11:42)
Okay. What happens after that? What about that unknown and how things are coming through? And we’ll talk about some other maybe, uh, what I’ll call speed bumps that are been having for our contractors and things, but overall optimistic. Um, you know, it’s amazing. I think the war for talent is still very much if not one, two or three on the list and trying to find the right people that have the relationship, not only doing the work, but also bringing in the work business development happens to be a very big thing as well, that contractors are putting, uh, very much front and center. So it’s interesting.
Speaker 2: (12:16)
Yeah. And from a, you know, Mike, you and I see the world from similar perspectives as we’re, you know, professionals working with contractors, um, what was interesting about having Scott and Rachel present, you know, RCC associates has always been, um, in my mind anyway, the brand is, you know, high-end restaurants and retail. Um, and so as this, as the pandemic hit and we saw a lot of that change, um, I was very interested to speak with these folks during the course of the pandemic to see how they were doing. And Scott and Rachel, I’ll flip it to you with the same question. You know, what, what have you seen over the last eight months? Does your experience match what Mike is saying? As far as you’re busy and you’ve got some good prospects and are you seeing a shift in the type of projects that you’re working on and does any of that change geographically?
Speaker 4: (13:09)
No, it’s really interesting that, uh, you know what I’d say, what would you say Rachel, about 90% of our projects in process that come middle of March, whenever this all has happened, a restaurant and, uh, there were many of them that, uh, you know, they, they range from, you know, large national chains to, uh, you know, long pop restaurants and, uh, all between, you know, all the different points within the, those, those types of clients. Um, there are many of them today. We’re not sure if we’re going to complete the projects, uh, the awards that we have for additional restaurants. We’re not sure if we’re going to go forward with, and then, you know, we also have to concerns about collections. So it was really all hands on deck. What we did was we, we really very proactively first, you know, uh, made the adjustments that we could control, you know, we made some cost cutting measures, but what we did was we really communicated as a team.
Speaker 4: (14:09)
We got together, had strategies as a team, you know, and, uh, you know, we had the right professionals advising us on how to, to move forward, but we were able to convince owners that, Hey, now is a good time. You know, eventually the COVID will end. You can continue construction. You know, sometimes we made some concessions to keep construction, construction going, but when this is all over, you’ll have a restaurant and my make a zoo and set with the war with a town. Fortunately we had a top notch business development team. So we immediately put together some, uh, really, um, concerted efforts to start to, um, make natural extensions from what we already do from just the restaurants and retail, you know, where we got into more of hotel, renovation type work. Um, you know, again, a lot of this work is happening now, but the hotels are, you know, fully occupied because of COVID, there’s a lot of opportunities where some of these hotels invested in that, uh, that work, uh, we’ve we’ve um, here in South Florida, the country club work has been very planful.
Speaker 4: (15:19)
There’s a lot of country clubs in our right now seem to be, uh, kind of a competition with one another to improve their clubhouses. So, you know, we, we’ve kind of started, we were successful in getting more projects, um, you know, that type of work. And then lo and behold, we were able to finish all of our restaurants, the clients all ultimately went forward with it. I think that they identified this as an opportunity to kind of maybe get some good pricing and understand that there’s going to be some pent up demand coming out of COVID or people, as soon as they get vaccinated, I’ve seen people saying, Hey, it’s party time. We’re going to restaurants, we’re going to bars, you know, whatever we can do. So I think that they see that there’s going to be some demand, demand. They just don’t know exactly when, but it will be coming. So we’ve seen it. We have a very strong backlog and we’re in really good shape, uh, for, for 2020.
Speaker 2: (16:12)
Okay. Thanks for that. Scott and Alex, are you, you know, from your working with level-set users, um, are you seeing similar trends? Um, what’s been your experience?
Speaker 1: (16:24)
Yeah, I think, you know, things have fundamentally changed and, you know, mainly people have a little bit of a new mindset and that’s kind of like be extra careful, be extra vigilant about how you go through the process of, you know, all the way from making a bid to the contract, to completion and payment. Um, you know, we look at things a lot through the payment lens over here, and we collect a ton of data through our software and through large industry surveys that we do on a quarterly basis. Um, and we’ve, we’ve seen a lot, you know, we’ve seen, you know, businesses like y’all have been saying, like doing really well and having some of the best year of their life. And they’re also putting in a lot of processes and procedures, um, or using technology or leveraging the data that they have to cross the T’s and dot the I’s and make sure they’re not exposed to the risk that’s out there. I mean, you know, hotels, cruise ships, um, so many industries were hit so much harder than construction as an industry. Um, and they’re interrelated in a lot of ways. Um,
Speaker 2: (17:24)
Um, but like
Speaker 1: (17:28)
They’re all connected in terms of, you know, we have people come to us that have been doing the painting for Hyatt hotels for years and years. And, you know, they had to file a lot of mechanics liens because that industry was hit really hard. And you have to keep an eye out for those kind of macro trends within the various industries that are interwoven in construction. And, and we’re seeing people not be to protect their lien rights. We’re seeing people, making sure their pay apps get out very quickly and on time so that they can ensure payment. And we see people now checking into the history of contractors, um, and seeing, you know, do they have a good track record for working with their subs and honoring the agreements that they have? Um, and you know, I think there’s a lot of competitive angles there too with how people set up pretension or retainage, um, and how, how they treat their subs. So there’s, there’s both sides, there’s, you know, the GC and top of the payment chain, who’s dotting the T’s and crossing the eyes so that they can make sure that they keep their great subs. And there’s the subs and the suppliers who are doing the best job they can and the best communication they can to make sure that there’s a good outcome.
