The DYOJO Podcast introduced a series of episodes covering the lawsuit between Robert Jordan (RJ) Construction and the Arlington Independent School District (AISD). According to RJC they brought suit for underpayment of a 2021 emergency response at Sam Houston High School in Arlington, Texas following the aftermath of Winter Storm Uri. We are diving into the court documents and internet content to draw out the lessons contractors can learn from this unfortunate experience. Is this an example of a contractor behaving badly?
Whether contractors "chase storms" by responding to national catastrophes such as the devastation left by Hurricane Ian, or provide aid during a regional events such as the one we are talking about in the aftermath of Winter Storm Uri (2021), or are simply working on projects where there are multiple representatives involved in the decision-making matrix, there are lessons to be learned from this unfortunate story. The DYOJO team has poured over the available court documents and a key component of this case centers around what constitutes a contractual agreement. As our guest Bebo Crain puts it, "It's hard to drive from the backseat after the ride is over." With the benefit of hindsight, many contractors listening to the show will likely conclude that there are several ways in which this situation could have been avoided or better resolved, yet, we don't have all the facts and we weren't there when they were unfolding in real time. As a twenty-plus year skilled trades professional, I have to admit, there are many of the mistakes made in this story that I have committed myself. Two of the key ones being what Mr. Jordan says, "I thought (enter client name) could be trusted." as well as believing that a series of emails would hold up as confirmation of an agreement. Robert Jordan says that his company sprung into action, received letters of thanks for their services, but have yet to be paid for their work. According to RJC the school district is using sovereign immunity to say, "Screw you, we don't owe you a penny because we are the government." Many in our audience will resonate with the frustration of having performed the scope of work agreed-upon for the price agreed-upon only to find they are in some level of negotiation with a client, third-party consultants, insurance representatives, or another person in a position of authority, after the work has been completed. Contractors will resonate with the frustration of having performed the scope of work agreed-upon for the price agreed-upon only to find they are in some level of negotiation after the work has been completed. Topics to be addressed in this series inculde:
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If you are one of the 33,000 plus viewers of a video from a contractor in Arlington Texas released in September of 2021, you may already have an opinion about the situation we are going to discuss in this article and upcoming episodes of The DYOJO Podcast. We would like to invite you to dig into a water damage emergency project that descended to litigation to unearth lessons that will help contractors shorten their DANG learning curve. READ MORE in the Cleaning and Restoration Magazine (C&R) Article Subscribe and listen to upcoming episodes of The DYOJO Podcast on lessons learned from RJC vs. AISD following a 2021 winter storm response at Sam Houston High School. It should not be a surprise that responding to a catastrophic loss is not the same as getting paid for rendering services. While many look at our industry and think there is ‘easy money’ to be made, there is no such thing as easy money in general, especially when working with insurance companies and handling catastrophic events. Contractors who want to ensure they get paid for the good work that they do will want to tune in for the story we are about to tell on The DYOJO Podcast. READ MORE in the Cleanfax Article Watch the introduction video for The DYOJO Podcast series reviewing the RJC vs. AISD case from Winter Storm Uri (2021) When people ask what we do as property restoration contractors, I always like to explain whenever there's a situation where someone says, "Who's going to clean this up?" - that's what we do. Many people, consumers and contractors, are frustrated by the insurance claims process for mitigation (drying structures) and repairs. Disagreements about what was done and what is owed can occur on projects large or small. For this article and the accompanying video, we will introduce you to a story that will resonate with contractors who feel like they have completed the work, BUT the customer is playing games with the check. When it's time to pay, the customer says, 'Thank you for helping us buuuuut...' RJ Construction vs. Arlington Independent School DistrictSo, what happens when the help is provided by a contractor but then there is a disagreement when it comes time to collect payment. The customer says, "Thank you for helping us but..." Recently, one such issue came across the desk here at The DYOJO Podcast between RJ Construction (RJC) and the Arlington Independent School District (AISD). RJC claims they dehumidified about 450,000 square feet of wet air within Sam Houston High School for what they believed was an agreed-upon price of $2.50 per square foot, plus some expenses. The total amount invoiced by RJC at the completion of their work was $1,245,600. When the school district delayed on payment, owner Robert Jordan took his case to the local community and to YouTube. RJC's initial video on the dispute received over 33,000 views. We did the job we were hired to do." - Robert Jordan (RJC) Contractors