5 Warning Signs a General Contractor Could Be Trouble

Jon R. LowranceJon R. Lowrance is a strategic business investor who has bought and scaled 4 different companies. He is currently focused on adding companies to his Freedom Brands portfolio in the construction, manufacturing and home service industries.Jon R. LowranceI got back-charged $28,000 on a large construction project. I remember opening the deductive change order and having my jaw hit the floor.

I was confused about how this could have happened when we were only two days behind schedule. It turns out they had another subcontractor finish our work with prejudice and an open checkbook.

I requested a meeting with the owner and general contractor, thinking I could surely rectify the problem and satisfy all involved parties. Additionally, I felt that if our relationship had any chance of a future, all participants needed to be heard.

I was wrong. I was disheartened by how insensitive they were to my financial heartache and how we were 100% in the wrong.

Sometimes there are no black cats

If you have been in the construction business for any reasonable time, you undoubtedly have experienced a soured relationship with a general contractor. Sometimes those relationships were doomed by design from the start.

Confucius once wrote, “The hardest thing of all is to find a black cat in a dark room, especially if there is no cat.”

I was trying to find a resolution to a problem where there was no resolution to be had. Sometimes a contractor’s business strategy is to get the lowest bid possible and milk that sub for everything possible; then when all is spent, call the following sub waiting in line.

These are the general contractors you should avoid working with if at all possible. The first step in avoiding these contractors is to recognize that they do, in fact, exist.

Don’t leave a dragon out of your calculations

Jobsite problems are the metaphorical dragon. They exist from the moment construction plans are made.

Bad weather conspires against you; workforce shortages are compounded by no-call no-shows; suppliers delay shipments, and unforeseen design conflicts show up at the worst times. Top it off with emotional and imperfect humans; there is bound to be trouble ahead.

The right question isn’t whether there will be conflict in the future; it’s how well will the general contractor and the subcontractor plan for this conflict. Ideally, when problems appear, resolution and trust building will happen; if not, it will lead to never working together again.

In the past, I have dealt with a few general contractors that had little desire to work things out and were more interested in blaming others and using those to justify imposing financial penalties. Often there were warning signs, I should have paid attention to – statements that should have caused me to ask more questions.

The following “warning signs” are not absolutes but rather potential markers.

1) They communicate with you solely through bid invitation software.

The best general contractor to have is one that you have worked with before. However, in today’s tech-savvy world, it’s understandable that new subcontractor solicitation is conducted through this method.

This isn’t necessarily a problem, but rest assured, scoundrels hide under the veil of the obscurity these platforms provide. My advice is to make sure that your bidding relationship has more substance than just an online chat. Have phone calls, go out to lunch and, most important, do your background checks.

2) Their first bid question is about price.

Best-in-class contractors are more concerned with project planning than buying down bids. I understand that if you receive five different bids, you’re going to get five different prices with a massive swing from lowest to highest.

My problem is when their first point of contact is spent trying to get your number down. It’s OK to talk about money, but not first thing. My advice is to concentrate on the GCs that first ask about what you included in your scope, what your availability is like, how long the project will take and how you would phase the work.

3) They don’t prequalify subcontractors.

If you didn’t have to go through a prequalification process, it speaks to the professionalism they expect from everyone, including themselves. I think having to spend five hours filling out a prequel form that asks for everything short of blood samples is annoying. However, I appreciate the fact that it eliminates the low-tier contractors and elevates the competition.

General contractors should have some standard level of quality they won’t go below and a process to ensure they avoid it; if they don’t, then beware.

4) They constantly use new subcontractors on every job.

You should be doing a reference check on every client before you sign a contract. Watch out for the statement, “This is the first job I have done for them.” If this contractor has been in business for several years, surely they have identified who the best subs are in your trade.

The question should be why those subs do not work for them, and the answer should be self-evident. The best general contractors have longstanding relationships and are highly selective in who they use. Long-term relationships are one indicator of quality.

5) They don’t have time.

When they ask for a bid in just a few days, it means you’re late to the party, and they are not in a great position to win. When they don’t have time to answer pre-bid questions, they are bidding on more jobs than they should be. When they don’t have time to verify client funding, they are desperate. When they don’t seem to have time for anything, what makes you think they will have time to deal with everything after they win the job?

If any of these warning signs provoked a reaction in you or caused you to recall a specific incident, you are not alone. The problem isn’t that bad general contractors exist; it’s that good subcontractors don’t demand more from their clients.

One thing I have learned about people is that our behaviors are learned, and we often adopt behaviors that reward us. I suppose contractors continue to use these strategies because they are compensated with new projects and a never ceasing supply of eager subs.

Our challenge is to stop rewarding them and demand more. Let’s work toward raising the bar together.

Jon R. Lowrance is a strategic business investor who has bought and scaled four different companies. He is currently focused on adding companies to his Freedom Brands portfolio in the construction, manufacturing and home service industries. He specializes in acquisitions, scaling strategies and business coaching. His website is www.onefreedom.com