“Becky,” CFO of Amp-Up Electric, was worried about cost overruns on a school project. She discussed the problem with her friend “Alex” of Voltmore Electric. (The names have been changed to protect the innocent.) Here’s what happened.
Becky told Alex: “The drawings and specs for this project were basically all right, and there were not many changes during the job. I’ve gone over my foreman’s daily reports and saw nothing unusual—although the reports did accurately show the temperature at the site and whether it was raining. Nothing stood out as a red flag as to why the labor costs were so high.”
Alex gave it some thought and said, “Too often daily reports do not tell the whole story. I suggest that you set up a meeting with your foreman and talk to him about what happened.”
The next day, Becky followed up and met with her foreman, Jim. When Jim arrived at Becky’s office, he was clearly defensive. Jim started out saying: “I’ve got to tell you about how difficult it’s been dealing with the school’s project supervisor. He’s a real pip. And, I’ve not been able to overcome the low morale of my crews.”
But Becky really wanted him to talk about the high labor costs. Without criticizing Jim, Becky took a deep breath and asked him to start again: “Jim, let’s look at this like the old police shows where the detective says, ‘Just tell me the facts’.”
Then the story started to come into focus.
Becky knew that the contract terms said the school area was to be available to her company from 9 a.m. to 4:30 p.m. every day and that the school supervisor unlocked and locked the building.
Jim replied: “That may be what the contract says, but most of the time that guy did not show up until 9:30 or 10:00, and often he would come by at 4:00 and tell me to shut down for the day. On other days, the supervisor would tell me to be ready to start in one specific building area on the next day, then it would turn out that the building was closed.”
Becky was annoyed at hearing this and asked: “Jim, why doesn’t any of this show up in the daily reports?”
Jim tried to explain: “At the time, I didn’t think it was such a big deal, and I didn’t send any notes to the school because I didn’t want to antagonize the school supervisor any more than he already was.”
With this new information, Becky was able to see the pattern that caused the excess labor costs. She assembled a calendar chart of these problems that showed these interferences and calculated the labor impact. She then submitted this information to the school as a claim.
It was a good story, but the claim was denied.
In a snarky note, the school supervisor wrote: “There is a clear clause in the contract that requires a written notice from you of any job impacts within 10 days of the event, and you sent me nothing. Also, I looked at your daily reports, and there is no mention of any of these so-called problems that you want me to pay for. I am left with the strong feeling that this whole claim business is an invention after-the-fact to cover up for your lazy crews.”
Becky needed advice on what to do, so she asked to meet with the prior owner of her company, Mark. After Mark heard the story, he said: “Every new job is a learning experience. It’s almost impossible to predict what can go wrong or how your people will react. But there are some guidelines that I have always used. You can give them to your foremen and project managers and it might help in the future.” Here were his guidelines:
- For each job, go over the contract and highlight any written notice requirements for extras, delays, etc.
- Check the contract for restrictions for lay-down areas, site access and work area access.
- Go over the schedule to ensure it is reasonable.
- Discuss what should be in, and what should not be in, the daily reports.
- Make sure the reports note anything unexpected, such as a change in the schedule or interferences.
- Keep the notes factual and avoid opinions. For example, write “Electricians showed up but job area not available because … and had to reassign/send home my crew.”
- Notes should not make guesses about why things were the way they were.
- Make sure the foremen talk about unexpected events at progress meetings with the owner.
- If some problems reoccur, ensure an email or speedy memo is sent to the owner describing the problem.
- Never apologize to the owner.
- Make sure the home office is kept up-to-date.
- At the end of every job, meet with the foremen again, go over the job and discuss ways to improve recordkeeping in the future.
Becky was sorry she didn’t talk to Mark before. But Becky decided these were good suggestions and she was going to add to them with new experiences.