As we speak to members and answer their questions, we tend to notice patterns. Recently, NSCA has been talking to integrators about “profit killers” – things that help us lose money.
Do you fall prey to any of these?
No. 1: Failure to read the front end of the spec
Pay attention to what’s required in Division 0 (instructions to bidders) and Division 1 (general and site conditions). It seems as if more risk is being pushed down to specialty contractors like integrators; new clauses and provisions are emerging. One example: the use of subcontractors, and under what conditions this is acceptable. It’s important to address this issue before you put your number out there.
No. 2: Not understanding implications of “related” sections
Make sure you investigate these prior to submitting a proposal. For example, understand the timing of the project and when you can coordinate with other trades to make sure device locations are free of conflict, and conduits and pathways are placed according to appropriate distances and timeframes. Don’t assume anything; read everything.
No. 3: Change orders impacting the original contract
We’ve recently seen changes to the scope of work, or modifications to the bill of material, that come back to cost you money. An example is the delay in final approval and payment as a result of submitting a change order for additional equipment or labor. Integrators need to cover expenses for delays in payment, as well as time spent with site visits, meetings, processing, finance costs, etc. If the change order causes a delay in final signoff and substantial completion, be careful about how you proceed. Set clear terms and conditions in advance.
No. 4: Managing a shifting project schedule
The companies that “schedule” best seem to be the ones that make a decent profit on new construction projects. It may seem out of your control, but there are integrators that have figured out how to manage client indecision, compressed schedules, and delays far better than others. There are things you can do to be far more efficient in a project’s early phases to keep profits from slipping away.
No. 5: Overtime
Having good project managers – who have authority to approve overtime – is a starting point to managing this profit killer. Letting installers and technicians decide when to work overtime without approval is a bad idea.
No. 6: Selection criteria used to bid
If you’re busy during a particular period, don’t submit a low-margin proposal for a project that has to be done in that timeframe. Don’t oversell your capacity, knowledge, or skill sets that take you beyond your area of expertise.
No. 7: The solution you provided can do too much
You get the system 95% finished, and training begins. Soon, you discover that programming and DSP configurations are left to a frontline tech and programmer to define with the client (user). The clocking is ticking. Before long, eight hours of commissioning and programming have turned into 40. The tech and programmer have completed a masterpiece, and you’ve lost 32 hours. Turn over only what was promised or specified.
No. 8: Complex projects
Projects with complexity often cause companies to underestimate labor – even if they’re using tools, such as NSCA’s Labor Installation Standard. This is due to lack of training and/or experience for frontline people, resulting in systems designers and other unplanned resources having to get involved.
If you can stay away from these profit killers, you’ll be well on your way to improving your bottom line. –Chuck Wilson, NSCA Executive Director
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