2019 Construction Industry Outlook

Last month I went to a construction industry trade conference and attended a session presented by ITR Economics.  I enjoy listening to economic forecasts and do so a few times a year.  ITR is one of my favorite firms in this space as they not only look at the near term, they review longer macro trends and forecast several years out.

I’ve included a copy of their full presentation at the end of this post, however I’ll put the summary below for those that don’t have time to review it in full. 

ITR Summary as of Fall 2018

•          Nonresidential construction lags; expect a strong year in 2019

•         Expect fewer projects up for bid late next year to fill 2020 pipeline

•          Multi-Family/Apartment market still throwing off warning signs, be cautious

•        Wage and input cost pressure will be intense near-term; prioritize profitable work in 2019, accept leaner             margins looking into 2020

•         Build cash reserves next year to ensure you can survive a later slowdown

•         Do anything to avoid layoffs, labor market will be tight through 2020

•         Follow the Leading Indicators

Although not as good as having an economist present the data to you, I will say clicking through the presentation embedded below is interesting nonetheless.  It provides data on the economy at the national level while also providing state by state economic/demographic data using easy to view maps.  The presentation also covered data on the various sectors of the construction industry including US office buildings, private commercial buildings, educational buildings, hospitals, etc.

One area highlighted was how government spending on healthcare, social security and interest continues to increase as a % of Gross Domestic Product.  In 2018 these areas accounted for just under 21% of total GDP.  That number is forecast to rise to 25% of GDP in the 2030s which will pose problems.  Right after this section there is a slide entitled “What to Tell the Kids” and it stated the following:

•         Live below their means

•         Learn a second language

•         Each household should have multiple or diverse income streams

•         Choose career(s) oriented toward the “opportunities”

•         Pay off as much debt as possible by 2030

•          Be ready to buy at the price cycle low in the depression 

•          Be self-reliant

Employment Practices Liability Insurance (EPLI) in the Era of the Me Too Movement (and a little HR function discussion)

EPLI is a type of insurance coverage addressing liabilities arising from wrongful acts involving employees.  These acts can range from sexual harassment to discrimination, wrongful termination, failure to promote, creating a hostile work environment, etc.  It has always been a good idea to at least seriously entertain this coverage, if not carry it. 

The main catalyst for me writing this post is that I’ve realized in recent months that many business owners not only don’t carry EPLI, they have never heard of it.  I have seen first-hand over the years where not having an EPLI policy in place has caused significant financial damage to businesses.  It’s a different time in our society where injustices are not tolerated as they may have been decades ago.  These changes have been occurring long before the “Me Too Movement”, however that movement has put a brighter spotlight particularly on sexual harassment in the American workplace (not just Hollywood and Harvey Weinstein) over the past year.  With these societal developments occurring, it has become increasingly important (it was always important) to train your workforce on a regular basis such that a person doesn’t have to be a victim to any of the circumstances which could give rise to a claim.  Secondarily, even if you have systems in place they could fail and that is when an EPLI policy could be effective in preventing significant financial harm to your business.

One area that has hurt many businesses are wage and hour claims.  The legal profession is aggressive in pursuing these claims and they can reach into the seven figures when they assemble a class of employees to join the lawsuit.  EPLI policies do not protect against wage and hour claims and you cannot bind coverage that would cover monetary judgments in this area.  You can, however, add coverage that will provide for the legal costs incurred against defending these claims.  Generally the amounts covered will be up to $100,000 and covers the defense costs only for wage and hour claims including meal, rest period and overtime.  As mentioned before, class action lawsuits are generally pursued and you must consult with your broker to determine whether there is a "multiple claim or class action exclusion" on the policy.  

Once you've made the decision to carry EPLI, making the best decisions surrounding deductible levels, amount of coverage, etc. are important as it is with any insurance policy.  One difference with EPLI coverage is that, with most standard policies, the amount of legal defense costs incurred goes against (i.e. reduces) the coverage amount.  With general liability policies this isn't the case, so that will be a factor and an important part of the discussion with your broker regarding coverage amounts.

In addition to reviewing EPLI options with your broker, I strongly recommend that if you don’t have a strong HR team in-house, you connect with an outsourced provider.  The maze of employment law rules and regulations is vast, and if you don’t pay attention to the details it could end up costing you and your business in a variety of ways.  Many small to medium sized businesses do not have in-house HR professionals but that doesn’t mean that function can be ignored.  There are providers out there who will take on all of your HR needs or if you have some functions covered internally, you can choose from a menu of services to complement what you already have in place.  Having the HR function properly covered by the right professional(s) can mitigate the risk of having an employment claim made.  As a backup, EPLI is a very good coverage to have in place.

