When discussing the government, most people focus their frustrations on our president, Congress, or the Supreme Court. However, closer to home we’re finding an increased government burden in our industry that is quietly costing all of us an exorbitant amount of time and money.

Each municipality, county, school board and college in the state of Florida is responsible for overseeing development and construction within its jurisdiction. Oversight generally consists of plan review to ensure code compliance, issuing permits, inspections during construction, and issuance of a Certificate of Occupancy. There is a statewide building code as well as regulations that are followed by each group. However, the code serves as a minimum statutory requirement and can be customized and added to at their discretion. Some of these groups outsource the oversight of this building to private companies.

Over the decades we have become accustomed to dealing with varied requirements and idiosyncrasies of each municipality. However, since the recession started in 2008 we’ve found the burden of some of these groups to be excessive and overwhelming. Some examples include:

- Since the recession and the subsequent slowdown of some county building departments we regularly have inspectors tell our superintendents to, “call in for four 30 minute concurrent inspections even though I can do everything in one inspection.  I’m afraid if I don’t fill my day I’ll be laid off. I’ll just spend the next two hours on your site.”

- Regardless of how minimal or insignificant, any deviations from the permitted plans must be redrawn, signed, stamped and resubmitted through permitting. Submittals to some municipalities take as long as four weeks to process.

- Many municipalities don’t care what was reviewed and approved during permitting. If the inspector wants it, the inspector will get it!

- Requiring us to prove why an Underwriter’s Laboratory (UL) listed piece of equipment has a UL listing. “It shouldn’t have a UL listing. We have a problem with that.”

- Requiring work they always wanted to have done at that property. On one project in a designated industrial park the local municipality asked us to install windows on a warehouse because they stated they would like the look of it.

- Requiring permits on our temporary construction trailers. This includes requirements to have a handicap ramp for each trailer – even if the trailer is in the middle of the site and a wheelchair would have to traverse acres of sand.

- On a recently completed project the county required over $100,000 in added scope above what they added during their permit review. All of this was required before a Certificate of Occupancy would be issued.

H. J. High has always prided ourselves on our ability to work with building departments and despite the increased burden we’ll continue to lead our industry in this regard. I am the chairman of the Construction Industry Council in Central Florida and we work to have a forum where private companies can have discussions with these groups to try and streamline the process and resolve issues when necessary. It’s not productive to complain about something if you’re not willing to be part of the solution. We’ll continue our work on this issue. It is our hope there are continued efforts among the building departments to standardize requirements and practices to help minimize this problem.

In my continuing look at the strategies some companies are (likely unwittingly) employing to survive these times, my blog post will focus on the misstep of one of our subcontractors.

Kill Quality

The traditional mentality among those in our industry is aligned with numbers, specifically LOW numbers: low bid, fastest duration, least amount of change orders, shortest punch list, etc. When times are tight, most contractors naturally look at how they can lower the numbers associated with running their businesses. The largest number they have to look at is overhead. Within overhead, the largest number is salaries/wages, and within that line item are the highly paid craftsmen who immediately get a target painted on their backs.

In this situation, the strategy for survival plays out something like this (as it did for a casework contractor on one of our recent projects):

1.  Contractor cuts overhead by laying off his expensive (i.e., highest paid and therefore most skilled) labor.
2.  Contractor is finally awarded a project with H. J. High, after years of pursuing our work.
3.  Contractor isn’t properly staffed, and submittals and pricing requests are late, incomplete, or incorrect (or, as an added bonus – all three!).
4.  Contractor’s remaining shop labor (i.e., lowest paid and therefore least skilled) construct casework.
5.  Same least skilled labor visits project to install casework.
6.  Casework appears to have been built by a blind carpenter. Using a chainsaw. With a dull chain.
7.  Casework is rejected and must be refabricated.
8.  Contractor bid the project assuming no mistakes would be made.
9.  Contractor is now in the red.
10.  Contractor is unable to finish the project.
11.  Contractor’s client (i.e., H. J. High) is forced to take on more work by having to procure the services of a replacement casework contractor. Original contractor pays the cost to complete his contract and loses the ability to work with H. J. High again, thereby forfeiting future profitable work.

So the contractor’s strategy to lower his overhead in fact cost him more money by having to produce the job twice, paying to hire a replacement contractor at a premium, and cost him even more in lost future work. This “strategy” is pervasive in today’s market. A more sound strategy may have been to negotiate lower salaries with his most skilled craftsmen and instead let his unskilled labor go. Doing so would have reduced overhead, while also insuring work in the future by taking care of the client (not to mention keeping the welfare of his most valuable employees in mind).

While a strategy such as lowering overhead may seem like an obvious way to protect a business during this tight economy, the reality is if not done wisely, it will end up costing the business in the end – both in terms of reputation and future work.

H. J. High is committed to making the changes necessary to preserve ourselves in this tough business environment, but by doing so wisely and not at the expense of our clients.

The construction industry is commonly considered the most litigious industry in the nation. Contractual relationships are generally structured to “pit” designers, owners, and construction managers against each other in a misguided effort to create a checks and balances atmosphere. In today’s market environment, it’s common for new project Requests for Qualifications to ask contractors for the number of lawsuits they have had with clients in the last five years.

