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Management Side
Week of 23 Jan 2017: What you don't know about your capital project

Email Jim at jthompson@taii.com

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I left you last week with this statement: "But there are even worse things you can do that drive-up costs." I am going to leave you waiting with anticipation for most of what this means until next week. In the meantime, I want to show some other things that are going on in your major capital project. Yet, I'll even preface this further--what I am describing below tends to happen with your less than ethical general contractors. Dig deep to find out who the ethical ones are before you sign the contract.

How do you do this? It is quite common to seek out references for general contractors by asking to talk to their customers--in other words, your peers. You should do this, for if they did a poor job for someone else, there is some 'splaining to do before you agree to hire them. Most likely you will just ignore them if you learn of bad work.

There is another group from whom you should seek references as well. In fact, this group may be more important than your peers (and even more difficult when it comes to extracting solid answers). They are the subcontractors and the subs of subcontractors that have worked for your general contractor.

Why do you want to do this? You want to make sure the money you spend on your project is being invested in your project.

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How does this work? Your general contractor may, at your request, give you a nice breakdown on planned spending on materials, licenses, fees, and subcontractors on your project. This may be used to justify a bid. If you award a straight-up, firm, lump sum contract, this may be the last time you see these numbers, for you have no right to interfere in the contractor's business under this type of contract.

What you don't know, is how much the contractor beat up the subcontractors, either pre-award or post-contract signing. You don't know what is said about you to the subcontractors in order to cajole them into meeting the price and performance the general contractor wants. You don't know if both general and subs, but especially the subs--follow all the labor and safety laws applicable at your site or not.

In other words, there is a boatload of conversations and documents you may never see. Some of these conversations and documents may be counter to your stated company mission, principles, and ethics. Just because your general contractor sends "Smilin' Jack" to see you as a front person, you have no idea what is being done on the other side of the curtain, so to speak.

What if, on your fifteen-million-dollar construction contract, your general contractor finds a way to put an extra two million in his company's pocket--money taken from subs? If you received the overall value contracted, you probably have no complaints. If your general put your company at risks, whether those risks manifest themselves or not, or if they portrayed you to their subs in a way that besmirches your company's reputation, you need to know about this.

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Join Jim Thompson on the 2nd Annual Papermakers Mission Trip to Guatemala, 22 - 29 July 17. Build houses, talk about the pulp and paper industry. For more information, email jthompson@taii.com with "Guatemala" in the subject line.

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Construction projects are complicated, even the little ones. I can guarantee you that you can watch a five-million-dollar project all day long for its entire duration and you won't know half of what happened, not half the interactions that occurred over its duration.

There is one contemporary and one post completion test you can do. During the execution, and I have mentioned this before, regularly look at the writing inside the port-a-potties. If there is a lot of angst on the walls there (and I have seen it), you have a problem somewhere. Post project, if you invite some of the subcontractors to work with your company directly on new projects and they either seem to hesitate or submit outrageous bids (in price, terms or scope), something went wrong in the last project.

The danger with subs that are treated differently from your stated corporate values, of course, is that something can go bump in the night and your company can end up in an embarrassing lawsuit. If you are in consumer goods (read: tissue) this can explode to damage you in immeasurable ways.

So, do your due diligence--deeply and thoroughly. There are land mines everywhere.

We'll put a wrap on this next week.

In the meantime, you might like to take our quiz this week. You may take it here.

For safety this week, remember safety on your site extends to every human on your site, no matter what company name is on their paychecks.

Be safe and we will talk next week.

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Nip Impressions has been honored for Editorial Excellence by winning a 2016 Tabbie Award!

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