Speaker 2: (18:33)
Yeah. It, it, uh, you hit on an interesting point, Alex, which is in a circumstance like this, where the, where the uncertainty is heightened, um, we’re planning, um, is not as easy. It underscores the need to make sure that you preserve your rights to get paid up front, that, you know, to look for red flags of when there might be a problem. Um, and it’s not only problems with owners or lenders. If you’re a subcontractor, you need to know if your contractor is in trouble. If you’re a contractor, you certainly want to know if your subcontractors are in trouble. Um, and making sure that your contract terms are right, that your insurance policies are in place. You preserved your lien rights just becomes that much more important. Um, one of the I’m going to switch to a different slide for a moment. This is a slide that Mike Walter and I have used before to present.
Speaker 2: (19:23)
Um, and it’s, it’s a top 10, most, um, common causes of contractor failures. Um, and, and the first one up here is growing too fast. And, and one of the reasons that I think that that’s interesting is because as I’ve seen the market, when we came out of the Oh seven Oh eight Oh nine timeframe, there were so much of that pent up demand on those. Like what, um, what I think Scott was saying. Um, and we’re going to see that again, post COVID and my con, one of the concerns that I have is as everybody grows so quickly, whether it’s your contractor, your development owners, um, your substance suppliers, they’re all gonna try to ramp up to, um, to meet the needs of the market. And they’re going to grow quickly. Um, Scott, what have you all done? And Rachel, what have you all done to, to number one, make sure that internally you’re not taking on more than you should. And also, what do you do to make sure that your subcontractors downstream and your owners upstream aren’t, aren’t also falling prey to this, um, this concept of what, you know, there’s a shiny new object in front of me, let me grab it. And I’ll worry about it later, whether or not I have the capacity to hold it in my pocket,
Speaker 5: (20:42)
Actually every week I’ve started sending to all our project managers and active subcontractor. So when they award projects, they can see how many projects each subcontractor has. So we’re careful that we’re not overloading somebody. That’s one thing we’ve been doing.
Speaker 4: (20:57)
Yeah. That’s been very helpful. I want to say that probably since you’ve been doing that during the pandemic, probably about five or six subcontractors. Oh, you know what, that, that explains, you know, all the project managers, don’t always talk with one another, but they’ll say, Oh, that explains, you know, we have this millibar contract run seven different projects. That’s why we’re having a hard time. Um, you know, on the owner side, you know, we do kind of, um, we’ll, we do kind of like, you know, our, our backlog turns quickly, but we, we keep an updated, you know, six months look ahead in terms of what we schedule out worth, um, you know, whatever projects we’re working on with the resources, the superintendents that we would put on them, the project managers, and even like some of the support teams and the project county’s project coordinators.
Speaker 4: (21:43)
And when we start to get into like, maybe more than one or two, we know that we kind of start to like, get a little bit more selective with what we, uh, we, we, we, we take on. And then I guess in terms of the owner side, um, you know, we do a lot of negotiated repeat work with clients. So we kind of keep an eye on, some of them were publicly traded, so we’re able to keep an eye on, you know, filings that they make. But, you know, we, we do try to do some searches through, um, you know, when we, when we, we, we get some work done in a different state that, uh, you know, that we’re not familiar with, you know, Rachel will, you know, she does a lot of work to research, you know, the, the, the lien laws in those places. And, uh, we, um, you know, do a little bit of background check, you know, on the owners to really understand, well, we’ve been asking for financials information sometime make sure that the money is there to build the project.
Speaker 2: (22:42)
Yeah, it’s, it’s, uh, um, you, you, you haven’t seen this slide before Scott, um, I’ll represent everyone, but you segwayed perfectly for us into the second, most common cause of contractor failures and that’s moving into a new geographic region. Um, I’ve seen a lot of that when, for instance, South Florida, the South Florida, residential construction market took a big hit about 12 years ago. And a lot of those contractors moved to central and Northeast Florida to build other project types. Um, and even moving from in Florida market from Miami to Orlando presented a whole bunch of new challenges. Um, it’s even harder for folks moving from one state to another because you’re a wean laws, different, um, you, your, the relationships are different, the customs are different. Um, so Mike, what, what do you typically advise your contractor clients, um, about different things that they should be very careful about when they’re moving into a new geographic? Because we all know that doing so is so risky.
Speaker 3: (23:49)
Yeah. You know, it’s almost like any venture it’s a matter of, okay. Hey, how well do you understand that new geographic region? And, you know, at the end of the day construction, you know, it’s kind of like accounting and law. I think construction, accounting and law are very similar. It’s a relationship business, right? The very end of the day it’s yes. We kind of have an idea of what we’re going to do, but it’s that relationship you have with the other side to make sure you’re going to be building that special project you’re going to be doing that consulting work, or you’re working on a, a litigation claim. So it’s a really a matter of, okay, you’re going into this new region, what type of relationships do you have? And that could be upward and downward, right. It could be. What kind of relationships do you have with the subcontractors, uh, at the same time, what kind of relationships do you have with the vendors?
Speaker 3: (24:33)
Uh, what type of relationship do you have just getting a pulse on the job market? You know, as I talked about early on, you know, the, the people side of the business has been such a, a tough thing. Yes. You might have the job in place. Yes. It might be in a great location, but if you can’t find the people to really do the work, you’re, you’re kind of stuck as well as starting to have with delayed clinks, you know? So it’s really also, um, related to new regions for Adam. You have this at your firm. I do at Markham. Every region has a different culture. So you want to make sure, at least is that culture. If you’re going to be doing a job with a group of people, is it aligned with the same culture that your company has as well to make sure everyone’s on the same page in terms of either how aggressive are they with unapproved change orders or how aggressive they are with that and things like that. So there is a lot of risk involved with that. Um, nine out of 10 times, you know, a lot of times I always recommend if you’re going to start off that way, maybe do something like a joint venture to do the work with someone who’s already there that has the relationships in place. So you get a better feel for the market and then take the big chunk and go into a new geographic region, possibly all on your own.
