Why the builders carrot is always a raw deal

Has your builder ever bribed you with the preference on the next project if you walk away from outstanding payments on his current job? 

Maybe the money isn’t outstanding, but a bunch of variations are still “for discussion”. 

If you knew what your builder was really thinking when he suggests this arrangement to you, you would focus your quoting efforts elsewhere and force your competitors into his trap. 

Now before I get into the juicy stuff, I need to give you a disclaimer. This blog is about you being asked to walk away from proper, honest to goodness costs that are legitimately owed to you. I trust that you will know in your gut whether this is truly the case, or whether there’s a genuine dispute afoot. 

To be clear, there is a difference between a builder who is trying to settle a barney with you on a good bloke basis, and a builder who is trying to hoodwink you out of your final claim.  

So while I’m not saying that your builder premeditates screwing you on the next one, I am saying that there are underlying reasons that these situations arise. Anyone in the builder’s shoes is inevitably following a decision tree and if you know what you are looking for, you can reverse engineer this behaviour to pinpoint the root cause.  

Or you could simply read my blogs, because I used to be that monkey in that tree when I was a builder’s contract administrator, back in the day. 

So let me come right out and tell you, that unless your Builder is a black swan who enjoys predatory profiteering as a sport, this kind of an ultimatum almost always relates back to these three root causes: 

1. a lack of money to pay you, ever. That is to say, there is no margin and there is no contingency. The job is making a loss – or worse, the builder is going broke; and/or 

2. a lack of cashflow to pay you now; and/or 

3. if you’re less unlucky, a stupid mistake that the builder’s staffer made that he/she is trying to cover up. 

Here’s the kicker. At the time that you get given this ultimatum you will have no way of knowing which problem the builder has. 👆 

If it is a cashflow-right-now problem, he should be willing to add that exact amount on top of your price (with margin) on the contract sum for the next job. He should not even hesitate. If this is happening for you, congratulations shiny banker – you are now a financier. I sincerely hope you have a Trade Credit Insurance Policy and some interest payments for your trouble. 

But if your builder has no money at all, you are walking into the next job to throw more good money into a hole that there is no way out of. When your builder inevitably goes broke, you will lose your retentions on both jobs and your unpaid claims in one go. (*Side note, if you do have a Trade Credit Insurance policy and you knowingly walk into another project with a builder who has told you he can’t pay you (yet, or at all), you could void your insurance policy for your efforts.) 

If your builder’s staffer has made a mistake and he’s asking you to drop your claim to hide his problem, you are only less unlucky because this isn’t as dire as your builder going broke. Assuming of course that the mistake itself doesn’t cause the builder to go broke. Thing is, you’re going to have to throw the kid under the bus to find out the truth.  

So if you suspect that the person offering you the carrot isn’t the man behind the money, give the boss man a call and ask him outright if he’s aware of the deal his minion is trying to cut. You will find out soon enough if it really is as simple as someone made a blunder – or if you have bigger issues and your builder is in financial trouble. 

If you are still reading this, and I haven’t convinced you yet that nothing good can come of taking another job with this builder, this next bit might hit you in the feels. (Here’s hoping) 

When a builder is backed into a corner because he’s got financial troubles, or a staffer is backed into a corner because they’ve made a huge mistake, the first decision they need to make is where to come up with that cash.  

If your builder was honourable and taking the higher road, he never would have asked you to walk away from your money for preference on the next job. 

The fact that he has asked you to walk away from your money tells me that he chose you over another subbie.  

The thing is, if there is simply not enough money to pay everyone, the builder has to choose someone to burn.  

 Here are the four likely reasons you might have ended up on his shortlist:  

1. The value of your outstanding payments is big enough for to him to burn you. The only time this isn’t the case is when he is screwing multiple subbies on the same job for a lower value amount each (for example, everyone gets liquidated damages for ten grand).  

2. Your administration is so poor that the builder thinks he has a decent chance to roll you. 

3. He’s strong armed you before so he knows he can get away with it again – or worse, he thinks you’re so useless that you can’t work out how to get your money. 

4. He suspects you don’t have the money to fight him. If you can’t afford to fight him you’re of no real threat. And hey, if you go broke he’ll have a run at keeping your retention too. 

    

The purpose of this blog is to demonstrate to Aussie Subcontractors that nothing good can come of these types of arrangements. If a builder is in financial distress and he’s using your payments to prop up his finances, there is a very real risk that your business could get caught in the collateral damage.  

If you think that this may be happening to you, reach out for a 20 minute call to see what Tricks of Your Trade can do to assist you getting out a hole before its dug.