Liar, liar pants on fire. Misleading proposals and how to avoid them

Presented by

Beverly A. Koehn www.beverlykoehn.com Beverly Koehn and Associates, Inc. San Antonio, TX.  and John Barrows, president, J. Barrows Inc. Wainscott, NY.

Given some of the comments we heard at the recent Canadian Contractor roundtable discussion, it makes sense that we should take some time to sit in on a seminar intent on improving the, let’s say, moral quality of our sales proposals.

THE PRE-CONSTRUCTION CONFERENCE

According to Koehn, a pre construction conference is an absolute necessity for any renovation project. “The more that, at the front end, you spend time cementing the relationship and getting everyone on the same page, the better off the project will be.” She suggests a pre-construction conference could last as long as three to four hours. Her co-presenter, John Barrows, says that the greater the detail, the more likely the project will run itself.

As a preparation for the conference, she also suggests you evaluate your customer according to what you have learned about them. You may, for instance, have to schedule a much longer pre construction conference for some clients than others. You should also prepare yourself by making sure you know what you want to say during the conference and what you want to accomplish.

Here are some examples of the things you need to clarify during the conference:

Acronyms: You know what ABS is, but does your client? There are many acronyms that you use that they need to know about.

Costs: You need to be clear about your costs. You need to be as specific as possible so that they can have the correct expectations when change order happens. They need to

Timing: Customers must understand what the effect is of delays in their decisions.

Allowances: Your allowances must be clear. Don’t let there be any misunderstanding here as to how allowances work and what they are for and NOT for. State what it represents, and whether it is a per unit or cost basis. Barrows says for his business, he prefers to show his cost rather than his cost plus markup. ” You don’t what your customer going to a retail outlet and finding your allowance costs being consistently higher than what they see in the store,” says Barrows. Remember, “Surprises during a project are never pleasant surprised,” says Koehn. When you are upfront, there are no surprises.

THE JOB PROCESS

Koehn made a point of making sure that your agreement makes some sense when it comes to allowances. She had a custom home built for herself where the allowance provided for only four hours of time with an interior designer to completely outfit the interior of a 3,500 sq. ft. home. It was clearly inadequate but she only found out of the time limit when she was halfway through the work.

Change orders:  Your customer must know all the implications of changes, including the ripple effects and overhead changes.

Scope of work: Scopes must also be as detailed as possible. Remember to include what you are not doing as much as what you are doing.

Progress reviews: Does your customer know what progress is expected and when they will be updated on progress. “When you keep your customer in the dark, often when things change, the only thing they can think is, ‘you lied to me!’” says Koehn.

Draw schedule: You should always tie your schedule to way points that are easy to identify like: “The delivery of hardwood.” or “Start of taping.” When you use a point that is hard to identify. “Finish of drywall,” can be tough to identify when you have a large project where, perhaps, you have some drywall that can’t be done because of a mechanical installation that needs to be completed.

With draws:

–       Make sure the budget is clear.

–       Make sure your overhead is covered by the draws.

–       Again, be transparent.

–       Know where you are all the time when it comes to the draw schedule so you can answer clients’ questions between draws.

When it comes to the progress of a job, these are the areas where you’ll find there can be grey areas.

Allowances:

– Don’t use allowances to cover sloppy estimating. It will come back and haunt you big time.

Change orders:

–       Get rid of ambiguity in change orders and in the original contract so there can be no dispute.

–       And when you sell a change order, sell the value, not the cost. From the client point-of-view , there is a value to doing something different from the original plan. You need to identify that value and charge it, not just the cost of the change.

–       Have a line describing the time lost on the change order itself. And this number can’t be just the cost of the change but also the ripple effect on the rest of the job.

–       Koehn says on the issue of value, “Changes are things that the customer is already predisposed to be wanted by the customer.” That is where the value may well be much more than the actual cost.

What about verbal agreements?

–       You contract should say something about verbal agreements.

–       You should know what your local statutes say about verbal agreements.

–       Make sure you workers know what happens with verbal agreements.

–       There is nothing wrong with verbal agreements as long as you make them written eventually.

Progress meetings

–       Make sure your notes from these meetings are distributed to everyone who needs to have them.

–       With the notes, make a request that if there are any differences in understanding, that they are set back within 24 hours.

Scheduling

–       Scheduling is the best management tool in the tool box

–       Put your customer in the schedule.  They need to know their impact when they have to make decisions.

–       Be specific. Don’t use terms like, “couple of days.” Better is “Five o’clock on Tues. Jan. 25^th.”

–       Schedules don’t have to be fancy. If it’s a white board, it can be equally effective.

–       Use your schedule to help your workers think ahead