or the Government Behaving Badly?Jordan states, "I believed the AISD board could be trusted. So, my company went into action. Over the course of days, working around the clock, Sam Houston High School was dried and dehumidified. We did the job we were hired to do." Some people, even fellow contractors, watch this video or have read the Fact Sheet produced by AISD and conclude, "I got all the information I need. It's clear this contractor's a gold digger. RJC is just another opportunist that doesn't know what they are doing; seeing only dollar signs and trying to paid on the big one." Others, including local community members, have listened to what RJC has to say and read some of the court documents. They heard RJ Construction share their plight, "The AISD is hired a team of lawyers to claim that the district does not owe a penny for the hard and diligent work my company performed." Some are concluding, "The school districts is a bunch of crooks, probably in cahoots with the insurance companies, hiding behind sovereign immunity, trying to put a local company out of business." Is An Email A Contract?This dispute between RJ Construction and the Arlington Independent School District will provide all parties with lessons that can be learned from this regional winter storm. While there are many details to sift through, a key element for any contractor is understanding what constitutes a contractual agreement, especially when there are multiple parties involved in the decision making tree. This is central to the RJC v. AISD litigation, as they are arguing whether a string of emails constitutes an agreement or a contract.
Tune in on Thursdays to The DYOJO Podcast as we dig further into this story and help contractors shorten their DANG learning curve.
CONTACT The DYOJO Keep your eyes and ears open as you listen to this series of upcoming podcast episodes. How often do contractors receive arbitrary rebuttals to their inclusion of overhead and profit in their estimates for insurance claims? The answer is often. Sometimes the issue is easily explained by clarifying the complexity of the work or the number of trades involved. In this article we will briefly review a few scenarios, ensure that we have the correct understanding of indirect (overhead) costs verses direct (supervisory) costs, and share a sample email format for requesting clarification from the adjuster on a denial of overhead and profit. Work Complexity and O&PIf complexity is the barometer, O&P should be added to every claim without question (especially program or third party administrator work) as the level of compliance (i.e. complexity) for an insurance claim exceeds "normal" contracting scenarios. The insurance claims process for mitigation or renovation is inherently more complex than home improvement or remodeling when insurance is not involved. If complexity is a condition of the insurance policy, the carrier representative should be able to point this out to the customer and the contractor. A good question for the customer to ask would be, "Please show me where it states in my policy that overhead and profit is a condition of complexity." General Overhead are expenses incurred by a General Contractor, that cannot be attributed to individual projects, and include any and all expenses necessary for the General Contractor to operate their business.” - Xactware Direct vs. Indirect CostsAs we wrote about previously, "Indirect costs are all of those necessary expenses that a contractor incurs but are not directly related to an individual project. If a contractor, or any business, does not account for their overhead expenditures in the costs of their goods and services, they will not be in business for long." Indirect Costs are necessary for a contractor to remain in business. The insurance company may not care about this, but they sure understand their need to be profitable and protect that with great force. In most industries the overhead and profit are embedded in the costs. For example, when you buy an apple at the grocery store, they do not break out what their overhead and profit factors are for that item but they are certainly charging for it.
O&P are not optional for any business that wants to remain in business. General Overhead expenses are not included in Xactware’s unit pricing, but are typically added to the estimate as a percentage of the total bid along with the appropriate profit margin. These two costs together constitute what is normally referred to in the insurance restoration industry as General Contractor’s O&P, or just O&P.” - Xactware Supervisory labor (aka project management time) is as much a real cost that should be accounted for an compensated for the work as temporary power or restroom facilities. Supervisory time is a direct cost and should not be confused with or "traded" for overhead (indirect) costs. It is not included. It is necessary. It is common to either bid supervisory labor as a percentage of the estimated labor or submitted as a breakdown for billing at project intervals (i.e. bi-monthly). A Sample O&P EmailIf you receive a denial or a request for clarification for why you are requesting overhead and profit (O&P) as a contractor, this is a sample email that you could discuss with your customer and then send to the insurance carrier representative with the customer cc'd. Understand, this is not a guarantee that an adjuster will see things your way but it should help your customer and the adjuster to more clearly understand your position. Why wouldn’t overhead and profit apply? Overhead and profit are normal and necessary costs for a general contractor to remain in business.