Speaker 2: (25:43)
Yeah. And, and th and the not knowing your partners, whether they’re subcontractors or owners or contractors, not knowing who you’re doing business with can be a pretty big risk. And Alex, that was something that interested me quite a bit about level set. I oftentimes, and, you know, rely on your professionals, right? A lot of clients will send me notes saying, Hey, we’re, we’re doing a job in a new city. Do you know any of these subs on the list? Um, we’re not familiar with them. Right. And I know that from speaking with Mike, he gets that question a lot as well. Um, and if you’re a large contractor and you’ve got resources like Mike and I, we’re, we’re great to, to take advantage of Alex, you all have some tools that are right at level set to kind of help folks know and research different contractors and owners as far as payment history and things like that. Yeah. Yeah. It’s one of our newer products. Actually, we launched at the very beginning of this year, and we continue to add, you know, a couple of hundred thousand data points to it every single month
Speaker 1: (26:44)
To keep it up, add a couple of thousand new contractors to the database every single month, um, or more, and really it’s, how can we make, you know, this really vital information that was previously unknown, known and available to help people avoid bad outcomes. Um, you know, fun fact is level-set used to be called xylene, um, which is, uh, not a great name. You know, you’ve got the four-letter word of lean in, in your brand name. People don’t really want to talk to you. Um, but w we really like moved. I forgot where I was going with, why I had to bring that up. But, um, at the end of the day, we want to create a world where there are no leads. Like why can’t people just get paid for the work they do, and kind of the core message that guides us as we do that is how can we get people to communicate and collaborate on jobs like they do in the field?
Speaker 1: (27:36)
How do we get them to do that on payment? So they don’t find themselves leveraging, you know, Hey, these change orders weren’t approved. Like I’m not going to pay you for them. Like, how do you collaborate on that stuff? Like you do, you know, no one comes and paints the wall before the drywall guy gets there, they’re working together to make sure that this thing gets done right. And that doesn’t always happen with payment. And really like all the data that we surface and all the products that we’re putting out there to kind of get to that reality where no liens have to be filed and people are communicating and collaborating.
Speaker 2: (28:05)
Yeah. And, um, it sounds like quota utopia, and, um, but it’s a good, it’s a good goal. And I think that those, I think that those tools that are available, um, both through platforms like level set, but even just Google searches. And what have you, I know Rachel does a lot of litigation searches on subcontractors that are new, right. Rachel, that’s something that you guys have part of your due diligence. Yes, they did. We don’t promote subcontractors and we’ve done them for owners. Yeah. And I’m sure on this list somewhere is referenced a litigation. Obviously a lot of litigation of can be a red flag. One of the things that I’ve seen problematic from a subcontractor performance perspective and from a contractor’s performance spec perspective is a huge increase in the size of a particular project, you know, oftentimes, um, and especially as we sort of talk about pivoting, you may be starting a project that was designed for one thing, and it may shift to something else.
Speaker 2: (29:02)
Um, it may or may that may end up increasing your costs quite significantly. Um, I, one of the one example I have is I had a, um, a multi-family apartment building pivot into an assisted living facility and the MEP, and some of the other, uh, issues there created a pretty significant increase in the size of the project. And some of it with, with inordinate application to particular trades. So some trades solve their contract values, almost double based upon that, that shift. And, um, there were a lot of failures on, on that project. Mike, do you want to speak to some of the reasons why you’ve got increases in a single job size as number three on your list and, and what, uh, the attendees can look out for there?
Speaker 3: (29:53)
Absolutely. You know, and for me, this, uh, hit close to home because at the time, if, uh, I know the Florida Marlins are not a very good baseball team, but they do have a beautiful stadium, but it’s amazing how the time that took to build that stadium and all the hoopla and, and how these large jobs for all of these subs, as well as even the GC to a degree, because it was a joint venture, you know, how much work was, was going into it and how none of those subs really had that much experience with big arenas like that. And so, um, sure enough, what ends up happening is, um, it’s much easier when you’re seeing big numbers and you don’t have to, you have to reduce a number by let’s call 5%. Well, it sounds not like a lot of money, but 5% is a lot more money than what you’re used to when you’re dealing with an extra zero or two on that, uh, side.
Speaker 3: (30:44)
Um, as well as when you’re dealing with something larger, you know, it’s the old adage, bigger is not better. Right? So as things are getting bigger, there are more things that you almost have to worry about or things that you didn’t take into account about, uh, you know, especially, uh, you think about usually if it’s a large job, it’s usually a large type of job to, you know, how many baseball, stadiums and arenas have these subcontractors done in the past. Well, there, isn’t another one that’s been built at least in the Southeast, maybe Atlanta, but the bulk of the ones that we’re doing, the Marlin stadium, we’re not the same, same group. Um, so again, it’s really just a matter of expertise, you know, it’s just like, you know, it’s funny, I’m always gonna make an analogy to even going outside of construction. We always tell people, right, focus equals power, stick to what you’re good at.
Speaker 3: (31:30)
And, you know, if you’re, if, if you’re used to doing a lot of large jobs, well, then that’s great. But if you’re not used to, again, I always go to the joint venture route. So then team up with someone that’s used to doing these larger jobs and get comfortable with it. You know, that’s the part on that came through. And the part that’s really interesting if I looked at most of our, our contractors that have done a very large job well, during the first 30% they’re high fiving and the pre-bid meetings, everything is going great, but that last 70% of that job is usually a lot of heartache, uh, especially what I’ll call the a hundred, 1% as they’re talking about, you know, are they going to get paid and, and just debating a lot on change orders.
Speaker 2: (32:10)
Yeah. And we actually been getting some questions in the chat. So, um, whenever, when no, if you, if you have questions for us, um, put them in the chat, we’ll get to as many of them as we can. But, um, there’s been a couple that, um, have been asked that I think are relevant to the part of the discussion that we’re on right now. Um, and as we talk about, you know, work in new geographic regions and the importance of relationships, um, and particularly Scott, this might be a good question for you and Rachel to address because you all are operating in different geographic regions. What do you, what are you doing to, you know, address diversity and inclusion and local hiring and your subcontractor mix is there, uh, is, you know, most of your projects as I know them to be anyway, are private. So you don’t have the public requirements, but do you find that that’s helpful as you’re in new geographic regions to make sure that you’re getting local companies and, and including them in the process?
