The Impact Of Beliefs On The Construction Industry

The Impact of Beliefs

The Impact of Beliefs

 

Perhaps no other single factor has a greater impact on the management of construction concerns than the unexamined beliefs held by senior management. What we believe to be true, (whether it is or not), affects every choice we make. And our most deeply held beliefs usually go completely unexamined. We don’t know that we believe what we believe and are oblivious to how unexamined beliefs are influencing our behavior.

 

An Unexamined Contractor Belief

 

Let’s examine one such belief widely held in the construction industry that continues to have a profound negative effect on cash flow, profitability, and even “going concern” status:

 

  1. Contractors are not entitled to payment as stated in the contract.

 

In the minds of most contractors, entitlementto their money is somehow clouded. Contractors want their money, and some really go after it, but often they don’t seem to have a strong feeling of entitlement.

 

How This One Belief Affects Behavior

 

Contractors send in their completed requisition and, if the designer disagrees, they sends it back marked with changes (usually in red pencil), and the contractor retypes it, signs it, and sends it back to the designer. These practices demonstrate the payment environment in the industry and demonstrate, for me at least, a problem with entitlement. These practices put contractors in the passive role of taking what they can get rather than the active role of invoicing their customers for services rendered. The very word “requisition” suggests that we can only askfor our money.

 

One Unexamined Belief Leads to Another

 

Another unexamined belief of many project owners and designers is:

 

  1. Contractors probably won’t do their job unless forced to.

 

Owners and designers deny this. The authors of contracts deny it. But no one wants to give up the practice, and it sets the tone for the relationship between customers and contractors. Contractors shouldn’t need any help determining what work was performed during a month nor how much they should be paid for it. If the designer doesn’t want to approve it, that’s their prerogative. They can red pencil it and send it on to the owner along with the amounts they think should be paid. There’s no need to retype it any more than a need to walk the site and bargain for the amounts.

 

And to Another

These first two beliefs lead to another:

 

  1. The designer, and only the designer, decides what the contractor will be paid.

 

Retyping means changing the request to say what the designer says it has to be. Effectively what they have done is establish that we and the designer will need to agree on the amount before it is “approved” to be sent to the owner. This is ridiculous. It not only rewrites the payment provision of the contract it leaves contractors in the one-sided position of trying to talk someone into agreeing on how much they should be paid.

 

Examine and Change Beliefs

 

If you don’t get treated in a businesslike manner when it comes to getting paid, it may be because you believe (somewhere down deep in your psyche) that you’re not entitled to payment and, therefore, can’t demand businesslike treatment.

 

Payment is not a matter of entitlement. You are a counterparty in a transaction. Explain that your efficiency and productivity depend on paying your subs and suppliers on time and that you don’t want to invest in the job—just build it. Owners and designers should know that (they shouldn’t need to be told) but they do because they are laboring under belief #2 above. You need to manage the process and keep it in the forefront of everyone’s mind. I strongly recommend that you stand firm on all contractual payment requirements from the first requisition.

 

Finally, it is our lack of belief that we are entitled to payment that led to this corrupt business environment. If the owner doesn’t fulfill their end of the contract, a completed building is excellent collateral, so don’t go under because someone is failing to honor a contract that you’ve completed.

 

Read more: Slow Pay