Xactware, the estimating software utilized for this estimate as is common for insurance claims, states, “General Overhead are expenses incurred by a General Contractor, that cannot be attributed to individual projects, and include any and all expenses necessary for the General Contractor to operate their business.” Overhead and profit is normal and necessary for all companies including insurance companies. The insurance company included overhead and profit in their policy fees to the insured, correct? Where in the policy does it state that overhead and profit are excluded from the cost for an approved scope of work? Most contractors, if not all companies (including insurance), embed their overhead and profit costs into the lump sum pricing. Presenting overhead and profit as a markup is unique to insurance claims estimates in Xactimate. The software company advises, “General Overhead expenses are not included in Xactware’s unit pricing, but are typically added to the estimate as a percentage of the total bid along with the appropriate profit margin. These two costs together constitute what is normally referred to in the insurance restoration industry as General Contractor’s O&P, or just O&P.” Please advise if you need any further information to approve the total submitted scope and cost from our estimate as we know our shared customer is eager to move forward with restoring their home to resemble pre-loss conditions in a timely manner. Contractors often struggle to find the "right" price for their services. There are many means and methods for bidding anything from drywall repair, tile floor replacement, kitchen remodeling, to whole home renovations. Whatever the cost estimation platform is or the estimating software that a contractor chooses to use to try to hone the science of their process, there is always an element of art in determining the materials, labor, and equipment for a project. In this segment from The DYOJO Podcast Episode 82, Steve Patrick of Level the Playing Field shares a story about a mindset change for a plumbing contractor that affected how they priced their services. Estimating and Closing Work at the Right PriceDuring our conversation regarding using questions during business negotiations, especially with insurance claims adjusters, Steve Patrick shared a story that he heard during a sales training. The story goes something like this, There was a plumber in Chicago who immigrated from Yugoslavia. He was a master plumber and he was selling the work for a higher price than anyone else in Chicago. He was closing almost like 90% of the jobs that he went out on. The owner of the company asked him one day, "How is it that you're able to close such a high percentage of the work you estimate? The owner obviously wanted to clone this plumber who could bid work higher than their team members and converting a high percentage of those estimates into contracted work. The owner told the plumber "I want you to train all the rest of our plumbers. I want you to show them how you are able to close 90% of the work you estimate when you are selling it at a higher price than anyone in Chicago." This causes the plumber to pause. He doesn't know why he closes more work than anyone in the organization or how he is able to charge more than them either. The plumbers says, "I don't know. I just go in and explain what needs to be done and the customer hires me to do the work." Steve asks The DYOJO Podcast audience, "So, what happened to the plumber's closing ratio after the owner told him he was charging the highest price in Chicago?" Unfortunately, we know the answer, his close rate plummeted the 40%. The Mindsets and Habits for Estimating SuccessWhy was there such a drastic reduction? As Mr. Patrick says, "Mindset change. The plumber's mindset changed. Back when he thought he was bringing tremendous value to the client, they bought the value that he was selling. Once the owner told him that he was charging the highest price in Chicago, all of a sudden the plumber thought, oh my goodness, I'm overcharging the clients. And guess what happened?" Isn't that interesting? It's all about what is in between our ears. Mindset change. As a former adjuster, Steve trains roofing and restoration contractors how to succeed in the challenging world of insurance claim's repairs. In the extended conversation of Episode 84, Mr. Patrick shares, "It's your mindset. You know that you're right. You know you bring a tremendous value to the client." The contractor should take the confidence of the value they bring to helping the client navigate the insurance claim repairs process. Steve says, "Whenever you are dealing with an adjuster, 80-90% of the words coming out of your mouth should be in the form of a question." Mindset change. |
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