Speaker 4: (33:11)
Absolutely. And you know, what we’ve done is since we’ve had the, we’ve been in business for since 1971, we’re having our 50th anniversary coming up. So we’ve done so much work in different parts of the country that like we have, like, just say, Oklahoma city, we have a subcontractor base that they work. They’re located in Oklahoma city and they do work in Oklahoma city. And we really try to do that. There are parts of the country. I know that we pass up an opportunity to patent a bid on a job for, in Kansas city because the client had one in Kansas city and one in Houston, Houston, we do a bunch of work in, so we have a group of subcontractors in Houston that we work with. And we said, Hey, you know, we really don’t know the Kansas city market as much. So we really try to get local contractors and not, not really take con sub subcontractors and have them travel around,
Speaker 4: (34:09)
You know, and that goes to my Adam. I believe you said it earlier too, for us when we really do rely on, I think I mentioned it in, you talked about how important it is talking to your professionals and talking to people like you and Alex and the lead laws and understanding that. And even like things we didn’t touch on it too, but it was really important, you know, talking to your CPAs and things like state and local taxes and there’s different requirements, not just in every state with this of these jurisdictions that you can get stuck with, you know, some, some tax bills, if you don’t plan for it, including your bid product,
Speaker 6: (34:45)
Speaker 4: (34:46)
Oh, go ahead. I’m sorry. I’ve just got to let you know, in terms of some of the contractors that I see on diversity and inclusion, you know, they’ve really been very proactive with it and have set up separate committees that have been just kind of talked about the issues a little bit more than talked about with their subs and kind of making it one big issue that they’re trying, just to talk about things a little bit more openly. So, um, you know, we always look at, you know, CFMA construction, financial managers association always has a category called best in class, and that’s usually, yeah, the top 15% return on equity return on assets and are doing all the right things. Our best-in-class contractors have absolutely set the committee, set up communication devices with their employees, as well as to their vendors, to their owners, to the subcontractors, making everyone known that they are really trying to make a difference and try to help with that communication process. Yeah.
Speaker 2: (35:38)
Um, across my, my national practice, I’ll tell you a lot of my contractor clients have not all of them, um, have been very focused on diversity and inclusion, participating in groups like, um, G wick and [inaudible], which is a national association of women in construction. Um, we’re very active. A lot of my clients are very active with MBE minority business owned, um, construction companies. And there’s a lot of opportunities, um, out there for, um, you know, MBEs to, to get some, you know, just get resources. And it’s, it’s interesting too, it’s, you know, level set is another not to go back to that, but, you know, putting the tools of large contractors into the hands of, you know, everyone in the industry, I think, I think is, is a big part of that. Um, and there, and there certainly, um, while obviously it’s the right thing to do, I think there’s also profit incentive in that, um, you know, you can create best relationships and, and, and get some subcontractors that maybe you haven’t before.
Speaker 2: (36:44)
Um, and it, and it goes to one of the, another question that, that was asked in the chat, and I’m not sure if everyone can see the chatter, just the presenters, but, um, you know, there’s a question about the subcontractor pre-call process. Um, and when you go into new localities and you’re trying to get local, um, and more diverse subcontractors, you know, sometimes they can’t necessarily meet the criteria, um, that you normally, as a company Scott and Rachel May have set up. Um, do you ever find yourselves making exceptions, um, and working with folks who may not meet all of your, uh, pre qual requirements, but that are good in a particular area or going to number four on our list, particularly well-suited for a type of work.
Speaker 4: (37:30)
We do. I mean, we try to evaluate everything on a case by case basis, you know, I’m sorry. I probably should have noted too that, uh, you know, it’s, um, we, we’re a woman owned contractor and actually most of our, you know, including Rachel, most of our, you know, leadership and executives are women and, uh, you know, so we placed a great emphasis on, you know, uh, you know, diversity and inclusion, uh, you know, uh, you know, across the spectrum. So we, that we really do that is something that is really important to us, but
Speaker 2: (38:04)
Tell you that also kind of goes to the number five thing on Mike’s list, which is high employee turnover. I can tell you that, um, RCC in particular, I’ve been working with the same people, um, at your company now for seemingly forever. Um, and I think that a big part of that is your commitment to diversity and inclusion. And I’ve certainly gotten an earful from Rachel, um, positively. So about all that you all do and how passionate she is about it. Um, in fact, I remember even offering her to come sit at my law firm for a week two and tell us all the things that we should be doing differently. Um, so it’s, it’s, I, I, you know, I think that, um, I think that having low employee turnover and focusing on, on those things, um, all helps with that. Um, Alex, do you, do you see, um, as you, as you know, as you interact with level set users, do you see, um, folks going into new types of work, um, struggling, w w w whether it’s a new scope or new product type,
Speaker 1: (39:07)
You know, I’m probably not the right person to ask about that. I don’t deal directly with too many of our end users. I typically create a lot of the content that helps them. So I’m probably not the right person to ask about that. If I were to take a guess, I would say, you know, I should probably just defer to the other folks on their call. It really, um, but you know, my gut tells me that a lot of people are, you know, trying to, you know, they don’t like the idea of things changing. Like, I feel like construction is a very slow industry to change. Um, but everyone’s looking for creative ways to make sure that they can have a strong year. They can continue to grow and they can continue to have better and more efficient processes to, you know, get projects done and build strong relationships, even though there’s all this madness going on. So I don’t know if they’re, you know, specifically, I guess the answer would be like, it depends probably. So,
Speaker 2: (40:02)
Yeah. I can tell you that as, as an, the word pivot, which someone said earlier really does define among a bunch of other terms, 2020 in that, um, I’ve had a lot of clients pivot to new types of work from, um, high-end high rise, condominium towers to healthcare facilities, um, and, and, um, things of that nature. So I can tell you that that’s, that that is a real risk, and that’s a real red flag. You want to be aware of if your contractors that you’re working for, the subs that you’re bringing on a job, what’s their experience with a particular type of work. I think asking about their employee turnover is critical. And then obviously number six on Mike’s list, which should be obvious to everyone is inadequate capitalization. Mike, can you, can you give us some ideas of ways when, you know, you’re, when, if you’re a subcontractor or a supplier on a project and you’re analyzing whether or not to go forward with it, what are some tools that are generally available to folks to see? Well, the co is the contractor capitalized. Um, and, and, um, you know, is there enough funds for this particular project to, to get a completed? What are you, what do you recommend there?
