Budget structures vary by the type of construction a contractor performs. For example, subcontractors typically have a significant amount of their costs allocated to direct labor and materials while general contractors’ budgets are likely to have more subcontracted work on their books.
However, despite the differences in where the budget is weighted, every contractor, no matter its specialty, is vulnerable to cost overruns.
Weather delays
When serious rain, snow or other weather events keep contractors from making progress on their jobs, it’s not uncommon that both subs and GCs have those lost days tacked onto their schedules. But what about the extra costs?
“If we get a rain day, it’s not like we can send the superintendent home and not pay him,” said Chuck Taylor, director of operations for Englewood Construction in Illinois. “If we have a construction trailer, it’s not like we can tell the rental company, ‘Hey, it rained today, so we’re not going to pay for the rental on the trailer.’ It doesn’t work that way.”
Additional costs, which also include items like water remediation, wrapping an exposed building in protective material or bringing in expensive heaters, are often compounded by having to spend even more money on extra labor to make up lost time. That could mean paying for additional crews or paying workers overtime.
This is an area of contract or subcontract negotiations that deserves attention, and it never hurts to ask the owner or GC for reimbursement beyond just adding time to the schedule.
Joe McLaughlin, chief financial officer of Austin Industries in Dallas, said contractors need to take into consideration where they’re building and factor in potential weather issues. But, he said, it all goes back to what’s in the contract, so it benefits contractors to try to make the terms as flexible as possible.
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