Is the GC’s Goose Cooked?
June 10, 2011 Comments Off on Is the GC’s Goose Cooked?
Do you remember the story about the gifted goose – the one that delivered a daily golden egg? More to the point, do you recall the crux of the story? Greed leads to short-sighted behaviour whereby the future is forfeited for immediate gain. Let’s see how we can weave GCs into this cautionary tale.
Let’s start with CATs. You have heard the openly-stated fact that GCs can knock a few dollars off a regular claim (if asked) since they mop up more than water every time a CAT comes around.
After grinning and bearing this for years, insurers decided it may be a good idea to look into those CAT costs. Surprise! Square foot costs, fixed costs, stringent limits on how long equipment could be stored deployed at a job site, and a lot of nose thumbing at IICRC S500 followed rapidly. All of a sudden, CATs aren’t quite as lucrative.
Next up is sub trades and associated overhead uplifts. A lot of crumbs were swept under rugs before flooring programs showed up. Once again, insurers got curious about costs, looked a bit more closely and nearly passed out. Personal experience: Some contractors (NOT you, intrepid reader, not you) were found to be tacking on an additional ‘fee’ (anything up to $1,500) to every flooring claim in addition to the ‘customary’ 10&10. All of a sudden, direct invoicing from flooring vendors became the norm.
Roofing is the latest object under the microscope. It’s just a matter of time before this segment, too, goes the way of the 10-day-dehum. However, for now, some lucky contractors still get to slap the ‘customary’ 10&10 on the roofer’s total invoice in return for some supervisory input.
Now this isn’t small stuff. Flooring and roofing account for possibly one-third of the overall dollar value of property claims across the country. The loss of the ‘customary’ 10&10 related to this from the GC’s bottom line will be felt. Furthermore, it will never come back. That’s because no matter how bad the service provided by the flooring and roofing trades is and no matter how much adjusters complain about having to manage additional parties, the money saved will be a tangible benefit and that trumps complaints any time.
Another factor that cannot be ignored is the fact that many of the vendors in these trades can provide service at a lower direct price than that contained in the estimating programs mandated by insurers. Not always and not for every job but it does happen pretty often. Food for thought.
And that’s just the beginning. Demolition, environmental, and other highly specialised sub trades will all get their turn under the spotlight.
Every GC will disagree with some part of this article. And every GC knows that there’s enough truth and fact here for insurers to really get their teeth into – possibly for all the wrong reasons. And every GC (NOT you, heroic reader, not you) knows that your compromised margins, your faultless service, and your patience with adjusters means nothing because you didn’t engage insurers productively when you had the chance.
Would you like some gravy with that goose?