Speaker 3: (41:21)
No, it’s interesting as we talk about COVID, um, one of the things in relation to capitalization, just the relationship with the banks. So what I’ve noticed is during COVID, if we make contractors that maybe were missing, or there was a delay in the financial statements because of COVID, you know, everything happened so quickly where the banks pretty much said, okay, no, don’t worry about it, get it to us as quick as you can.
Speaker 7: (41:45)
Speaker 3: (41:46)
They’ve had the time to regroup. The underwriting committee has come in and they’re getting all these memos about, you know, what things could, might get a lot tougher before they start get a lot better. And so now they’re asking for financial information much quicker than before and now saying, listen, you cannot be late going forward on your financial statements, but now you’ve had COVID do you understand? You should be working from home. You should have the technology in place. You need to really have things kind of up in order, and they’re going to be holding them accountable much more. So it’s been very interesting how the change has happened. I would say almost in this last 45 days, as we’re getting closer to the year end December 31st, when they’re asking for those financial statements where they really want to get a feel within 30 days of how they’re doing.
Speaker 3: (42:31)
Um, you know, so with that, you asked a question on, on inadequate capitalization. You heard me reference CFMA construction, financial managers association, uh, actually myself and Scott, Sherry, both, uh, past presidents of the organization. It’s great. It gets CFOs and controllers together. But with that, it has that survey that I discussed that has best in class. Um, a lot of the bankers, a lot of the bonding companies are taking a look at that data and trying to take a look, okay. I see how liquid your company is compared to the rest of the group. Well, you know what? You need a little bit more help. You need a little bit less help. Um, without a doubt, if, if, if there is a takeaway to take away from this so far today, if you are not doing benchmarking to your peers, and again, if you’re an HPAC contractor to other HPAC contractors, but even down to in the Southeast region, HPAC contractors to kind of get a feel, you’re doing yourself a disservice, because then that’s really going to be eyeopening to figure out, okay, how well capitalized am I, um, I believe in a little bit more money, uh, in there, uh, as opposed to before.
Speaker 3: (43:38)
So there’s a lot of different things in all relation to it. Uh, your bonding company, I’m sure could give you a lot of good information, as well as talking to your banker and ask the banker, uh, what is, what are your underwriters looking for? Um, and the only other caveat that I’ll put for those of you that are, are with some large banks, make sure your bank understands the construction industry, you know, uh, not to get into an accounting exam, but, you know, billings in excess, you know, that over billings is really a positive. I know from an accounting standpoint, it’s a liability, your bonding company, everyone else wants you to bill as, as quickly as possible, and hopefully receive that money as quick as possible. And the detriment when you’re just thinking of maybe a bank underwriter going, wow, look at this large liability, we have a problem here. Maybe isn’t the case. So it’s really the understanding of everything.
Speaker 2: (44:28)
Rachel talking about inadequate capitalization, um, is, is one of your roles when you’re, pre-qualifying subcontractors to look at their financials. And what particularly do you and Scott look for, um, as indicators, when you’re looking at, uh, subs or suppliers, qualifications to work on one of your projects?
Speaker 5: (44:49)
Um, I think it’s, it’s kind of like you said, a case by case basis. I know recently we had a new subcontractor and it was a really large contract. So I know Scott did some background and we ended up not awarding them, but a lot of our subs we use all the time. So it kind of depends on the size of the contract and if it’s a new region or,
Speaker 4: (45:09)
Well, we’ll ask for things like, you know, um, and in addition to the financial, sometimes we’ll ask them if they’ll provide a working process schedule or, um, you know, an AR aging schedule, some of the things that, you know, the banks and, uh, um, you know, the sureties would ask for in their underwriting decisions to see, um, do they have a concentration with, you know, a certain customer or one particular job that, uh, that’s been out there for a while? How old are those receivables? We look at, you know, ratios of like, you know, do they have, you know, you know, current ratios kind of quick ratios, you know, those sorts of things to see, you know, they have enough cash on hand to, you know, really be able to start the project, definitely wait through the payment cycle, you know, invest that money in materials and, uh, and labor. And so the draws start coming through.
Speaker 2: (46:01)
Yeah. One of the, um, one of the things that Mike mentioned that I, that we talked about earlier, and I think it’s interesting is as we’re rounding the corner on the end of 2020, um, are you doing, and I guess I’ll Scott, uh, I’ll, I’ll leave this, I’ll ask you first since you’ve got the hot mic. Um, are you doing anything differently with respect to your owner clients to make sure that you get paid before the end of the year, then you’ve done in years past. And do you see that your subcontractors are doing anything differently to make sure that they get paid from you? All
Speaker 4: (46:39)
The answer is yes to both. Uh, you know, I’ve, I’ve noticed that I’m getting a lot more calls from subcontractors directly. And of course, you know, I take the calls and I listened to what they have to say at a plumber today in a millwork contractor. And then, you know, uh, you know, I’m, non-committal, I just taken, taken the information. And then I talked to the project team to see if there’s anything that we can do to help them out, you know, and again, it’s a case by case basis sometimes, you know, um, you know, we have the typical pay when paid, paid, paid visions. Sometimes we work things out, especially if we know it’s a key trade for the worst thing that we really want to see happen is, you know, subcontract or not be successful on a project that we have. So, you know, there’s various things in terms of we do to help them out.
