Blog 019 - The High Cost of Specialising Part Two

The purpose of this series of posts is to explain some of the costs that form part of daily Specialist Contractor life that might get overlooked when an Employer queries the “high” overhead and profit percentages within the supply chain. In the first part of this series, I look at the “subscription” costs of being a reputable Specialist Contractor, in this follow up post, I dive into one of the other costs that all Specialists incur, the “one on the chin”.

Construction is an industry that relies on collaboration, interface management and daily working relationships. The one thing that gets in the way of all this is the money! Site Agents are forever requiring additional elements of work, its just a fact, they need “this” moved here, a temporary “that” put there etc. but it always gets complicated when it comes to the payment. The Specialist doesn’t want to be the “difficult Subbie that wants an instruction for everything and always chases the pound notes” but there is a cost to it and they do start to add up. The Site Agent doesn’t want to be issuing instructions and “costing his company money”. The result is often the Specialist “taking one on the chin”.

The benefits of taking one on the chin are that it generally helps keep the working relationships very fluid and puts the project first. The problem is the hidden cost. Usually to take a man and move them onto something else takes 20-30 minutes of set up and tool movement, loading of materials, undertake the work, supervise where required and then demob back to the original work front. The materials then usually have to be re-procured, delivered in and re-loaded out. The small favour job starts to gather some momentum...

I’m not saying Specialists shouldn’t do the favours and that they shouldn’t take them on the chin, there just needs to be a recognition that this has to be paid for somewhere and usually that comes out of the Specialist Contractor’s profit on the project. Therefore, the profit needs to be suitable enough that these small “keep the site moving and the working relationships oiled” favours can be afforded by the Specialist Contractors.

Specialists, take note, if these favours are going to cost you, then you should make sure they serve you. For this, I like to keep what I call a “grey ledger”. It is a small and informal schedule of all the items you’ve taken on the chin throughout a project with a rough cost next to each. This will help in the following ways:

1. If your margin starts to disappear you will have a good idea how much of it is down to the favours

2. If the list gets excessive and you’re not seeing any reciprocity, then you have good reason to call an end to the odd job favours

3. If the client’s QS appears at the end of the project with a long list of spurious contra charges, the grey ledger can be used to chip away at some of that. After all, that working relationship is only a relationship if it works both ways.

At the very end of it all, don’t rely on the grey ledger as a silver bullet, but it is a worthwhile exercise that requires minimal upkeep during a project. It might give you a good insight into how each client operates and the true cost of working for them.

Specialist Contractors have always done favour jobs and they always will, its an inevitable part of the industry and really does stop the site grinding to halt due to paperwork every few hours. My advice is just to ensure that;

1. Clients understands that favours do cost money and it must come from somewhere and;

2. Specialists learn how to make the “one on the chin” work for them!

If you have nay question about your overheads and profit, want to learn more about grey ledgers or understand your cost control better, drop me an email.