By Aaron J. Stull
Owner/President - Keystone Basement Systems, Inc.
AStull@keystonebasementsystems.com

Last week, I was speaking with a colleague of mine who is also in the basement repair field and the discussion of quality came up.  We have both observed that in lean economic times many businesses slash their prices in an effort to attract customers with little regard for the quality of products and services they render.  In an effort to offer “the lowest price” they compromise on fundamental aspects or use materials of inferior quality.  Although this may bring some short-term success to the contractor, in the long run the customers will express their frustration that will doom the reputation of the company.

Events That Lead to Contractor Failure

Contractor failure are usually the result of multiple causes. The Surety & Fidelity Association of America (SFAA) reviewed 86 claims cases and identified the top factors related to contractor failure:

Unrealistic Growth

•   Change in type of work performed
•   Expansion into a new geographic area
•   Significant increase in the size of individual projects
•   Rapid or over-expansion

Performance Issues

•  Inexperience with new scope or types of work
•  Personnel do not have adequate training or experience
•  Insufficient personnel

Character Issues

•   Contractor retires, dies, sells company, changing leadership or focus
•   No ownership or management transition plan to ensure continuity in the event of death or disability

Accounting Issues

•  Inadequate cost and project management systems
•  Estimating or procurement problems
•  Lack of adequate insurance
•  Improper accounting practices (not adhering to the AICPA Audit Guide for Construction Contractors)

Management Issues

•   Key staff leaves company
•   Staff inadequately trained on company policy and operations
•   Insufficient or incapable personnel at upper management or project level
•   Failure to maintain solid accounting and management systems to track costs and billing

Other Factors

•  Economic down-turn and high inflation
•  Weather delays
•  Poor site conditions and/or building plans
•  Labor difficulties (lack of skilled labor)
•  Material and equipment shortages
•  Owner’s inability to pay
•  Onerous contract terms

“Keystone Basement Systems, Inc. is a foundation repair company. KBS is not, however, a engineering firm and should not be considered as such.”

Tags: Advice, Informative

This entry was posted on Friday, December 18th, 2009 at 11:26 am and is filed under Advice, Certified Professionals. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.