An ounce of prevention is worth a pound of cure as the old saying goes.  Properly, and regularly, training your workforce with human resources professionals is vital in succeeding in today’s workplace environment.  With the right HR professionals on your team, you can not only potentially avoid having an employment claim made against your business, you can also learn how to get the most out of your workforce while your employees also get the most out of your organization in their journey to continuous professional growth and development.  It’s a win-win scenario when done correctly, and can also have many other positive effects on your business including cultivating built-in succession planning, for example, as employee retention (including key employee) increases within a good workplace.  Employees who are happy in their work environment will produce better quality results which should be evident in the bottom line.  At the end of the day we are all in the people business, be sure to treat your people well and have the right HR team in place to help with that initiative.

If you are interested in obtaining the right professional resources to help you with your business lines of insurance (including EPLI) or HR professionals, let me know.  

Technology and Your Business - Video Surveillance

Today we have an ever increasing number of technology tools to choose from to employ in our businesses.  The workforce has become more mobile with computing power held in our hands that was barely imaginable 30 years ago.  Productivity gains have been incredible and we can do more with less people.  That trend seems to be increasing as well with automation top of mind of many business leaders around the world.

There’s an old saying in business… “Employees don’t do what we expect, they do what we inspect.”  Well today we can inspect in better and different ways.  One such way is through video surveillance.  Security cameras can be utilized in many different aspects in business.  A business owner can place them on the manufacturing floor, in the warehouse and on the construction jobsite to name a few examples.  At our business we are considering placing cameras in the common areas of our building for added security for our professional staff and to better safeguard equipment.

You can see just in the examples above that cameras can be used for different purposes.  On the manufacturing floor, management can monitor equipment and people making sure processes are operating smoothly and all equipment is up and running effectively.  In a warehouse, cameras can be used to monitor inventory and serve as a deterrent to theft.  Additionally, any unsafe practices with forklifts, ladders or any other shortcut that an employee may take can be mitigated by the presence of surveillance cameras.  On a jobsite, you can again monitor the efficiency of processes as well as equipment usage practices, etc.  Safety can be increased as laborers will be less likely to take poor risks in the execution of the work.  What would it mean to your workers comp insurance premiums if your experience modification was improved in part due to this monitoring as well as keeping your employees safe and on the job?

In all of the above scenarios, having “eyes in the sky” can serve as essentially having another foreman on the site, in the warehouse or on the production floor.  Today’s cameras are high resolution and with certain makes/models, you can zoom in without losing any resolution providing clear pictures in the area of interest within the frame.  One can access these cameras anytime, day or night, from any device including your cellphone, tablet or desktop computer.  If you haven’t already added video capabilities to your business, now is the time to consider doing so.  If you are unsure where to find a technology provider, ask one of your business partners (banker, attorney, CPA, insurance/surety provider, friend in your industry).  This is an investment that should pay for itself in short order.

Prevailing Wage, Benefits and Compliance Overview

by Mike Bottinelli, Fringe Insurance Services

Prevailing Wage Overview

The wage determination belongs to the contractor (not the employee) with the mandate that it be spent for the employee's benefit in some combination of wages and bonafide third party administered benefits (ie health insurance, qualified retirement plans, flexible spending accounts, vacation plans and severance pay plans).

In California, the base wage must be paid out as cash compensation. Contractors not governed by a collective bargaining agreement may re direct some or all of the fringe portion into the aforementioned plans at their discretion. The employee has no say in how the fringes are allocated. These monies are viewed by DOL and the IRS as employer contributions - not employee elective contributions.

A Merit Shop contractor has enormous flexibility in allocating fringe dollars (absent a Project Labor Agreement (PLA)) to include allocating some or all of the fringes as an add on to wages. In addition, these allocation choices can be made on a job by job and labor classification basis. As a result, if it is advantageous to pay additional cash wages to compete for labor or attract certain trades on a particular job, there is latitude to do that.

Because of the discretionary nature of fringe allocations, benefit plan designs can be
customized to meet a contractor's individual needs. This flexibility often allows benefit plans to operate off the same platform for work performed in both the private and public sector. Conversely, prevailing wage drive benefit plans can be established to operate concurrently with existing core benefit plans.

