Handling Issues In The Commercial Market
Imagine a business world without new restaurants, remodeled hospitals, or redesigned libraries. Frightening, right?
Fact is construction represents a critical piece of the national and global economy. According to *Economy Watch,* those who build (and rebuild) our infrastructure comprise a whopping 10 percent of the world’s gross domestic product, and they make up roughly 7 percent of the planet’s workforce.
However, we massively oversimplify things if we lump everyone wearing a hard hat or gripping a set of fresh blueprints into one giant basket. When looking at construction, there is a tremendous range of work completed on a daily basis, under many different rules and environments. To understand truly the nuances that affect specific areas of constructions, we should divide this world into different segments.
For instance, those who work in commercial contracting face far different issues than those in the residential contracting sector. In addition to meeting building codes and satisfying the building owner’s needs and desires, commercial contractors must comply with additional rules and regulations, different pay stipulations and bigger projects.
For anyone involved with commercial contracting work — or looking to make the move into this line of work — here’s a closer look at some of the differences that you’ll face:
Commercial contractors are required to get a performance bond, which is a guarantee from an insurance company or bank that the customer would be reimbursed — should the contractor not complete the work or do the job in a satisfactory manner.
This is no small thing.
Getting someone to back your business with money can be difficult, according to Lanny Huffman, president of Hickory Sheet Metal Company in Hickory, NC.
“Whether a contractor can be bonded or not will determine to what extent of commercial work they will be able to do,” Huffman says. “But if you are to be bonded, make sure your financial house is in order, both business and personal. Acquiring a performance bond can be difficult because bonding companies take no risk.”
Keep in mind, U.S. federal law requires that all contracts — issued by the federal government — be indeed bonded. Likewise, many state and local laws also require bonds.
Keep it clean
Hospitals and facilities that involve working with (or around) infectious diseases can present numerous hazards for contractors. You’ll need to account for a considerable amount of extra work when trying to get your building plans ready.
Such work areas often can’t have any dust, debris, or other contaminants — a tough task to complete when your work’s byproducts are those very things.
Huffman says one project his company is currently working on has presented numerous issues.
“Some of the more difficult portions of this project are the ‘hot’ work permits, the infectious disease control criteria (each piece of duct is sealed on both ends with plastic), air monitoring and keeping areas at a negative pressure during construction,” he said. “Clearly, hospital renovation work is tedious, expensive, and you can lose money quickly.”
You don’t have to tell Ann Kahn of Kahn Mechanical Contractors in Dallas, TX. She knows all about work hazards.
However, she feels these types of hurdles can be handled with a bit of extra work on the front end of the project.
“We have worked in hospitals and other areas where a dust-free atmosphere is critical,” she says. “The key to a successful end result is the same here as in all projects: planning. With the right forethought and equipment, almost any situation can be overcome.”
Restaurants also have requirements when it comes to cleanliness.
Huffman says restaurant hoods are often a sticking point for building inspectors, who will refuse to give a project a certificate of occupancy unless the hood is adequately installed. The hood and the connecting exhaust system are needed to prevent smoke and odors from building up, as well as to remove potentially harmful particles out of the air that could otherwise fall into the food.
The sheer size of some commercial projects can makes them difficult endeavors. Huffman says problems arise with both (a) building beyond certain heights and (b) doing so within a customer’s time constraints.
“In some cases, a land-based crane cannot reach locations on the roof where HVAC units may be,” he says. “In those cases, helicopters can be used. However, there are certain FAA requirements that must be met along with paperwork that most of the companies providing helicopter crane service will help you through. Schools always present a challenge. They usually are on a very tight schedule. Whether it is a new school or school renovation, there is always a hard date to meet, and typically it is not negotiable.”
Big projects also require big tools. Big tools, in turn, require plenty of extra training for the contractor’s employees. Getting those employees, the training they need — and keeping them up-to-date on any advances in regards to the work they’re engaged in — costs contractors both time and money.
Show them the money
Most commercial contracting jobs are subject to prevailing wage laws. That is, you must pay workers the benefits and overtime that are due to the majority of laborers within a certain municipality. These wages are in effect to prevent one contractor from underpaying his workers by submitting a lower bid for a different contract.
Complying with these laws can cause headaches for contractors who have to balance the needs of their employees with their own profits, since profits are the ultimate goal of their businesses. Kahn says laws have become uniform across the country, in terms of how much workers make from place to place.
“The words ‘prevailing wage’ used to scare us all,” she says. “Back in the day, wages were much higher on the eastern seaboard than here in Texas. Today, we see prevailing wages that are more in line with what we pay and sometimes even lower.”
In addition, the additional wage regulations that commercial contractors must comply with also call for additional paperwork. Commercial contractors have to keep certified payrolls, which are documents from the government that have to be filed to ensure rules are being followed on federal projects. These regulations have been a sticking point for contractors since they were enacted during the Great Depression, but the dawning of the digital age has made things at least somewhat simpler.
“An online certified payroll form is available that does all the calculations for you, and that coupled with our software’s certified PR report is a breeze compared with the hand-written, hand-calculated reports from the ’70s and ’80s,” Kahn adds.
Get it in writing
Contractors of all shapes and sizes must sign contracts with their customers. Nevertheless, commercial contractors have to put forth a lot more effort in completing that paperwork. That’s because commercial contracts include additional legal hurdles that could arise. Commercial contracts often involve more than two parties and are generally worth far more money. They also must often provide supply chain details, backup strategies, completion criteria, and other details.
Getting all of these details in order often requires expert help. Moreover, lawyers cost money. However, the expense could prove well worth the investment should the contractor be brought into a legal dispute with a customer. Having as many details drawn out on paper before lifting a saw or hammer helps protect the contractor in case of claims of inadequately done work — or work that’s not done at all. They help spell out clear expectations for the customers of what the job entails.
Ultimately, getting everything in writing protects both parties. For the contractor, it protects every dollar possible that’s there to be had.
“Just as in residential contracting, if you under-price a job, you lose money,” Huffman says. “If you under-price a commercial job, you lose money and, in some instances, your business.”
Posted In: Management
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