Tools we can use to manage risk in our business
- Vetting our customers – The first thing we do is pick winners. McFarland has the gold standard for a client list. Most of our clients are well-established corporations, healthcare systems, or public institutions. However, we do have some nonprofit and small businesses in our portfolio. It is really important to know our clients have the ability to pay within 30-45 days and that the check will clear so we can pay our team and sub partners. Never take it for granted that every client can pay. Sometimes, it is important to verify how a smaller client will fund the job before we ever mobilize to the site.
- Prequalifying subcontractors – Preconstruction is the first line of defense against subcontractor failure. We want to work with a lot of subcontractors from all over the Carolinas. However, it is essential to make sure we are signing up the right partners for the right scope of work. Sometimes a smaller contractor can do great work on a $200,000 window package, but they may be stretched too thin on a $1 million project. Precon works diligently to prequal our subs so we can measure their ability to be successful on our projects prior to invitation to bid. We may also elect to bond a sub which is essentially an insurance policy to replace the subcontractor if they do not perform.
- Writing complete bid scopes – Our bid scope is the starting point to a subcontract. If we write a good scope that does not overlap with other divisions of work, we can buy out the project responsibly. The bid scope enables us to clarify scope items, labor, and methods we expect to buy from each subcontractor. It also is the baseline for how we will compare and contrast bids when we level the scopes in pre-award to a contractor.
- Detailed project schedule – Our project schedule sets the expectations for everyone including the owner. Driving results using the activities noted on the schedule keeps everyone accountable to milestones and timelines. Our clients enjoy us, but their patience wanes when we are onsite beyond our contracted completion date.
- Know the contract – Contracts are complex! They are often written to benefit the owner, not the contractor. Therefore, it is imperative that the project manager, superintendent, project executive, and leadership understand what might be a risk provision buried in the long-winded paragraphs. We work to eliminate some of the biggest risks, but it is important for the project team to understand what we are expected to deliver before we ever set foot on the site.
- Strong field management – A good superintendent is the field general in control of all the manpower and activities on their site. This includes taking ownership for safety, deliveries, security, manpower levels, and adjusting to make sure the job is built with a high level of quality and firm finish date. Failure to do so will lead to a lot of re-work and punchlist work that keeps us onsite longer than necessary
- Documentation – We have all the right tools to document the living history of a project. If it is not documented, it didn’t happen. This is why we are always reinforcing the idea that we need to document all of our minutes, decisions, daily reports and back it all up with PCOs, RFIs, and submittals to ensure we are not exposed to paying for something that is not our problem. When in doubt, document, document, document.
Our projects take months to build and no project is like another. New buildings take hundreds or thousands of hands, hundreds of vendors, and tons of coordination to bring two-dimensional drawings to reality. Managing our risk is one of the most important concepts for all of us to own from start to finish.
Tools we can use to manage risk in our business
- Vetting our customers – The first thing we do is pick winners. McFarland has the gold standard for a client list. Most of our clients are well-established corporations, healthcare systems, or public institutions. However, we do have some nonprofit and small businesses in our portfolio. It is really important to know our clients have the ability to pay within 30-45 days and that the check will clear so we can pay our team and sub partners. Never take it for granted that every client can pay. Sometimes, it is important to verify how a smaller client will fund the job before we ever mobilize to the site.
- Prequalifying subcontractors – Preconstruction is the first line of defense against subcontractor failure. We want to work with a lot of subcontractors from all over the Carolinas. However, it is essential to make sure we are signing up the right partners for the right scope of work. Sometimes a smaller contractor can do great work on a $200,000 window package, but they may be stretched too thin on a $1 million project. Precon works diligently to prequal our subs so we can measure their ability to be successful on our projects prior to invitation to bid. We may also elect to bond a sub which is essentially an insurance policy to replace the subcontractor if they do not perform.
- Writing complete bid scopes – Our bid scope is the starting point to a subcontract. If we write a good scope that does not overlap with other divisions of work, we can buy out the project responsibly. The bid scope enables us to clarify scope items, labor, and methods we expect to buy from each subcontractor. It also is the baseline for how we will compare and contrast bids when we level the scopes in pre-award to a contractor.
- Detailed project schedule – Our project schedule sets the expectations for everyone including the owner. Driving results using the activities noted on the schedule keeps everyone accountable to milestones and timelines. Our clients enjoy us, but their patience wanes when we are onsite beyond our contracted completion date.
- Know the contract – Contracts are complex! They are often written to benefit the owner, not the contractor. Therefore, it is imperative that the project manager, superintendent, project executive, and leadership understand what might be a risk provision buried in the long-winded paragraphs. We work to eliminate some of the biggest risks, but it is important for the project team to understand what we are expected to deliver before we ever set foot on the site.
- Strong field management – A good superintendent is the field general in control of all the manpower and activities on their site. This includes taking ownership for safety, deliveries, security, manpower levels, and adjusting to make sure the job is built with a high level of quality and firm finish date. Failure to do so will lead to a lot of re-work and punchlist work that keeps us onsite longer than necessary
- Documentation – We have all the right tools to document the living history of a project. If it is not documented, it didn’t happen. This is why we are always reinforcing the idea that we need to document all of our minutes, decisions, daily reports and back it all up with PCOs, RFIs, and submittals to ensure we are not exposed to paying for something that is not our problem. When in doubt, document, document, document.
Our projects take months to build and no project is like another. New buildings take hundreds or thousands of hands, hundreds of vendors, and tons of coordination to bring two-dimensional drawings to reality. Managing our risk is one of the most important concepts for all of us to own from start to finish.