The ability to redirect fringe dollars into benefit plans affords a significant tax and cost savings to both the employer and employee. Since these dollars don't flow through payroll they are not subject to payroll taxes (FICA, Workers Compensation, FUTA, SUTA or General Liability Insurance (based on payroll) nor are they subject to income tax at any level. Additionally, they can be used to directly offset medical insurance costs. These advantages level the playing field when bidding jobs.

How these savings are applied is at the total discretion of the contractor. They can be used to lower bids and/or increase profits and that decision can be made on a job by job basis.

Benefit Plans

Qualifed Retirement Plans:

Retirement plans in a wide range of platforms capable of addressing virtually any design requirements and/or demographics can be offered.

Plans are available on a bundled (administration and investment provider the same entity) or unbundled (administration firm independent from investment provider) with a wide range of investment and third party administration options.

Health and Welfare Plans:

Available programs include fully insured plans (HMO, PPO, HSA) from all major carriers, partially self insured plans, level funding plans and actuarially designed stop loss self insured plans and can be designed to desired specifications.

If necessary, prevailing wage employee groups may be isolated and offered dedicated plan designs without impacting other employee classifications currently covered by existing core benefits,

Vacation Plans:

Merit Shop contractors are not required to provide vacation pay. If they choose to offer this benefit they can put additional monies on the check for that purpose or accrue it in a third party trust. If they accrue it, they can only offset their cost with fringes dollars based on the ratio of public to private work. An in-house sponsored accrual plan is not allowed in California, while it is allowed in a Federal Davis Bacon or Service Contract Act.  In either case there is no tax savings - if it goes on the check it's subject to tax, if it goes into an accrual plan it merely defers the tax until the employee is issued a vacation check.

Hour Bank Plans

Participants become eligible for coverage by accumulating a minimum required hours of work credit. For example, if eligibility for benefits is based on working 130 hours per month, each 130 hour increment of work credit provides a subsequent calendar month of benefit for the participant (and dependents if family coverage is elected).

The hourly equivalent for monthly premiums is determined by dividing the participant's
monthly premium by the hour bank level (ie. $390 monthly premium divided by 130 hour bank level equals a $3.00/hr equivalent).

Once the participant has completed the necessary 130 hours of work credit, they will be
covered effective the 1^st day of the following month (ie. if contributions started September 1^st coverage would begin October 1^st). Participants accumulate hours of work credit for excess hours worked (ie. participant worked 160 hours in a month, the participant will accumulate an excess of 30 hours of work credit for the month (160 hours worked minus 130 hours required equals 30 hours excess credit toward future coverage).

If a participant falls below the required amount of hours of work credit, they or their employer can make up the difference. If not, then a COBRA notification will be issued. Once the minimum required hours have been reached again, benefits will resume the 1^st of the following month.

Upon termination of employment the cash equivalent of any remaining hours may be used to offset COBRA premiums or refunded to the participant. Refunds are subject to income tax and a 1099 will be issued to them at the end of the calendar year.

Hour Bank Plan Advantages

Hour Bank Plans solve the problem of contractors paying medical insurance premiums for employees as though they were working full time when they are often working less than full time.

Using this methodology, premiums are paid on a retrospective basis. The traditional method pays premiums at the beginning of each month with no way of knowing how many hours an employee will actually work that month. As a result, a contractor is either overpaying or underpaying. Hour Bank Plans remedy this situation with the added benefit of providing a method for reconciling monthly premiums to an hourly rate equivalent for compliance purposes.

Advantages from Employer's Perspective:

Employees learn coverage has to be earned

Addresses "lack of value" perception of benefits by employees
Aligns cost of benefits with bidding/job costing

Affords flexibility in amount of cost employee pays on private work

Advantages from Employee Perspective:

Helps cash flow issues when not working
Dollars vest immediately

Simple to understand - work an hour get paid a benefit for one hour
Earn extra benefits by working extra hours

Compliance

Wage Determinations:

On Federal jobs, the fringe is expressed as a lump sum. On State and Municipal jobs the fringe is designated in a "line by line" format ( ie. pension, health & welfare etc).

The Unions' various collective bargaining agreements determine the hourly rates by labor classification and the fringes are allocated in their trusts based on the various job classifications and area jurisdictions.

