Table Of ContentConstruction Business Management
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Construction Business
Management
A Guide to Contracting for Business Success
Nick B. Ganaway
AMSTERDAM • BOSTON • HEIDELBERG • LONDON • NEW YORK • OXFORD
PARIS • SAN DIEGO • SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO
Butterworth-Heinemann is an imprint of Elsevier
Butterworth-Heinemann is an imprint of Elsevier
Linacre House, Jordan Hill, Oxford OX2 8DP, UK
30 Corporate Drive, Suite 400, Burlington, MA 01803, USA
First edition 2006
Copyright © 2006, Elsevier Ltd. All rights reserved
No part of this publication may be reproduced, stored in a retrieval system
or transmitted in any form or by any means electronic, mechanical, photocopying,
recording or otherwise without the prior written permission of the publisher
Permissions may be sought directly from Elsevier’s Science & Technology Rights
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email:
Contents
Preface: What you can learn from this book xiii
Acknowledgments xvii
Chapter 1 Do you have what it takes? 1
1.1 Essential traits 2
1.1.1 Initiative 2
1.1.2 Passion 2
1.1.3 Stress tolerance 3
1.1.4 Reliability (follow-through) 3
1.1.5 Willingness to work while others play 4
1.1.6 Unyielding positive attitude 4
1.1.7 Mental toughness 4
1.1.8 Attention to detail 5
1.1.9 Sense of urgency 5
1.1.10 Self-control 5
1.1.11 Thirst for knowledge 5
1.1.12 Ability to get along with others 6
Chapter 2 Your role as owner of your construction f irm 7
2.1 Leadership (Setting the course) 7
2.1.1 Vision to reality: The required path 9
2.1.2 Leaders and managers are different from each other 10
2.1.3 Tame the ego 10
2.2 Leadership in times of uncertainty 11
2.3 Manager vs owner/shareholder 14
2.4 The entrepreneur mindset 15
vi Contents
2.5 Managing risk 16
2.6 Establishing your corporate culture 17
2.7 Striving for excellence 19
2.8 Hiring the right people 20
2.9 Knowing your industry 21
2.10 Coordinating resources 23
2.11 Keeping in touch 24
2.12 Being there 25
2.13 Identifying objectives 25
2.14 Measuring results 25
2.15 Marketing 26
2.16 Little habits with big payoffs 26
2.17 Getting involved 28
Chapter 3 Sales, marketing and business development 29
3.1 Marketing materials 30
3.2 Publicity 32
3.3 Proposals and presentations 32
3.4 Staying ahead of the pack 33
3.5 Impressions 33
3.6 New customers vs old 34
3.7 Reaching out 35
3.8 Data mining 35
Chapter 4 Creating customer loyalty 37
4.1 Budget 38
4.2 Quality 40
4.3 Relationships 41
4.4 Schedule 43
Chapter 5 Business considerations 45
5.1 The corporation 45
5.2 Capital equipment 46
5.3 Purchasing 47
5.4 Collection 48
5.5 Dealing with the IRS 49
5.6 Contractor failure 51
Contents vii
Chapter 6 Controlling your f inances 55
6.1 Working capital 55
6.2 Projecting cash needs 56
6.3 Understanding financial statements 57
6.4 Dishonest employees 57
6.5 Where is the money? 58
Chapter 7 Bidding 59
7.1 Qualifying to bid 60
7.2 Approach to bidding 60
7.3 Pricing 61
7.4 Cost databank 62
7.5 Pre-bid site inspection 62
7.6 Warranty considerations 65
7.7 Compiling your bid proposal 65
7.8 Reverse bidding/auction 67
Chapter 8 Building it 69
8.1 Registration and licensing 69
8.2 Environmental studies 70
8.3 Subcontracting the work 70
8.4 Photographs 71
8.5 Pre-construction meetings 71
8.6 Before you start a project 72
8.7 Project overhead/general conditions expense 73
8.7.1 Managing project overhead/general conditions cost 75
8.8 Warranties 76
8.9 Mechanic’s liens 77
8.10 Lien waivers 78
8.11 Closing out the project 79
Chapter 9 Accounting and record keeping 81
9.1 Certified public accountant 81
9.2 Audited financial statements 82
9.3 Bookkeeper 82
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9.4 Cash vs accrual accounting procedures 83
9.5 Percentage of completion vs completed contract
reporting 83
9.5.1 Percentage of completion method 83
9.5.2 Completed contract method 83
9.6 General and administrative expense 84
9.7 Fixed vs controllable G&A expense 84
9.8 Cost accounting 85
9.9 Financial statements 86
9.9.1 The income statement 87
9.9.2 The balance sheet 87
9.10 Reports 88
9.11 Billings 90
9.12 State sales tax 90
Chapter 10 Contract terms and conditions 93
10.1 Types of agreement 94
10.2 Requirements for a binding agreement 95
10.3 A few generalizations about contracts 96
10.4 Know the project owner 96
10.5 Getting paid 97
10.6 Commencement/completion dates 98
10.7 Owner delay 99
10.8 Contractor delay 99
10.9 Changes in the work 100
10.10 Constructive change 102
10.11 Differing conditions (Changed conditions) 102
10.11.1 What to do upon discovering differing
conditions 103
10.12 Insurance 105
10.13 Indemnification 105
10.14 Warranty obligations 106
10.15 Limitation of liability 106
10.16 Governing law 107
10.17 Dispute resolution 107
10.18 Contract termination by the owner 108
Contents ix
Chapter 11 You and your employees 109
11.1 Who are the “right” people? 110
11.2 Hiring the “right” people 111
11.3 Good hiring practices 112
11.4 The interview 113
11.5 New employee orientation 114
11.6 Non-compete non-disclose agreement 115
11.7 Managing employees for the long term 116
11.7.1 Relationships 116
11.7.2 Autonomy 118
11.7.3 Recognition 118
11.7.4 Employee’s return on investment 118
11.7.5 Employee incentive plans 119
11.7.6 Benefits packages 120
11.7.7 Trust 120
11.7.8 Work/life balance 121
11.7.9 Work fulfillment 121
11.7.10 Training 121
11.7.11 Job security 122
11.7.12 Internal conflict 122
11.7.13 Openness and communication 122
11.8 Responsibility vs job description 123
11.9 Evaluating employee performance 124
11.10 Employee termination 125
11.10.1 Conducting the termination meeting 126
11.11 Employee handbook 127
11.12 Professional employer organizations 129
Chapter 12 You and your subcontractors 131
12.1 Independent contractor or employee? 132
12.2 Subcontractor qualification checklist 133
12.3 The contractor–subcontractor agreement: Special
considerations 133
12.3.1 Pass-through or flow-down clause 134
12.3.2 Scope of work 134
12.3.3 Work as directed 135
12.3.4 Changes to the subcontract 135
