If you’re saying that as a matter of law, housing contractors can never pass on to clients any rise in cost for materials, labor, etc, then I stand corrected. I doubt that’s the case, but you’re the experts.
It’s a weird conversation because scott seems to be talking about a market that
a) Rewards / only employs underbidding contractors (so the correct answer is to always underbid) and
b) The client doesn’t actually understand the scope of the project (so the correct answer is to always underbid and explain the details later).
Like, you’re in an industry where the clients don’t understand/value/ignorant of the true cost of the work they’re contracting for, but also have discretionary funds enough to happily make up overages if the final product fulfills their (apparently) badly thought out goals.
So, imo, this has to be industry->consumer and not industry->industry, right? Because i’d be surprised if that is standard practice if your clients are commercial or industrial.
Read the available literature on project success rates. It is absolutely industry->industry.
You/your company must be fast then!
No, but contractors and owners sign this thing called a contract. Unless such changes are specifically allowed in the contract there is no legal basis for the contractor to expect a contract price to change based on rising material costs.
As for labor, we are a union company. Every July 1 my labor expenses go up. That is something that must be considered before a project starts, it must be addressed in the negotiating/bidding stage as we can’t go to the client afterwards and tell him that hey, labor is more expensive now your project will cost this much more.
Don’t know what that means, but I’m not making this up.
Fast / Good / Cheap (pick two).
LOL! Yes, we were fast, and sometimes good. Never cheap.
Of course they do, and nobody ever disagrees later about what the terms of the contract mean, and nobody ever settles that disagreement by coming to a compromise in which both sides pay something to resolve the problem.
I can tell you that there are contractors who make a living underbidding and then attempting to blame the quality of plans or whatever to make up the shortfall in change orders. These type contractors are also known for shorting their subs. I think Trump would fit this definition of a developer.
You don’t seem to understand that in business many clients are working with limited budgets, or their money source isn’t necessarily from within. I can’t ever recall negotiating after a project because material prices went up. If you are doing a project with x amount of something you check those prices (and you check for how long that price is good) before you start and before you sign a contract.
Now items you can’t predict, those are usually negotiated at the end of a project, but that doesn’t include the costs of materials.
I was a CxO in four different companies. Two of them were publicly traded, one a Fortune 500 company. The other two were privately held, one a very small company ($100m revenues) and the other midsized ($1b revenue). Maybe the problem is not that I don’t understand budget constraints.
We’re they custom home contracting companies? Because I’m telling you that the situation you’re describing is an outlier. Custom home contractors cannot go off budget or renegotiate terms willy-nilly.
I think you’ll find I’ve already more or less granted that. I don’t think it’s as hard and fast as you claim, but I don’t think it’s as loose as I thought.
I suspect success rates of major projects vary by industry. I have experience with large IT projects and the fault for a project heading south fast can be spread around.
Business: … and we need to have this particular functionality operational by
Me: But that’s like a 6 week time frame for delivery. You would need 6 weeks just to do the QA.
Business: Those are the business requirements.
Me: That’s nuts.
Business: Well, we are putting it into the request for proposal. Let’s see what the vendors come up with.
And this style of conversation pretty much happens repeatedly as the RFP is put together for th entire project.
Four of the six vendors reply with with fancy looking spreadsheets and GANTT charts showing how they will be able to deliver this project on time. Two of the vendors politely tell us we’re nuts and provide a more realistic delivery timeline. They of course, get dinged on the RFP evaluation for inability to comply with timelines. One of the vendors lowballs their costs. I’m sure you can guess which vendor got the contract. They then started the project and promptly swapped out all their originally scheduled highly skilled personnel with other staff with more modest skills.
If you also guessed that this project was completed with a lawsuit, reward yourself with a cookie.
So says everyone on the internet. :)
Maybe the problem is you are used to spending money. And I have already said I wouldn’t argue that industries differ. I am amazed how software companies seemingly always underestimate time and money.
I think the problem is that I’m a realist. I’ve seen the movie so many times, I think I know how it is going to end, and I don’t get angry when it ends that way. At that point we can all sue each other, or we can figure out how to make the best of a bad situation, with everyone sharing some of the pain. In my experience, it’s nearly always better to go that route. But I could be wrong!
You are describing pretty much every Defence contract, ever :) (Said as someone working for Defence in Australia, but I know it’s the same for the US DoD).
That just about qualifies as an Onion headline.