Who is at fault if a "client" signs a contract (or work authorization) but they have no authority or ability to pay?
It only takes getting left holding the bag once for a contractor to realize that there are two critical questions for every construction project:
On Episode 98 of The DYOJO Podcast, we wrap up a review of an insurance claim from Winter Storm Uri where the contract had to sue the customer, a school district, as they believed they were not paid correctly for their water damage emergency services.
In this video, Bebo Crain and host Jon Isaacson discuss some of the hard lessons learned from being put in awkward positions with customers who either didn't understand the contract or misrepresented their authority to enter into one on behalf of the damaged property. As Bebo says, the simple the agreement, the better. Or even clearer, "The more understood, the better," for all parties involved.
Listen to the rest of Episode 98 or read The DYOJO blog. The DYOJO Podcast - helping contractors shorten their DANG learning curve.
Do you have the authority to sign my contract? If they say yeah, sure. Okay. Do you have the authority to initial or initiate payment? You can sign my work off, but your Are you going to pay? Are you the one that's going to pay? I think those are two really important questions.
Two critical questions for every construction project
Jon Isaacson (DYOJO): Two really important questions you can sign my work off, but are you the one that's going to pay you a mentor to do do a podcast?
I don't know about you Bebo, but I've done jobs like that, where you arrive, it's a big client, well known in the community, you know, like a school district, the teams jazzed to be doing something that's helping you really feel is a good cause we're working to get kids back into school, right? There's, there's nothing cooler than that. That's everybody's like, you know, I'm not excited to be working overtime, or overnight, or 24 hours or whatever. But because we're doing something good for our community, people feel a lot better about that.
Bebo Crain (BC): During that Texas event, Texas was hit with a massive winter storm temperatures dropped below freezing for days, there was heavy emotion in the air, and you add that, then we don't experience stuff like that. And so we got hit really hard in Arkansas. And it was, I'm telling you, like in a situation like that, I mean, if we could help out, we're going to.
I've dealt with larger entities like HOAs apartment complexes that have management shields in front of them, and things like that. And when you deal with an entity, or any property that you're gonna go on, I think that it's very important to understand who has control that property, who has control that property has control the property.
Or better or better yet, who doesn't have control of that property, talk to call. For the event, or the money that's allocated for that property, it's important to know that they can, they could withhold that information from us and make it seem like a property management company or superintendent has the authority to appropriate $1.4 million, without even knowing it's gonna be 1.4 million in the beginning.
I think it's very important for our contract contractor to have a contract and not just a contract, one that is clear with its terms, one that can be understood, like, you gotta be able to take your contract. And you got to be able to sit it down in front of three or four people after the fact that all this stuff's happened, right? Whether after you've done the considerations of the work for the money, and you've got to sit there and you've got to be able to explain it what happened, you got to demonstrate what happens and what's going on. It's got to be agreed upon, like, I agree to do this for this, you know, if something's going on, the simpler, the better. Or the more understood, the better.
DYOJO: Just asking somebody, do you have the authority to sign my contract? If they say yeah, sure. Okay. Do you have the authority to initial or initiate payment? You can sign my work off, but your Are you going to pay? Are you the one that's going to pay? I think those are two really important questions.
The Full Discussion, Ep 98
Setting Goals and Achieving Them
Project management is all about managing the project to completion, according to scope, on time, and on budget. The scope is based upon estimated time and material costs to complete the work. You can begin to master these basics, even as a technician or carpenter, by simply setting daily objectives for yourself.
If you know what you will be doing tomorrow, you can set out your materials the night before, have a plan for how you will be efficient throughout the day, and document for your supervisor that you have met or exceeded the benchmarks that you set for yourself.
For example, when you arrive on a project you can use the following acronym to develop your work SPEeD; this stands for:
If you aspire to a supervisory or leadership role, you can use this sequence to first lead by example. When co-workers and supervisors notice that you are bringing order to chaos, you will create opportunities to input on the daily goals for your team. When you can help yourself and others clearly set and consistently achieve goals you will become an invaluable asset for any workplace. Use The DYOJO Recipe for Production SPEeD to help you elevate your performance as well as everyone around you.
