“Establishing and maintaining a positive jobsite culture means that everyone gets to experience a workplace that is inclusive and respectful.  We know what a good jobsite culture feels like–it’s the job that everyone wants to be on because it looks and feels welcoming.  We also know that a good culture leads to a safer and more productive job, one that provides higher value to our client and allows each and every worker to perform their best work.”  

“Jobsites are our work homes, they are where we spend our days, and they are where we gather the emotions, attitudes, and behaviors that we bring home to our families.”

“We must create workplaces which are equitable and meet the needs of all employees, industry wide.”

All quotes from Construction Inclusion week 2022

Our accepted industry payment practice is for owners to process monthly payments within thirty to forty-five days of an approved billing from their general contractor.  This is recognized as accepted practice by the board of the Construction Specification Institute and seemingly accepted practice by the AGC, AIA and ASA.  At least I have not heard or seen any objections from any of those industry leading organizations.

With this practice solidly on the table, I have offered to hold a PEOPLE meeting on Wednesday, October 22, from 4-6 at Delmar DevINe to discuss what effect this accepted industry practice has on the various union affiliated trade contractors that incur the heavy weekly labor costs on the major commercial projects in our marketplace.  I am retired from the industry so this payment practice does not impact me personally, but it does seriously impact the lives of the many MWBE firms I work with, either through RISE, St. Louis Capital Collaborative, WEPOWER, or the many firms that may look for a helping hand along the way.  As most people know, my work is with the MWBE community, and primarily with diverse trade contractors working in a second-tier position.  But I do not see these standard payment practices as a MWBE or racial issue; these practices impact all trade contractors that employ union workers.  Especially hard hit are the new and emerging firms that enter our industry as an union affiliated firm, chasing a dream, looking to gain a foothold on the ladder of success.

Without belaboring the point or going through the details, we should all be able to agree that a trade contractor must have sufficient working capital to meet up to 11 weeks of payroll and a minimum of two months of union benefits before they receive any payment for work performed on a project.  For the MWBE firms that may be working in a second tier position, this number increases to 13 weeks and possibly up to 15 weeks.  In addition, they most probably have to pay for all materials prior to receiving any payment.  In addition to waiting up to 11 to 15 weeks for their payment, they only receive 90% of the work they performed two months ago.  Is this workable?  Do we in our industry think this should be workable?  Retention for completed work is an outdated concept, but that is another story for another day.

Possibly I look at this differently in that I experience the pain along with the firms I try to guide, assist, mentor, and help.  I have no answers for them.  For my customers, I know no financial institutions that offer lines of credit in the $150K to $250K range—an amount I feel most new firms entering our industry need to have in their pocket.  We have some funds available for MWBE firms at RISE, but our capacity is limited and our lending amounts typically fall short of the funds actually needed to succeed and grow.

I question why we accept this practice within our industry.  Throughout my rather long career working always in the capacity of a general contractor, we were always paid by owners by the tenth of the month, after submitting an application for payment through the end of a particular month.  Not “within ten days” but by a stated date of “the tenth of the month.”  We were considered late pay if we did not have our subcontractors paid by the 15th or 20th of the month.  For the smaller firms working for us, and there were many, we typically paid them earlier, usually by the 5th of the month.  What happened to those days?

For the professional firms in our industry, I have no idea how they manage their finances.  Their work is all labor and I am quite sure that architects and engineers like to be paid weekly or at least a couple times a month.  Oftentimes, architectural and engineering firms have to wait 60 to 90 days before they receive any payment for their work.  Maybe that is acceptable for the more established firms that have substantial lines of credit but I am sure many of them are challenged as well.

My simple questions are:  

Is this a welcoming and respectful jobsite to all involved parties if payments flow in this manner?  

Does pushing the new and smaller firms—and even the more established trade contractors–to the brink of failure month after month create the sort of jobsite culture that our leaders talked about in the quotes above?

Where is it we think the new firms entering our industry find the working capital to fund the distance between work performed and payment received?

Is it the position of the industry that new firms entering the industry as a trade contractor have this sort of working capital in their pocket?

How do the smaller, new and emerging firms, ever grow their business to where they can withstand this sort of industry accepted payment practice?

I welcome having this sort of discussion with owners, city and county leaders, general contractors, developers, trade contractors, MWB firms, professional firms, and any individual involved in the industry that wants to shed some light on some productive answers.

In my past discussions involving owner payments, this topic always seems to bring out a lot of passion–which I completely understand as I tend to get overly excited just typing this.  Personally, I do not know of any reason why the buyers of construction services cannot pay for labor and material costs by the tenth of every month.  Every reason I have ever heard is more of an excuse or an explanation and not a reason.  Even accepting the reasons, excuses, and explanations, the simple, seemingly hard-to-accept truth is that this practice does not work for the labor intensive trade contractors, most especially the little guys.  So, should we let them be and ask them to go away and chase their dreams elsewhere?

Should be an interesting meeting.  Then again, maybe it will be sparsely attended.  We will see.  All on this list are graciously welcome to come and participate, or come and listen.

Either way, I will have bottled water for all–assuming you come early enough.  Wednesday, October 22, 4-6, Delmar DivINe--we will be in the Ameren Community room, down that main hall, last room on the right.  Let me know if you think you may want to join the show so I can have you pre registered at the front desk. If you have never been to Delmar DivINe, be sure and enter under the canopy entrance on the far east side of the campus, off Belt Street.  Plenty of parking available.

“We must create workplaces which are equitable and meet the needs of all employees, industry wide.”

PEOPLE/WBEDC

Ron