Merit Shop contractors are not bound by collective bargaining agreements and can allocate fringe dollars at their discretion (with the exception of training or when performing work governed by a Project Labor Agreement) in any combination of cash or bonafide third party administered benefit programs (ie. retirement plans, group medical insurance, vacation plans, flexible spending accounts and severance pay plans).

Employer Obligation:

Wage determination dollars belong to the contractor, not the employee. This is the basis for them not being subject to payroll taxes.

The contractor's obligation is to spend the money for the benefit of the employee on a per hour/per employee basis in some combination of cash and/or bonafide benefit plans with the base rate required to be paid in cash.

In an audit, the contractor does not have to prove the employee received a benefit from fringe dollars allocated to bonafide third party administered benefit plans. It is assumed the employee received the benefit of dollars allocated to these plans.

Annualization

Principle:

In order to take full credit with the fringe to offset medical insurance plans, the contractor must pay on every hour an employee works in a pay period (both public and private). The rationale for this rule being since Union contractors must pay into their trusts on every hour worked, not requiring it of Merit Shop contractors would give the an unfair advantage by giving them the potential to subsidize benefits provided on private work with dollars accumulated from fringes on public works.

The only exception to this rule is contributions to a qualified retirement plan because they are 100 vested immediately and, as such, are viewed as a "cash in kind" benefit.

Credit Calculation:

Determining Hourly Rate:

Monthly premium divided by hours worked in previous month on per employee basis, or
Annualized premium divided by 2080 hours on a per employee basis

Mechanics:

Ratio of public to private work:

Monthly premium = $260/130 hours worked = $2.00/hour 

80 hours worked on PV job - 80 hours worked on private job

80 hours x $2.00/hour = $130 credit

OUTSTANDING ADVANTAGES TO THE EMPLOYER

LOOK WHAT IT CAN MEAN FOR YOU

25                Number of Employees

$20 per hour     Fringe Rate

160 per month   Hours Worked

$80,000         Contribution per Month

20               Payroll Burden (FICA, FUTA, SS, Comp)

$16,000         Savings per Month

INCREASED PROFITS OR BID REDUCTION!

You Save:

FICA contributions

Workers Compensation premiums

General Liability premiums(if based on payroll)

FUTA

SUTA
 

Results:

                         - You become more competitive
You increase your contract volume
You generate higher profits

Trump, Tariffs, Tax Reform and Trade

Tariffs on Steel and Aluminum are big in the news these past few weeks with President Trump looking to impose tariffs on these materials later this month, 25% and 10% respectively.  This has sparked a lot of debate around the country, including within Trump's own administration and potentially being the final straw causing Gary Cohn to resign as Chief Economic Advisor to the President. 

During the Presidential campaign, Trump set a goal of achieving at least 3% GDP growth on a sustained basis.  In his administration’s view, the tax reform package was a significant step toward helping to achieve that goal.  The administration looked around the world at tax rates and observed that our higher tax rates made our companies less competitive on the global scene.  Trump felt that was not fair to U.S. companies and his administration moved to narrow the gap.  Now he has turned his focus to another campaign promise, that of free and fair trade.  The trade deficit has been in existence largely in the past 20 years or so.  On the link just provided, click on MAX to see the history.  One factor contributing to this deficit are the tariffs other nations impose on our goods coming into their country.  China, for example, imposes a 25% tariff on U.S. car companies on vehicles sold into China.  In January 2018, the trading partner with the largest deficit was China at $36 billion dollars, an increase of almost 17% from the prior month.  The cause for the sharp increase was primarily due to much lower exports to China, dropping by 28%, while imports rose 3%.  It seems that China is a primary focus on this issue, not so much other trading partners such as Mexico and Canada.  Exports to Mexico rose almost 11% in January 2018 while exports to Canada dropped by almost 3%.  Imports from both of these countries increased by about 3% from each.  The overall trade deficit in January 2018 was just under $57 billion (again, China is well more than half of this amount at $36B), the largest trade gap since the Fall of 2008.  Although month over month fluctuations could contain one time transactions and other isolated events, it is an interesting indication nonetheless. 

