Twelve or so years ago, I wrote a column titled “How to stay ethical in an unethical business.” After reading my editor’s (Steve Spaulding) parting comments in last month’s issue, it occurred to me that it might be time to revisit those concepts.
The gist of Steve’s column was trust; establishing it, nurturing it and keeping it in the forefront of your business dealings. Our businesses are more dependent upon trust than most others. Outside of service work we, as subcontractors, must provide materials, labor and other expenses “up front” and then wait about a month to be paid for it in most instances. If that is not trust, I don’t know what is. The history of construction subcontractors is littered with the carcasses of the many shops who have fallen victim to the unethical behavior of the people for whom they have labored “in advance” of being paid.
Sometimes the problems with getting paid timely are unanticipated, sometimes they are contrived and created with the idea of “breaking” a subcontractor for whatever reason the GC can convince themselves that it is okay to mess with another person’s livelihood. That is where the ethics come in. Trust follows.
For any number of reasons, our industry seems to produce an inordinate number of charlatans. Whether it is the lure of perceived big profits or the misguided notion that it is an easy business to be in I don’t know, but over the years I have seen, and dealt with, many general contractors who had no business being in the construction business. Many had worked as project superintendents for larger companies, some had merely been subcontractors for the various trades who decided that they could make the “big bucks” for themselves by running the whole show. Still others were fresh out of college, with stars in their eyes, after receiving a degree in construction management.
Cascading Cause and Effect
Being “ethically challenged” and getting into a business where trust between parties is paramount is a recipe for disaster, in my opinion. Yet there always seemed to be a host of marginal players who hung out a shingle and started a construction company with little capital and even less ethics. The effect of this combination almost always leads to bankruptcy for all involved parties. The thing is, after suffering the collapse, more than a few of these people opened up another company, either with the same players or new front people, and began the same series of moves that lead to failure previously.
With the ethically challenged, the sequence is predictable. Start a licensed general contracting business (either residential or commercial). Bid a project, or negotiate one, with the owner/architect or both. Put the project out for bid to the various subcontractors. Assemble the project using the lowest bids. Begin construction. Get the draw money from either the bank or the owner. Pay only as much as you absolutely need to to keep the job flowing. When the subcontractors begin to balk, refuse to pay them until they either complete the project per “their” contract or until they walk away. Get another subcontractor to complete the project. Ignore pre-liens, or liens, and let the owners deal with them. Get into an irreversible bind on the job. Chances of being sued over contract breach are ignored. Take the money and close the doors. Then “rinse and repeat.”
Does that seem jaded to you? Unfortunately, I have seen that exact scenario play out for sixty plus years in our industry. I have watched good people lose everything trying to do the right thing for the wrong people. For those who survived, a little perspective moving forward helped to keep them from doing the same thing over again.
Trust But Verify
As we begin the new year of 2023, it is wise to consider the lessons of the past as enumerated above. While not all contractors are as described previously, there are enough of them to warrant a jaundiced eye when accepting a contract to perform your piece of the project.
Contractors with whom you have an established relationship are excluded from this narrative. Specifically, because they are a known quantity. If you have worked with a GC on successful projects, done, and been paid for, change orders and then paid in full, you can pretty much assure yourself of continuing along those lines into the future.
Use caution when bidding and accepting work from a new contractor. It is your responsibility to do your due diligence, checking out that contractor as thoroughly as possible. Everything from qualifying party for their license, to their bonding and insurance company. If you can get financial information for them, so much the better.
Establishing trust in a business relationship is paramount. That trust must flow in both directions though. If you are the only one who invests in the trust while the other guy is not bound by it, you are borrowing trouble. Building trust, especially with a new contractor, takes time and a little leap of faith.
We live in perilous times for our industry and economy. You do not want to be a business casualty because you didn’t take all proper steps to protect yourself when dealing with an unknown business. So, try to be sure when you extend your trust to a new business associate that they are worthy of it. Then do the right thing and keep true to your word. It’s all you’ve got, after all. Happy New Year!
The Brooklyn, N.Y.-born author is a retired third generation master plumber. He founded Sunflower Plumbing & Heating in Shirley, N.Y., in 1975 and A Professional Commercial Plumbing Inc. in Phoenix in 1980. He holds residential, commercial, industrial and solar plumbing licenses and is certified in welding, clean rooms, polypropylene gas fusion and medical gas piping. He can be reached at [email protected].