Speaker 4: (47:25)
If we know that they’re struggling, you know, if they need some help paying for materials, then we step in and try to do that to help struggling people get through on the owner side. You know, again, Rachel is a fantastic resource for us. You know, she, um, you know, publishes, you know, cash and receivable reports daily, and we all kind of circle back around on Monday morning, you know, and follow up on receivables that we should have received that week. And if not the other thing I think that we’re doing a little bit more this year is really trying to make sure that the client are completely satisfied and they have no reason not to pay. So I spend a lot of time in range with us as well, too, with our project team. If there, if there are any issues with payment, really understand what they are. I talked to the clients a lot. It’s a lot of what my, my my time is spent on them, making sure that they’re satisfied. There’s not anything that, you know, whether it’s paperwork-wise or something in the field that needs to be addressed, that hasn’t been dressed and we’re sitting here looking at it, you know, receivable that’s past to just aging without really understanding. And just a lot of
Speaker 2: (48:38)
It, it seems, um, I’m seeing it both from the subcontractors coming to my contractor clients, um, being a more aggressive in making sure one that payment applications are timely and that they, and that, um, payments are coming from the owner. And, and obviously the same applies to my contractor clients with the owner. And at this time of year, you always have some of that, but I’m definitely seeing a much heightened level of, of attention paid to this as, as everyone’s worried about uncertainty and they’re managing, they’re managing the risk. Um, another thing that was that you said, um, Scott, that I think is interesting, you know, you talked about relationships and it all, a lot of what you just described kind of goes back to, okay, well, we’re, we’re speaking with our folks, we’re making sure they’re doing okay. Um, we’re connecting with people. Um, and that’s one of the things that I’ve always thought was so great about the construction industry, um, is that it is a pretty close knit and a, and a very relationship driven industry.
Speaker 2: (49:40)
How, how, and I guess I could ask this to Alex to start off is how are you seeing folks dealing with that now in the age of COVID, it used to be that a lot of these conversations were had over a beer after work or, or at a lunch table. And even though constructions would need essential, thankfully, most places and a lot, I’m not really aware of too many projects that had to stop, certainly, you know, getting new a bar and having a beer or a lunch and having a meal with someone isn’t really available as an opportunity anymore to, to have those conversations, build relationships. So I think we’ve all gotten creative, um, and found some new way to do it. Alex, what are you, what are you seeing in regards to that? Yeah, I can, I can only speak to one half of the equation, which is like, how are people, you know, keeping their relationships straight on the payment of things. Um,
Speaker 1: (50:28)
But it like everything, Scott, my glider, and y’all had been like singing, singing the gospel here, which is like, relationships are everything like you have you, like, if you don’t have a good relationship with someone they’re not going to hire you, they’re not going to pay you. It’s like, it’s going to end poorly. And one of the, you know, we have this kind of three-step process we talk about, Oh, we call it the set method, which is, you know, being able to see everyone on the job CNB scene, having everyone know who’s there and who’s who, and who’s doing what, when they’re going to do it when they need to be paid, um, exchanging documentation, uh, is the E and the set model and, you know, making it easy. Can you exchange more electronic documents or electronic payments? Like w what is that process like and how do you make it easy?
Speaker 1: (51:10)
And then when things go poorly, you talk it out and that’s the T. And if you follow that set framework of, you know, knowing who’s on the job, exchanging the proper documentation and having conversations, your relationships are gonna be great. And, you know, I love the idea of, you know, a bunch of office managers going out and getting beers after work. I don’t think it happens as much as the project managers or our other folks that are on the jobs, but I know people, you know, groups like CFMA, and NCAM like all these trade organizations that used to pull these people together and talk about it are, you know, not able to do as many events as they’re used to, and not able to put things on. And there’s a, you know, one thing we’ve noticed on our end is webinars. Like this are extremely popular.
Speaker 1: (51:54)
We get great attendance all the time. We have great speakers coming in here, and we’re trying to bring people together to, you know, have common conversations on the level set community, talking with peers and things, learning from each other others processes. Um, you know, the times I got burned, the things that they’re doing to avoid those problems in the future. So I think people are trying very hard, um, to find that semblance of normalcy with all the changes that are going on. Um, but those relationships are sacred. And the key is that, like that set method or the talk it out and communication between parties. That’s how I look at it, at least.
Speaker 2: (52:31)
Yeah. And I think technology, I mean, you touched on, it has played a big role with that, right. So, you know, I didn’t even know what Microsoft teams was before the pandemic, and now I’m seeing it dozens of times a day. Um, you know, the zooms become now the, the standard means almost in these video conferences of communicating, not only through webinars, but even just things that used to be a phone call now, um, everybody seems to want to be on video. And while sometimes I find that to be annoying. Um, I can tell you that it’s created an opportunity for me to develop relationships with people in a different way, for instance, I mean, you know, um, I go to the office a bunch that I happen to be at home, you know? So, um, you all are getting a glimpse into my home office.
Speaker 2: (53:17)
That’s not something you would ordinarily have the opportunity to do. Last time, I was on a zoom with Mike, he was having an internet issue and we got a tour of his house while he was looking for a good stop. So you kind of have that, that personal touch here that you maybe didn’t that we maybe didn’t have before. So I love that technology has helped with that. Um, I think tools like level set, um, document crunch. I mean, there’s a host of construction technology solutions out there now. Construction’s always been a very slow adopter of tech, but there’s a lot of solutions out there now to help not only with cost savings and efficiency, creating, but also monitoring your project, um, you know, things that you might’ve done in the past with the superintendent, as far as time sheets and things like that, maybe you don’t want it, you know, you want to use a technology solution for that, and there’s a lot out there. So I think, I think Tech’s played an important and important role, not only in helping folks manage the project, but also with, um, but also with, um, relationships just to get through, uh, this, this list is 10 part list. Um, you know, Mike, I’ll kind of let you walk through through, through these because really these are your, these are your, uh, items, but I’ll pop these up and then maybe what you just sort of quickly talk through them.