Setting Clear Goals to Accomplish a Task
If you know the goal, you can "reverse engineer" what you need to do in order to achieve this intended outcome. For example, if the team needs to remove all of the drywall in two rooms within an eight-hour shift, a simple goal would be to remove one wall per hour (eight walls total in eight hours). If it's lunch time and your team only has two walls down, either there was an unknown factor decreasing production efficiency or the team needs to light a fire under their butts.
The more you practice setting goals like this and achieving them, the better you will be at this process of project management. This kind of success is addictive and contagious in that team members will respond positively to the sense of accomplishment and managers will be asking how they can replicate your team's ability to achieve your production goals.
Imagine how powerful it would be for you and your team to be able to say, "This is what we are going to accomplish today and be able to hit your mark consistently." If you document your goals and how consistently you have met or beat them, this data will be helpful in showing value to your supervisors. If you want to become a site foreman, shift supervisor, superintendent, or a project manager, this process will help you set and achieve goals as you manager larger teams.
The DYOJO Recipe for Production SPEeD
SCAN your worksite to understand what needs to be done, how to do it safely, and how you can develop a PLAN that optimizes your resources. As a technician, if you have a detailed work order that your supervisor provides you with the night before so that you can prepare for the following day, you can create the framework for your PLAN before you ever set foot on the worksite.
If you can master SPEeD from where you are, you will be proactive in pursuing your goals, and you will also have a solid foundation for leading your teams as a project manager. Use The DYOJO Recipe for Production SPEeD to help you set and achieve your goals. Once you have mastered these abilities you will have all of your past experience to share and equip the teams you manage with the same resources for success.
More Resources from The DYOJO
Considering chasing storms or pursuing catastrophe work?
Feast upon this snippet from The DYOJO Podcast Episode 98. In this clip, Jim Thompson shares his perspective on how to set yourself up for success on a large loss.
"You can lose your company on a large loss. You do a three or four-thousand-dollar loss and then you sacrifice your credit line, you borrow money from your friends and family, you hock your truck, or you do anything to get that loss done, but then you don't do it right. Not that you don't do it right technically but politically. Then the adjuster plays the 'let's make a deal' and doesn't want to pay until 90 days later. It's a risky business. But you can protect that risk by doing things the right way."
Thursdays are for The DYOJO Podcast - Helping contractors shorten their DANG learning curve.
Project management is an essential function of any organization offering services in the skilled trades industry. Many project managers feel they are overutilized and underappreciated by owners, managers, subcontractors, and customers. Many owners wonder why their teams cannot consistently produce profitable projects with happy customers. Contact The DYOJO about more information to improve this processes and project outcomes.
The Three P's of Project Management are:
The DYOJO will be releasing more information on the critical tools for each of the Three P's. In the meantime you can purchase a copy of So, You Want To Be A Project Manager? by Jon Isaacson.
Have you ever lost a million dollars for a lack of water damage mitigation moisture readings?
On The DYOJO Podcast Episode 92 & 93 we have been discussing a Texas contractor who is suing a local school district for underpayment of services rendered during Winter Storm Uri in 2021. The contractor valued their water damage dehumidification services at over $1.2 million dollars, the school district and their insurance company made an initial payment of less than $200,000. The customer stated that more would be paid if additional drying documentation was provided by the contractor.
According to statements given to a local news station, the contractor says that this water damage mitigation daily documentation doesn't exist.
The video below briefly introduces a commentary that friend of The DYOJO Podcast, Josh "IAQ Josh" Winton produced reviewing the essential elements of daily moisture mapping and documentation for a water damage event.
Additional resources on this and related topics:
The DYOJO Podcast - helping contractors shorten their DANG learning curve.
Thursdays are for The DYOJO Podcast.
