He Can’t Do It For That
Last night I was chatting with a friend who related the lament of a contractor who had just lost a contract to a “kid” who had bid the job so low, the older, more experienced contractor knew the young fellow couldn’t complete the job for the contract price.
It’s a perpetual problem built into our American construction culture. Journeymen and master craftsmen are pretty much expected to become contractors themselves. Young people, attempting to avoid the minimum wage racket of fast food, take classes in school, leverage that into a part time job after school helping a builder, then work full time in the summer. By the time they’re 18 they’re almost journeymen; by the time they’re 25 they’re senior journeymen at their trade, and are crew chiefs or construction supervisors.
Many will decide to become a contractor. And there’s the rub.
Yes, they know the craft. But knowing how to build a house has nothing to do with knowing how to run a business, or how to accurately compute the cost of building that house. They don’t know the difference between their hourly wage and what it costs the boss to pay them that wage, and they have no concept what-so-ever of what it costs to run “the back office.” And ironically, even given another ten to twenty years in the trade, they still won’t know.
This was amply demonstrated to me many years ago. I was called out onto a job site on which a master carpenter was doing a beautiful job of fitting a hand made, cherry wood arched door frame into obtusely angled opening. The man had thirty years experience in his trade. All of it spent working for a company in Sacramento. Finally, he’d decided to strike out on his own. One day I had the opportunity to ask him what he was charging the customer. His answer: $25/hr!
I was stunned.
He was working for his former hourly wage, oblivious to some rude realities that were going to catch up with him at tax time: All those taxes his employer had paid for so many years — or had split with him — were now his responsibility. And then there are the hidden costs of being your own boss: Vehicle maintenance, bad debts, adverting, the non-billable hours of work that go into paperwork and bookkeeping, broken and worn out equipment — all costs not built into an employee’s salary. All costs the Boss has to factor into the price of every job.
There is a double standard in the construction industry, as in so many other professions. We expect people to go from being employees to business experts in their formerly salaried position with with the wave of a bureaucratic wand. Upon issuance, the master craftsman is supposed to be an expert on contracting law; to know how to bid a job, how to make payroll, how to write at least three types of legal contracts and a half a dozen other routine forms, none of which he’s likely ever even seen prior to striking out on his own.
There is no easy answer. In California the State License Board fails dismally in its task of attempting to turn craftsmen into business people by teaching them what the State thinks they need to know through the trade and License Law tests. But at least it’s trying.
In reality, this is problem bigger than, California. It’s a problem in all the States. The same mechanism that works so well in teaching young people the building trades — apprenticeship — fails dismally at teaching them to be contractors, and for good reason: Turning a young apprentice into a valuable employee is in the best interests of the employer. Turning a valuable employee into competent small business owner creates a competitor for the employer. Few contractors want to see yet another contractor succeed on their turf. Let the kid learn on is own!
And who gets to pay? Unfortunately, the public. Contractor horror stories are at least as common as medical horror stories. All too often the bubbly home owner’s enthusiasm at discovering they can get that new kitchen at a price they can afford turns into a nightmare of delays and cost over-runs that have them scrambling for money from everywhere they can find it, just to get a usable kitchen.
Sadly, often it isn’t really low-balling; it’s simply a lack of experience.
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