The risk/reward paradigm on tough jobs

THROUGHOUT MY project management career I've been known as the "project garbage man" because I am usually willing to take on jobs where other companies or project managers fear to tread. I'm known for my penchant for taking on difficult jobs involving high-purity systems, extreme system installation challenges, almost-impossible scheduling and manpower issues, and situations where the potential liability

THROUGHOUT MY project management career I've been known as the "project garbage man" because I am usually willing to take on jobs where other companies or project managers fear to tread.

I'm known for my penchant for taking on difficult jobs involving high-purity systems, extreme system installation challenges, almost-impossible scheduling and manpower issues, and situations where the potential liability is so great for the company and myself that a single mistake could conceivably bankrupt me and the company.

Why do I take on these kinds of jobs that few other project managers and companies in their right minds seek out? Three main reasons:

No. 3: You never know when taking on a difficult job might lead you into a whole new market and sub-trade specialty where theres not as much competition as there is in regular mechanical contracting.

No. 2: I just love a challenge! I just love being told that I can't succeed because the job is simply too difficult to accomplish on time and on budget. I just eat it up when I'm told I'm not smart enough or Im too old or not tough enough to be able to bring the job home. I salivate at the prospect of feeding my ego by doing what almost everyone else just shook his head at me for even thinking about taking on.

No. 1: But mainly I enjoy the usually extremely high markups and potential profit margins, usually two to five times or greater than a typical low-risk, low-reward job.

Putting aside the need for me to take on new challenges and feed my ego, if I can't put some real dollars in my own pocket and the coffers of my company with correspondingly high incremental markups, then screw it! I dont need the migraine headaches that Im not being paid very well to take. I dont need combat pay for being shot at on a daily basis and continually avoiding minefields all for just a couple extra bucks. If I'm going to war to accomplish whats almost impossible, then, by golly, Im going to be paid handsomely for doing so.

There's no real status involved in taking on the more exotic jobs like highpurity or dangerous work. No one really cares what you do or dont do.

Just because a job is super-high risk doesn't automatically make it superhigh reward. If the scope of work and contract terms straightjacket you, that gives you all the risk but only a fraction of the potential reward that should be there at contract's end.

That's why I simply wont bid highrisk jobs that require complete breakouts of every miniscule sub-procedure, fitting or fixture, nut and bolt and subfacet of my company's overhead. How I arrive at my final bid price, especially on high-risk/high-reward jobs, is none of the general contractor or owners business. If I spend a solid month crunching all the quantifiers on multiple, linked spreadsheets or pull my number out of my rear end five minutes before bid closing, its only a concern to me and my bosses. On high-risk jobs, I either bid lump sum or not at all.

If a high-risk/high-reward job looks like it'll come in at single-digit netprofit margins, then politely decline the invitation to bid and run away!

If you or your company hasnt dealt with high-risk jobs before but are considering doing so, consider first if your company meets these four criteria:

  1. Does your company have sufficient capital to be able to meet all proposed scheduling, manpower and equipment purchasing requirements without over-extending credit with your current suppliers or needing a short-term loan to mobilize the job?
  2. Do you have the talent either on staff or available that can physically accomplish the required tasks within the schedule?
  3. Are you and your company flexible enough to be able to think outside the box when unique problems might arise? If ordinary contractors using ordinary means could do the job, then you would'nt be looking at a job with extraordinarily large margins.
  4. Will your bosses give you enough real-time authority and, more importantly, flexibility (probably way more than they're used to giving) to make hard decisions on the fly and they wont second-guess you?

If your company can answer affirmatively to these four high-risk/high-reward job-bidding criteria, then yes, by all means give it your best shot.

But, if it cant or won't, then your company needs to stay in its safe marketplace and leave the crapshoots to the professional gamblers who, in reality, aren't gamblers at all because they know the rules of the high-risk games and how to win.

H. Kent Craig is a second-generation mechanical contractor and project manager with unlimited Master's licenses in boilers, air conditioning, heating and plumbing. He can be reached by calling 919/ 851- 9550, or via e-mail at hkcraig@yahoo.com