Speaker 3: (54:36)
Sure. And, and, you know, and, and seven, eight, nine really are all interconnected. So that’s perfect how you kind of stopped, um, right there. So, you know, at the end of the day, it’s all related to your accounting department. Do you have a good team in place? You know, I, I’ve known Scott and Rachel for a number of years and, and before they were there, it was a very different, uh, accounting group, as well as just the process things that were coming to life. So, you know, again, we talked about how important the people are. Uh, it’s just as important. And it’s funny using contractors don’t, they’re, they’re they’re top 10 lists usually as a matter. Well, I want to make sure I have a really good accounting department. Right. But that should absolutely be on the top of the list because how else do you know a, where you’ve been kind of rear view mirror, but also where you’re going in terms of projections and things of the like, so with that, you know, it, it, you know, it helps you, uh, the good accounting department is going to speak with your project managers.
Speaker 3: (55:28)
So this way they actually are talking the same language. So this way, those poor estimates are not happening. Your working process schedules are being delivered timely. And, you know, I have actually three contractors that have assigned one has a big, large one. The other, I have like a small ones that say no surprises with a big exclamation point. I can’t emphasize that enough, the better accounting department, the better estimating a job costing system you have as well as then, it’s going to be able to help you with how well you can project cashflow. We’ll make sure that you’re kind of a, again, a best in class contractor. So there are no surprises and that things are kind of headed the right way, which then will help. You know, it’s funny, they’re all linked. The seven, eight, nine are all linked to, then that’s going to help you with better capitalization because then the bank is going to feel more comfortable, is going to help with bonding capacity and so on and so forth. It’s almost, uh, a domino effect that they’re all are interlinked together,
Speaker 2: (56:20)
Know w one thing. And, um, I’m obviously a lawyer, not an accountant, although, um, sometimes the last that I plan accountant on TV, cause I’m oftentimes, um, bleeding into their space a bit, um, which is always fun. But one thing I can tell you that I’ve seen, um, in the accounting side, particularly in construction is a lot of changes on the, on the technology offerings, um, and, and solutions that used to be, um, either, you know, not at all specific to construction. So contractors were using just the same types of accounting platforms as a, as a normal, as any other kind of business. I’ve now seen a lot of specialization. We’ve seen a lot of specialization in the construction accounting space, and I’ve seen a lot of costs reductions such that, you know, you don’t need to invest tons of money anymore to have a construction specific accounting platform.
Speaker 2: (57:14)
Um, and, and the construction industry works in a unique way as compared to other industries. So if you, you know, if, if you’re just using QuickBooks as an example to manage your cashflow, you know, I would recommend researching and seeing what else is out there because probably for the same price, you can onboard yourself to a much more unique solution. Um, Scott and Rachel, I know you’ve seen huge changes in this area. Um, um, in particular, what are you, what are you seeing out there just in general, I’m not asking you to necessarily promote any particular platform, but what are some, uh, resources that you’re seeing that folks can look at to sort of amp up this, their accounting system, their job costs and estimating and things like that.
Speaker 5: (58:03)
I want to say, um, with the software we have, there’s a lot of things that we used to do manually in Excel, like the job estimates, and now that’s all automated. And our project managers can just go in and put their estimates in. And any day we want, we can pull that up and have a current estimate of where we are on the job. And I think that’s critical when even when COVID started to make decisions, we have real-time information and if we can give concessions or where we are and what we’re expecting to where we’re going to end up on a job.
Speaker 4: (58:31)
And then what was really important here is that we have somebody like Rachel, that is it not just that we have the tool, but she’s researched how to make it work. Perfect, you know, properly put the policies and procedures around it. And then we have, you know, management and ownership that really says, Hey, this information is very valuable. We’re following these processes. We do not deviate from these processes. No, you know, no matter what we don’t do, it even makes, you know, the guys, sometimes when jobs are starting to run a little tight in labor budgets, they talk about, Hey, maybe I’ll just start charging my child or this other job, Rachel, I don’t even have to say, don’t do that. You’re just fooling ourselves. Our owners tell them, we’d want, we want to see what it is and you know, and so we have, you know, that’s, that’s also just as important as I think, you know, these tools that are, you know, there’s a lot more integration and, you know, like, you know, things like, you know, like you said, like with, with the integration, with the change order management, like document crunch and level set, that, you know, you take things that people were putting more time into it, and you’re able to maybe utilize those resources a little differently and a little bit more efficiently to get better information.
Speaker 4: (59:46)
Speaker 1: (59:47)
I would love to add one thing. Um, you know, I don’t want to call out any specific tech partners that we’re friendly with because I don’t want to play favorites or anything. But one thing we talk about a lot when we’re, we’re, you know, having conversations with, you know, project management, softwares, or other accounting software partners of ours is like, you know, and to lean into the, uh, title of this webinar is like, how do you navigate next year with the changes that have happened? And COVID like the PPE and all the different procedures you have to have in place. And the amount of time at amount of people you can have on a job site, all this stuff has like caused a major increase in job costing or all the things that need to go into the project and keeping track of that and seeing, okay, now, you know, this, I used to build a McDonald’s and it would cost this much every time there are new costs on that right now, um, along every step of, of the, of the building process and looking at that historical data, whether you’re using software or whether you’re doing it on a old fashioned paper and pencil, and just saying this cost is much more, this cost as much more looking at that and making sure you’re factoring it in as you go into next year, how have your costs increased on a project that you’re used to?
