Masonry Magazine January 2006 Page. 47
"would not exceed!" Here's Coach's rule: When it comes to T&M work, never accept it on a "T&M not to exceed..." basis. NEVER. NEVER. NEVER!
There's a corollary rule to this. When it comes to T&M work, the absolute best you can ever do is to break even. You say, "Coach, are you nuts? This is guaranteed money. Why wouldn't I want this work?"
Let's use a common example where you are to be paid cost, plus 15 percent. What can possibly go wrong? Plenty! I just said that the best you can ever do on this type of work is to break even! Why? Let's say your crew and your foreman work all day long on this task. At the end of the day, your foreperson writes up an extra work ticket, listing your five crewmembers and himself. Consider these four things:
* Does the client smile when he sees that you expect to be paid for your foreman's time and his truck? Maybe.
* Does your client sign the ticket "verify for hours only"? This is a way of signing a ticket, verifying that your people were onsite and performing work, but it's not actually approving the work! In other words, it might be negotiated later. Coach is not making this one up this strategy is becoming prevalent among larger general contractors.
* When can you bill for this work? Do you get a unilateral change order now sort of an advance change order you can bill against this period or will you have to carry these costs until the end of the job when the client will execute one final change order?
* Even if everything is signed for, with a smile, you still have to collect the money, because the owner (in his or her own mind) may be thinking that there's still an opportunity to negotiate your
COACH GARY'S PLAYBOOK:
For a whole host of PM resources you can use every day, go to www.fullcontactpm.com and look for the link to the Playbook. There is no cost to use these resources, but it may cost you plenty to ignore them! Do yourself, and your company, a favor and check them out!
The Voice of the Mason Contractor
fully authorized tickets before you're handed a check for the amount.
Once again, before you think that ol Coach is exaggerating to make a point, let me ask you a question: How many times have you gone in to see your client with valid extra work tickets in hand- properly signed and asked for a check or a change order, and your client begins the process of reneging? Raise your hand if you've ever heard this: "Wow, that's a lot of money" or, "Gosh, I didn't think it would be that much" or, "This is coming right out of my own pocket-what can you do to help me?" or, my all-time favorite, "How about we just split the difference?"
The other big "elephants in the room" to consider when doing all of this extra work:
* Your liability insurance premium might be around two percent of your gross, so when you don't recover costs, you not only lose them, but you lose an additional two percent. Ouch!
* Which is easier to bill? An agreed-upon, lump sum, line item of, say, $10,000, or $10,000 worth of tickets and receipts that you have to first justify to your client, get approved, and then assemble a billing for it? I know my preference!
And that's why this column is subtitled, "Exploring the Evils in T&M Work," because when you split the difference with your client, what you are giving away is profit from your own company. Remember, the cost is already there, and has been picked up by your firm. Being asked by a client to tear up your valid, extra work request makes as much sense as having an employer ask employees to tear up their own personal expense reimbursement requests for things they've paid out of your pocket to help the company. No legitimate employer would expect an employee to do that! That would be evil.
Gary Micheloni is a project manager, author, consultant and speaker. He can be reached at coachgary@full contactPM.com.
Copyright © 2006, Gary Michelani and Full Contact Project
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Masonry 45