Imposing tariffs on certain trade partners is Trump attempting to continue his mission of leveling the playing field for U.S. businesses, in this case steel and aluminum companies.  Part of the challenge here is that as these companies stand to benefit, others in our economy will incur higher costs for those materials inputs.  The price of goods containing those inputs will increase, some more than others depending on how much of those particular inputs they consume.  As of last year, there are approximately 150,000 workers in the U.S. in the Steel and Aluminum industries (Bureau of Labor Statistics).  The number of U.S. workers who are employed at companies using steel and aluminum as inputs in their manufacturing processes is over 6 million.  The concern some have over these tariffs is that you will probably benefit those 150,000 workers (less foreign competition, more jobs/higher wages), but at the possible expense of the over 6 million using those materials as inputs.  When businesses face higher costs, they make decisions to offset those costs which sometimes comes at the expense of the labor force (e.g. job and wage cuts).  Additionally, consumers stand to get hurt to some extent as the rising costs of goods coming into the U.S. as a result of tariffs will end up being reflected in the price consumers pay for those goods, essentially a trade tax.

As of now Mexico and Canada were exempted from the tariffs, pending continued negotiations on the NAFTA deal, other trade partners may be exempted in the next few weeks per Treasury Secretary Mnuchin.  This should serve to mitigate the increases in the cost of steel and aluminum as we import just a bit over 25% of our steel from those two nations.  China accounts for approximately 3% of our steel imports when looking at direct imports.  The problem with the numbers I just cited is that there is a practice known as “trans-shipping” whereby a country like China sells through to another country, and that country in turn sells it to the U.S.  The import statistics don’t account for this trans-shipping practice so it makes it more difficult to know how much steel and aluminum are actually coming from China and what the tariffs will mean to the cost of goods here.  Trump’s administration has said they will not allow trans-shipping from Mexico and Canada since they will be exempt from the tariffs.  If you hear that tariffs on these materials won’t have much of an impact because we don’t get much of it from China, that may not be entirely true.  Some predict the cost of commercial and industrial construction projects, particularly those that are steel intensive, could rise as much as 4% give or take.  

There are concerns that imposing these tariffs could spark a trade war.  Trump himself has come out and expressed little concern over this possibility, also stating it would be “easy” to win a trade war.  It's often said no party really wins in a trade war, all parties would be hurt at least to some extent.  Even if there is retaliation in the form of new tariffs on U.S. exports, you would think it wouldn't last long-term.  Generally speaking these leaders aren’t stupid, and resolving any issues regarding trade is in everyone’s best interest.  Treasury Secretary Mnuchin stated last week that President Xi of China understands that it is their best interest to reduce the trade imbalance with the U.S.  President Xi knows it exists, the numbers back it up and he obviously knows it’s a serious issue with the U.S. administration presently.

Higher costs related to steel and aluminum are already showing up in the market, and determinations need to be made as to who will bear that cost.  If you are a producer of steel, you will get higher prices and fare well under this policy.  If you are a consumer of steel, you will be paying the producers more.  Work that is in process as these price increases are currently flowing though will be borne by the party consistent with the contract terms in place.  If you already have market volatility terms in your contracts, that’s great!  If you don’t, wording such as this might make sense... “Escalation costs may be added via equitable adjustment due to current market volatility”.  As always, consult with your legal counsel to ensure the objectives you are trying to reach are being well served by any terms and wording you include in your contracts. 

Buying Commercial Real Estate - Making the New Tax Law Work for You

Acquiring a commercial building may have become a little more achievable with the recent changes in the tax code. For years we have been able to break down the components of a building into shorter depreciable lives via Cost Segregation Studies. This allows taxpayers/investors to take advantage of accelerating depreciation of certain asset classes over a much shorter period than the typical 39 years for commercial real estate. The new law enhances this ability, allowing the investor/taxpayer to obtain an immediate write-off for a portion of the purchase price, subject to possible limitations depending on circumstances, in the year of acquisition. The cash flow savings that can be achieved from combining the effect of a Cost Segregation Study with the enhancements to bonus depreciation under the new law can be significant.

The Tax Cuts and Jobs Act of 2017 (TCJA) has changed many provisions in the tax code. Many of them are favorable while some take away certain benefits such as the elimination of the Domestic Production Activities Deduction and the ability to deduct state and local taxes on your personal returns. One area that we’ve seen since 2001 be of great benefit to business taxpayers is bonus depreciation. This provision was slated to be completely phased out by 2020, but it was expanded and new life breathed into it. In 2017, it was limited to 50% of the cost of acquired qualified property, with that number reducing to 40% in 2018, 30% in 2019 and eliminated in 2020.