Speaker 1: (01:00:56)
And how can you make sure that you set yourself up for success is like a super important thing that we’ve been hitting on a lot this year. Um, so I’ll, I’ll end on that, but I’m also, I know we’re coming to the end of time here, and I want to say, if we don’t get to your questions, um, on this call, you can always go to level-set dot com slash payment help. You can ask a question either anonymously or not anonymously, and we’ll have Scott and Michael and Adam and everybody who’s on this call. Be able to answer those questions on the website as well and writing, uh, afterwards. So I just wanted to let you know that’s option to be respectful of everyone’s time here.
Speaker 2: (01:01:32)
Yeah. And, um, uh, just real quick, and then I’ll kind of take y’all to the, um, to the conclusion here. I think, um, one of the things that Mike always tells me is a sure sign of either an owner that’s going to have a problem or sub is when they buy dumb stuff. I put dumb in quotes, because some of the things that I’m going to show you on his list, I’m not necessarily saying that I think they’re dumb. Um, but, uh, Mike has told me that he thinks they’re dumb. So this is Mike’s list of things you shouldn’t do. So now I can tell my accounting accountant joke of, you know, accountants are no fun, but here’s what Mike says to be on the lookout for fast cars, restaurants, ranches, and then unmentionables. That is the Mike Balter list of things that are dumb.
Speaker 2: (01:02:21)
Um, but, but in all, in all candor, I will tell you, um, I’ve helped clients avoid a lot of very sticky situations because I was aware that a subcontractor now owns a plane or an owner now owns, you know, is now investing in the restaurant business. All of a sudden, I wonder they were, you know, an industrial property developer before and knowing that and knowing that those things are going on can be really valuable, um, red flags to watch out for. So on that’s the Mike Walter list of, of dumb things. Um, one of the questions that was asked that I, that I, that I do, uh, within a couple of minutes that remain here, what I want to bring up is it was asked, what do we think the impact of the pandemic is going to be on construction insurance? Um, and what, what are, what are we currently saying?
Speaker 2: (01:03:13)
And I can, I can answer that by telling you, I’m seeing premiums go way up. I’m seeing, um, ex exceptions now to insurance policies, excluding pandemics, because if there was a gray area before about whether an insurance policy was going to cover a pandemic, certainly nobody wants a gray area now. Um, and in some ways I’m seeing that, um, that the insurance market is becoming so expensive that certain projects aren’t may not, um, concerned that certain projects other won’t be able to get insurance or the price will push the project out of balance. So, uh, with the time that’s left, I mean, Scott, can you kind of speak to whether you’ve seen some similar, um,
Speaker 4: (01:03:58)
Absolutely same when you’re saying, you know, certain insurances in the last couple of years, Otto’s bins gone going through the roof, um, lately, uh, the umbrella insurance has got to be really expensive because, you know, there are more and more claims that are piercing that first layer of general liability. Now, the other thing too, is, like you said, it’s really important for not only to really understand your policies and what’s included and what’s not, but also your subcontractors, if you are say, for instance, you’re doing, you know, Adam, you mentioned it, some of the things that a lot of these, these policies have residential exclusions on it, you know, which, you know, kind of not just knock out single family homes, but condos. And then if you have people too, we’ve had other subcontractors that have like roofing exclusions and, you know, so it’s really important, I think to, um, you know, to have the people, to, um, you know, make sure that you’re getting, you know, the endorsements and, uh, you know, to see what you’re really getting. Let’s really ensure not just on this certificate of insurance.
Speaker 2: (01:05:02)
Yeah. And, and, and a great sort of segue Scott to something that I definitely wanted to bring up when I saw this question. And that is the certificates of insurance that you folks are getting either from your owners who may be bringing some of the insurance to the project from your subs are working for you. Those don’t bind coverage, meaning they typically don’t. Um, they don’t require the insurance. They’re not evidenced to the insurance. It’s, it’s only illustrated. You really need to get the policy. You want to see the schedule of endorsements and you want the endorsements. Um, and, and I started preaching this about 12 years ago when I would make claims on projects based on certificates of insurance. And I was finding out that they were about 50% accurate. Um, half of that 50% of an accuracy was probably fraud on behalf of the brokers.
Speaker 2: (01:05:49)
Um, and, and the subs bringing the insurance and the other 50% were just, you know, honest mistakes, but either way, it doesn’t help you when you’re making a claim. So, as I tell my clients, Oh, make sure that you get the entire policy and review it. A lot of them look at me and say, yeah, that’s really great advice, but how do we do that? And so one of the solutions I showed you, not for this to be an advertisement for document crunch, but one of the solutions that document crunch offers is to review insurance policies and take you to those critical things like a residential exclusion, or a scope of work limitation. It may be in the policy. So kind of creates that tool, Scott, to help you find some of those things in the actual policy. Um, I do know that the presentation is going to be made available online. I think Alex starting tomorrow, you’re on mute.
Speaker 1: (01:06:41)
It’s usually about a 24 hours. So we’ll have it up some time tomorrow afternoon and it’ll be emailed out to everybody.
Speaker 2: (01:06:47)
Okay, great. And then I’ll also, I’ll also make sure that you have the PowerPoint presentation that can be circulated, um, to, to conclude here’s my contact information. Um, feel free to, if you’ve got any questions for anyone on the panelists or anyone on the panel, or for me to send me an email and I’ll, I’ll, I’ll try to connect you with, with the right people. Um, we did create, as I said, at the beginning, a discount code for level set uses a document crunch. It’s a level set, 15, it’ll go live about five minutes after this, this program. And it’s good for 10 days to get 15% off a document crunch. So feel free to check it out and upload some contracts and insurance policies and see, um, how it works. Um, and with that, I want to conclude, I want to thank again, everyone on the panel, um, Alex, everyone at level set and on your team, you all, it was, it was, it was a great job. We got through it with very limited if any technical issues. So that, that was good. And, um, thank you all so much.
Speaker 1: (01:07:48)
Thank you, Adam. Thanks for having us and, uh, really appreciate it. All right. Y’all I’ll see you later.