Masonry Magazine March 1971 Page. 7
MAKE MONEY MOVE!
Houston, Texas "The movement of money through the construction industry has regressed to all-time low speeds, contributing to the higher costs of construction in this nation."
Speaking at the annual convention of the Mason Contractors Association of America here, Richard E. Snow, Director of Industry Promotion, Allied Construction Employers Association of Milwaukee, said, "We are all to blame-architects, engineers, contractors, subcontractors and suppliers, alike for the mess our money affairs are in."
Snow urged the national association "to attack the problem of fiscal flow at the broadest and highest level with a concentrated education program aimed at construction users who are at the source of the monetary tributary."
According to a 1970 Dun & Bradstreet report, Snow revealed the median profit margin for general contractors is 1.23% with the upper quarter of contractors averaging out at 2.46% and the lower quartile, .58%. "No other industry category cited by D&B in its key business ratio report ranks lower in all categories than the construction industry," Snow disclosed.
Snow reported that, the Milwaukee construction industry has pioneered a program called "Make Money Move" that is beginning to show results, "but we're a long way from achieving the degree of sophistication we are seeking.
"We discovered, in our MMM research, that nowhere in the United States, nor the world for that matter, has anyone ever completed an authentic paper on the fiscal flow of money through the construction industry, thus we have had to stumble and fumble our way," he said.
The abuses and obstructions to fiscal flow locally, he cited:
Private Sector
• Delays in payments to contractors for work performed are caused by breakdowns or gaps in the contractor's information on the buyer's prime source of funds and/or financing.
• "Loosely-written" contracts which lead to misunderstandings and disputes between owner, architect, the contractor and subcontractors.
• Poor fiscal planning on the part of the owner causes early progress payments to flow satisfactorily but trickle to a near halt as project completion time nears.
• The owner arranges financing for a project, then diverts these funds to other areas of business activity. This act is usually compounded by the general contractor and, to a lesser extent, by the subcontractors, thus affecting a chain reaction.
• The owner withholds retained percentages because he must wait to receive monies he has invested in the securities market in order to make final payments to the contractor.
Public Construction Sector
• Increased use of federal funds in public construction activity has caused "institutional paperwork constipation," slowing the payment process. Form overlap and/or duplication is the major enemy, the public the loser.
• Delays of from a minimum of four months to a maximum of 13 months on final payouts on approximately 80% of all state highway contracts.
• Nine major steps and at least as many minor steps involving three separate governmental bodies occur in payments processed by the State Engineering Bureau. The collection period varies from 15 days to 90 days or more, with a 70% occurrence of delay.
• Statutes and ordinances governing partial payments, final payments and retained percentages vary from public body to public body.
In the public works department of one Wisconsin municipality 18 different steps must be completed before payment certification is completed. If no impediments arise, the collection period averages 35 days.
"The upshot of this trickle of money leaves the contractor with two alternatives. He bids fewer jobs. Or, (Please turn page)
7