H. J. High has never been involved in litigation with a client. This is absolutely unheard of! Let me state that again. In our 76-year history, H. J. High has never been involved in a lawsuit with a client. And not because all our jobs go smoothly. Not because we don’t have disputes. Not because we’ve always been paid on time or we are always compensated fairly on added scope. Not because we haven’t had clients conduct themselves in unscrupulous ways.

The reason why we’ve never been involved in litigation with a client is simple: we work out a solution, forgive, forget, and move on. Life is short.

Sure, our lawyers miss out on the chance for a windfall of fees, but this isn’t about making it easy for lawyers, it’s about settling arguments quickly and getting the project done. Litigation is one thing we don’t do well, and we are very proud we don’t.

It has been interesting to witness the strategies some companies have employed to make sure they are left standing once we start to experience an economic recovery (we’re still going to have a recovery, aren’t we?). In the coming weeks my blog will focus on some of the ways we’ve seen companies choose to deviate from sound business practices in an effort to survive these times, and why I believe these strategies ultimately will not be successful.

Destroying a Solid Foundation

H. J. High had developed a very strong relationship with a local concrete and masonry subcontractor, due in large part to the exemplary service we received from the company over a three year period during “the good times”. As the market was turning and work was really starting to dry up, the subcontractor accepted a contract with us for a sizable concrete and masonry (block and brick) project. They knew they were tight on their bid margin and decided instead of self-performing the masonry portion of the contract as they had done on previous projects with us, they would sub the masonry work out to a lower tier contractor. The lower tier contractor did a horrendous job – the workmanship was often unacceptable, many times requiring the work to be removed and replaced, in some cases multiple times; the workers were accustomed to working on residential project sites, often showing up wearing shorts and tennis shoes only to be sent home; the schedule couldn’t be maintained, the mason was consistently missing his own deadlines. Instead of stepping in and taking over the work with their own forces, thereby shielding H. J. High from further problems, the contractor decided to continue on course. After a multitude of heated discussions and battles between H. J. High and the sub, work was finally complete…with the exception of the final masonry cleaning. Then that became the battle – and the sub finally called us and asked if we would just do it for him and not make him pay for it since they had such a great loss on the job. I couldn’t believe the subcontractor was willing to destroy three years’ of hard work in building a relationship by making H. J. High suffer through their series of poor decisions. You can bet once the economy turns and work picks up we will not consider working with any contractor who fails to protect us by forcing us to endure the results of their poor decisions.

What happened to that contractor is not uncommon, even when times are good. Unfortunately most contractors don’t know how to say “no” to a contract, it is just contrary to our survival instinct. When times were good the problem for contractors quickly became having too much work and not being able to properly service it all. Now contractors know the pipeline is empty and they may not get an opportunity for another project anytime soon so they accept a job too cheap, rationalizing they’ll just figure the numbers out later. Their strategy seems to be, “I’ll lose a little on every project but I’ll make it up in volume” and that math doesn’t work. It is their client who suffers as a result.

It is better to recognize the reality in the numbers and not try to “force” the project. One of H. J. High’s strategies for survival during this economy has been to continue to avoid the open hard dollar bid market.  NOT pursuing certain work may seem contrary to a survival strategy, but we recognize there are desperate contractors in the marketplace who will take any job at any price just to “have a project”. Sometimes the best job we ever got was the one we didn’t get – we can’t properly serve our clients when we’ve agreed to a contract price and terms which force us to provide the least service possible. We instead will continue to focus on delivering value and committing ourselves to building trust with our clients, quality in our buildings, and in the process strengthening our community.

The recent death of Steve Jobs has prompted a wave of articles, books, and television specials dedicated to his remarkable career.  He was a creative genius widely considered one of the greatest visionaries and business leaders of our generation.  Although many lessons can be learned by studying the practices of the CEO of the world’s most admired company, I was struck by three simple beliefs he had that easily translate to the commercial construction industry and H. J. High in particular.

The Power of “No”
When Steve Jobs returned to Apple in 1997, the tech company he founded in his garage two decades earlier was on the brink of failure and was said to be three months from being insolvent.  While reviewing the company’s product line, he found Apple had been producing multiple versions of the same product to satisfy requests from retailers and customers.  He asked his managers, “Which ones do I tell my friends to buy?”  When he couldn’t get a simple answer he worked to reduce the number of products by 70 percent.  Moving forward, Job’s strategy was to only produce four products.  One year later, Apple computer turned a $309 million profit.

In construction, it’s easy for a company to try to be everything to everyone.  A contractor once told me, “If you can draw it, we can build it!” However, deciding what not to do is as important as deciding what to do.  Focusing on a few markets and products allows a construction company to build competency, become a leader in the market, and further differentiate from its rivals.  H. J. High has strived to make this change in the past five years.  Our focus on the commercial, educational, religious, and industrial industries has allowed us to build our expertise in those markets.  We feel our clients are best served by dealing with a contractor who knows who he is and who he isn’t.  You won’t see us building condominiums, water treatment plants or hotels.  We’ve recognized the power of “no”.