When a contractor sends an invoice, is there an obligation for the receiver to pay it? The real answer is, it depends. In this article, we will review two scenarios, one personal and another from a case that is currently in litigation. After reviewing both incidents, contractors should have a better understanding of some of the self-inflicted ways that their claims for proper payment of services rendered can be harmed. This content will also serve as a simple training resource to help your team members shorten their learning curve for understanding three critical questions for getting paid as a contractor.
Three questions that will help contractors get paid
Often our ability to get paid suffers from self-inflicted harm. Unfortunately, I had to learn this the hard way following a surprise freeze event that hit our local market in Eugene, Oregon. We were hired by a property manager (some contractors already know where this is going), they even signed our work authorization (potential nail in the coffin number two), we performed the work, they signed our certificate of completion, and were happy with our work. Case closed, right?
What painful lesson did I have to learn? The property manager was not the owner of the property, nor were they authorized to sign contractual obligations on behalf of the owner, nor would they pay our invoice unless the owner agreed to release the funds to them or us directly. While it takes two to tango, the contractor has the most to lose so the contractor is responsible to protect themselves and their money. In this scenario, we failed to answer parts two (fully) and three (at all) of a critical sequence of questions for getting paid.
In my role as an estimator, there were some office politics and internal dynamics that made this situation more tenuous than it should have been. During the literal flood of freeze claims, I was covering the account of another project manager on our team. I was dispatching our team members based on third-hand verbal commitments. Several senior members in our office, including the general manager, my peer, and myself believed that since this was a large account in town, we could overlook certain processes. While it would have been good for our office to gain traction with their book of business our failure to complete the critical sequence of questions for getting paid made the process difficult.
Stop ignoring red flags as a contractor
If this scenario sounds familiar, perhaps you have been listening to a story we have been sharing on The DYOJO Podcast about an Arlington Texas contractor. Robert Jordan Construction (RJC) claims they have not been paid for services rendered at Sam Houston High School following water damage from Winter Storm Uri in 2021. RJC believed they had answered question one but the customer, Arlington Independent School District (AISD), disagrees. The court documents ask critical questions that many contractors, including myself, must answer, such as, “Do a series of emails constitute a contract or agreement?”
As we cover in the podcast, RJC performed a walk-through, stated a verbal scope of work, and proceeded with what they thought was authorization from the appropriate parties. RJC followed up with a (briefly) written proposal, the school district responded with requests for further information. Listen to these rebuttals from AISD and ask your team whether these should serve as warnings to review your processes and tighten up your contracts.
With regards to Question One, RJC proposed a scope of work and stated a price based upon a pricing structure, square footage pricing for water damage response and/or dehumidification. AISD states that the quantities, documentation, and pricing are inconsistent with the cost of work that they believe is appropriate. As for Question Two, it is documented that AISD appealed for more information as soon as they received the proposal from RJC as well as after they received the final invoice.
Question Three should have been cause for teh contractor to take their foot off the gas as early into the process RJC was notified that no amount over $50,000 can be authorized without approval by the AISD board. RJC was notified of the date on which this issue would be brought before the board. The board did vote, “To authorize Superintendent or his designee to negotiate a contract - in contract with RJ Construction for emergency services and equipment necessary to perform moisture mitigation of district facilities not to exceed $1,245,600.00.” By this point of further payment ambiguity, the work had been completed.
Learning from your mistakes as a contractor
As with my personal scenario, one could see RJC believing they are acting in good faith and trusting people on the other end to “do the right thing.” Yet, the red flags popped up early and appear to have been overlooked by the contractor. A few additional lessons many have had to learn, especially when working with governmental agencies, is to always assume that a third party will be called in to review the work. One of the many pieces we are still trying to put together in the podcast research is just how much documentation RJC did or did not provide the district. AISD appears to have asked for additional documentation early and in a much more directed manner after they consulted with their insurance carrier.
I shared some of my story on Episode 93 of The DYOJO Podcast as we continue to dig into the available information from the RJC vs. AISD case. If any of this resonates with you or your team, we would love to hear from you. Tune in on Thursdays and contact The DYOJO.
The DYOJO - helping contractors shorten