With the passing of the TCJA, we now have bonus depreciation allowing for taxpayers to immediately write off 100% of the cost of qualified property (think equipment, furniture/fixtures and other depreciable assets). The new law allows for 100% bonus depreciation for certain property placed in service after September 27, 2017 (both new and used, essentially “new” to the taxpayer) with phaseouts starting in 2023 and expiring fully after 2026.

Section 179 expensing has also been modified and expanded, moving from $510,000 in 2017 (phaseout begins at $2,030,000) to $1,000,000 in 2018 (phaseout begins at $2,500,000). Section 179 has been further expanded to include the following previously excluded categories:

         Roofs

         HVAC

         Fire/Alarm/Security Protection Systems

There have historically been differences between bonus depreciation and Section 179, but now that both are offering 100% write-offs for both new and used property, the differences aren’t as great. One of the differences remaining has to do with depreciation recapture with Section 179 if business use of the subject property falls below 50%. Your tax professional can assist in making determinations on how to best use these options depending on circumstances.

With the performance of a Cost Segregation Study, the ability to carve out a piece of the cost of building into different asset classes allows for the use, again with certain possible limitations, of the new provisions to greatly reduce the cash flow obligations by taking an immediate write-off in the year of acquisition for part of the purchase price.

With the tax law changing, many creative opportunities arise. As with any information you read, consult your professional services provider to address your particular situation.

Negotiating Contract Terms

by Ilse Baeck, Owner of Contract Review Services for Construction

"Everbody signs our contract..."  If you are a subcontractor, this probably sounds familiar to you. Another oldie, but goody: “We do not allow changes to our boiler plate.” I consider both to be opening statements to negotiations.

As a general contractor you face similar situations. The competition on the top is fierce. And owners don’t miss a chance to alleviate their risks. Lately, design-build contracts are used to put responsibility for the architect, chosen by the owner, on the general contractor. And subcontractors, who are the essence of every project, who bring expertise, who do most of the work, and who basically finance the whole building project, are expected to assume all the risks as well.

If you, as the subcontractor, insist on getting the terms changed, you will find that most general contractors are willing to talk. General contractors will agree to negotiate for very good reasons:

·         They used your number to prepare their own bid for the owner,

·         They selected you, because you were either the lowest bidder or had the most solid and comprehensive estimate,

·         You have a good reputation in the industry and most likely are financially strong.

The last thing any project needs is a contractor going broke in the middle of it. Not negotiating with you means that the general contractor must now hire the second-best choice. That second choice subcontractor’s bid might have expired, their price might have gone up.  Plus, the owner may not approve a substitute.  It is a lot more headache for the general contractor to be rigid than to sit down with his top choice and negotiate.

Incidentally, the same is true for the general contractor. The owner will agree to negotiate for all the same reasons:

·         You have the best number

·         You have the best reputation

·         You are financially solid

·         You have most experience with the kind of project the owner wants you to build.

I remember meeting with a general contractor’s team in which their opening was “nobody else had a problem with our contract; you are the only one.” A half hour into the meeting, the main negotiator turned to his associate and announced “on this change, let’s use the same wording we did with that other sub.”  Aha! Nobody else asked for changes, right?

Sometimes reading a contract can be frustrating; for example, when allowances for deductions are listed within the billing requirements.  Who would expect them there?  Or when you are asked to indemnify the owner or the general contractor for their “whole omission and/or fault.” Personally, I love to ferret out the little and the big pitfalls that can cost a contractor a lot of money. If you look at it that way, it might become fun for you, too. Of course, these documents are prepared by lawyers and it does not mean that the person presenting them is not a good and decent customer. However, even the best customers get off the straight and narrow when they themselves risk losing money. For that reason, protections written into the contract are immensely important.

The best advice for a good outcome of any negotiation is to listen. Listen most of the time and once you hear all the reasons that your customer insists on a certain clause, offer a solution that works for both sides, changes the wording and spreads the risk evenly. It is also important to put not only the absolute deal breakers on the table. Be very detailed and mark absolutely everything you don’t like. That way, your negotiation ends with mutual wins and losses. Customers always need to know that you have their best interest in mind, but that you also need to have some basic protections for yourself in place. And in the end, once you have negotiated your contract, you have earned the customer’s respect.

In summary, I want to encourage everybody to negotiate, negotiate, and negotiate. There is a saying in the construction industry that there will always be jobs that lose money.  It does not have to be that way! With the inclusion of agreed-upon terms that will protect you, before the project even begins, you will be more likely to walk away with profit once it’s completed.