Designing Products Requires More than Asking Customers What they Want.
Jobs once said, “It’s really hard to design products by focus groups.  A lot of times people don’t know what they want until you show it to them.”  Apple developed products focused on meeting needs a customer sometimes didn’t know they had. They didn’t rely solely on focus groups or listening to their customers.  Instead, Job’s hired great designers and spent more time on innovative thinking.

When designing a facility, it’s not the client’s job to tell you what he wants.  It’s our job to get that information from the client.  It’s wrong to expect that customers will lead the design of a facility.  Most people don’t know what it is they will want next.  They know what they like and dislike. 

The best facilities are ones in which the customer trusted the designer to balance the functions needed while also providing something they couldn’t have known to ask for.  Delivering on this balance is what customers want and count on you for.  It separates the best firms from the rest.  It’s what we strive to do at H. J. High

Strive for Perfection
Steve Jobs was known for his relentless pursuit of perfection.  As a teenager he was building a fence with his father Paul Jobs who was a great mechanic.  His father told him, “You have to make the back of the fence that no one will see as good looking as the front of the fence.  Even though no one will see it, you will know. That will show you are dedicated to making something perfect.”

Later in life he brought this focus on perfection to Apple.  He would constantly refine a product until it was perfect in his mind.   The night before the opening of the first Apple store, Jobs didn’t like the look of the tiles, so he had them all ripped up and replaced. Right before the iPod launched, Jobs had all the headphone jacks replaced so they were more “clicky.”  This strive for perfection is widely recognized as separating Jobs and Apple from their competitors.

This trait similarly works to separate construction companies from each other.  In a world of increasing pressure to finish buildings ahead of schedule and under budget, many construction companies have found themselves focusing less and less on perfection.  Instead the focus increasingly becomes: What would the owner accept?  What can we afford to do?  What was the minimum shown and required of us?  Our goal at H. J. High is to build a culture of perfection in all areas.  We’re confident that this requirement of all our employees and subcontractors will separate us from the pack. 

Our focus will continue to be on the “back of the fence” as much as the front.

Some may consider it strangely ironic that on the heels of debuting our new website, which focuses on the social media aspect of the web, one of our first blogs would carry a title such as this.

We recently took subcontractor bids on a relatively large project.  In today’s market you can just imagine the aggressive pricing and quantity of bids we received.  For one particular trade, we received a bid from one of our long time subcontractors – one of our “good guys”.  Like many firms, the economy had ravaged their company and they really needed the work.  They were desperate for it.  They were begging for it.  They were pleading for it.  They were communicating with us at every level of their firm in an effort to win the job.  Although they were not the apparent low bidder at bid time, after close scrutiny of their scope we recognized they were not low due to scope overlap.  We were able to work through the issues and ultimately awarded them the project – we certainly could have made a different decision but were empathetic to their circumstances and confident they would do the best job for us and our client.  Fast forward several months and their work is now almost complete.  The project did not go well – their subcontractor consistently missed the schedule, their materials were wrong, or late, or both.  They submitted change order pricing incomplete, incorrect or late.  They missed coordination meetings.  The principals of the firm, the guys who were begging and pleading for the work months earlier, were persona non grata.  Not once did they walk the project.  Not once did they visit the site.  Not once did they pick up the phone to see if H. J. High (their client) was satisfied or if they could improve their performance in any areas.  Instead, their vice president sent me an email – via LinkedIn – to join his professional network.

Another similar example:  We have a subcontractor who worked hard for months pursuing work with us and was finally able to land a couple of our projects.  We also invited them to be a member of our High Quality Building Services (HQBS) team; they were anxious to be on board and promised good service and good quality work.  Within weeks they missed a long planned inspection of one of HQBS projects and went on to fail miserably on the two projects they were awarded – they couldn’t maintain the schedule, they didn’t show up when they promised, they disputed contract scope, and they consistently failed to meet their own commitments. The vice president of the firm, the person who invested so much time and effort in earning our business, continued to provide lip service but failed to deliver each time.  He never asked if H. J. High was satisfied or how he could improve his firm’s performance.  Instead, he sent me an email – via LinkedIn – to join his professional network.

In our busy information-overload world it is far more convenient to send an email, or text message, or LinkedIn invitation than it is to pick up the phone (or visit face to face).  The problem with that is the human experience is non-existent.  At our main office we’ve threatened to shut down our own internal email capabilities just to force our employees to walk down the hall and have real discussions with their coworkers.  Had the two vice presidents described in the examples above made the simple effort to call and find out if H. J. High was satisfied they would have learned there were problems in time to salvage the relationship.  Instead, they chose to take the “anti-social” route and sent me an invite to join their “social” media network.

There is no doubt social media is here to stay and serves some very beneficial purposes, but don’t permit yourself to use LinkedIn, or Facebook, or Twitter, or whatever the next great social media platform is, as a substitute for genuine human interaction with your client or those who are most important to you.  Pick up the phone or visit in person and socialize like human beings.  As for the two vice presidents above, I will not be joining their LinkedIn networks.