Part 1 – The Typical Construction Market
In a typical market, there are a certain number of construction projects – both new homes and remodeling – to be built each year. In most areas, there are usually a few major Building Contractors (BC’s) that do the majority of that work. Within those areas, there are usually several established and qualified Subcontractors – or “Subs” – representing each Trade – like Carpenters, Roofers, Painters and Plumbers – readily available to perform their “Scope of Work” for the BCs.
This work is highly desirable to the Subs because it is consistent and wellplanned. But, since there is only so much of it, there is then a “demand” from the Subs for the work. They must compete to “earn” it from the few BCs.
They strive to do this by:
- Submitting complete, professional Bids with competitive pricing for the work.
- Committing to provide their best personnel to complete the work and meet the BC’s Schedule.
- Limiting the amount of Change Orders they submit to the BC.
The Subs that successfully earn the work are usually well-established. They have adequate, experienced staff – for both administration and to perform the work in the Field – that they have employed for a long time.
In a typical Construction market, there are more Subcontractors available to do the work than there is work to be done. This creates a “demand” for the BC’s work that drives each Sub to do all that they can to earn it. Most notably, Subs know that they MUST submit competitive pricing to even be considered for the work.
Part 2 – The “Inverted” Construction Market
Florida is an atypical Construction market. There are consistently many more construction projects to be done – both new homes and remodeling – than in most other areas of the country. Here, there are several different Building Contractors (BC’s) vying for that mostly “high-end” work.
However, In Florida, there are NOT enough established and qualified Subs, mrepresenting each Trade – like Carpenters, Roofers, Painters and Plumbers – readily available to perform their “Scope of Work” for BCs, mostly because there are not enough qualified people available in the local labor force to staff them.
In Florida, the market is “inverted” – there is more work than there are qualified Subcontractors available to do it.
Here, the “demand” is FOR the Subcontractors!
General Contractors must compete for THEIR services.
General Contractors must seek THEM out.
The typical market is “turned on its head”.
In Florida’s Construction market, the “tail wags the dog”!
Here, then, Subs do NOT need strive to “earn” work that will mostly come to them anyway. So, in Florida, many of them:
- Submit incomplete, unprofessional Bids with pricing that the market will bear.
- Can’t (or won’t) commit to provide particular personnel to complete the work or meet a BC’s Schedule.
- Freely submit legitimate Change Orders without concern of losing future work.
Highly skilled professionals are particularly rare. That means there are even fewer qualified Subs available to perform the amount of “high-end” work there is – the work usually done under “Cost-Plus Fee” Contracts. Often, Builders doing “high-end” work “need” these Subs more than the Subs “need” the Builders. These Subs are even more empowered than the rest. Some can “pickand-choose” the work they take on. Many can all but dictate their terms – like price and schedule – to the BC. BCs have little leverage to negotiate and often don’t even try to.
The “Inverted” market “lowers the bar” for the entire construction industry.
In the “Inverted” market, there is more work than there are qualified companies to do it. The market forces that usually drive competitive pricing and high quality are all but absent, making it difficult for Builders to control Project costs. This leaves Owners – especially those with risky Cost-Plus Fee Contracts – exposed to high pricing and poor service.
Naples Custom Home Cost Consulting offers a full range of Construction Project Management Services to assist Clients. When hired as their Owner’s Representative, we strive to control their Project costs and maximize value,
while always keeping the “big-picture” in mind. We work with – not against – Builders to navigate the “Inverted” market and achieve our shared goal: successful completion of the Client’s Project.
