With precarious global developments leading to material price increases and shortages, flooring contractors are faced with many challenges, to which there are solutions…
THERE’S no doubt that we are now living in troubled times, the likes of which we hoped we would never have witnessed. As a nation we tend to pull together and do what we can to help on a humanitarian level, yet there’s no doubt that there are some businesses that will only have regard for their own profits.
I’m not trying to single anyone or any firm out here, but our buddies and clients who are all specialist contractors are reporting a constant stream of material price increases and shortages.
Over the last year or two, the excuses have flowed thick and fast. First, it was the container ship Evergreen stuck in the Suez Canal, then it was Covid, and now it’s Ukraine.
Undoubtedly, there are some genuine reasons for price increases and shortages, but you can be sure there’s some profiteering too!
Stuck in the middle
Unfortunately, flooring contractors like most specialist contractors are stuck in the middle.
On the supply side, there’s little that can be done if every manufacturer and merchant put up their price for the flooring, adhesives, and trim that you have to buy. You simply can’t do the job without the materials and it’s almost impossible to buy on your own terms. The manufacturers and merchants will only trade on their terms which allows them to put up their price and have no liability for delay.
On the sales side of the equation, you are mostly going to be engaged by contractors and clients who will insist on their terms and conditions which are almost exclusively going to be on a fixed price basis. And equally as bad is the fact that once you enter into that contract, you’re responsible for obtaining the materials irrespective of who specified them, and the damages that follow if you are late.
It can be an extremely costly and stressful place to find yourself!
What can be done about it?
What can you do to limit the impact and the risk to your business?
Firstly, you can be aware of the risks and make sure that everyone in your business is too, and ensure they play their part by taking action to minimise them wherever possible. Here are a few thoughts:
- Make sure you talk to your suppliers and to the contractors or clients for whom you are pricing the work
- In turn, are the contractors talking to their clients?
- Are clients talking to the government – a substantial proportion are public bodies
- Keep everyone informed about the market conditions
- Check with key suppliers about price increases
- Reduce your ‘open for acceptance’ time to seven days – yes, that’s short but possible, and in your control
- Update quotations at point of order negotiation so they reflect current price (or forecast price depending on delivery)
- Confirm lead times with suppliers and negotiate terms
- Give supply chain as much notice as possible
Agreement and contracts
- Can you reach an agreement about who will bear which risks?
- Can materials be set aside early and paid for?
- Can off-site storage be arranged?
- Will the employer accept a share of risk of price increases and delay?
- Ensure contracts reflect current prices and agreements reached
- Build in float wherever possible within your programmes
- Negotiate terms and conditions that allow for delays and price increases – not easy, I know, but if you don’t ask, you simply don’t get!
- Don’t accept terms that preclude your recovery in the event of delay
Delays to your progress
- If you’re delayed, then ordinarily you’re entitled to loss and/or expense (see above)
- Comply with your obligations to give notice and provide details of loss and/or expense
- You must be able to show that the increase in cost is the inevitable consequence of delay
- You must be able to show that you couldn’t have placed your order earlier
- This is why all the points above are so important to get right!
Don’t fall for industry myths!
Unless you know then you don’t know, and please only take advice from a reputable source. Here are some common industry myths debunked:
- Suppliers must hold the price on the order I placed. Check the terms, they usually allow them to increase their prices.
- If client specified supplier’s delivery dates slip back, I can get more time. No you can’t!
- If the contractor delays us I can recover all my costs. It depends what the contract says.
- We can deliver the materials early and get paid. Not without agreement and not without safe storage.
- We can use the force majeure clause to recover additional costs. Highly unlikely that this approach would succeed!
- In JCT contracts we can pass on delay if material is specified by design team.No you can’t!
- It’s tough out there – so don’t go it alone
Okay, there are some exceptions, but unfortunately, we know from over 30 years’ experience that for most of you, specialist contracting is hard work. And sadly, it isn’t getting any easier!
Very often, flooring contractors aren’t aware of how to access the cost-effective help they need and end up using expensive solicitors, ineffective debt collection methods, or trying to tackle issues all on their own. Please don’t go it alone, we are here to help you with:
- Late and/or non-payment
- Set off
- Payless notices
- Extension of time
- Liquidated damages
- Negotiating price increases and contracts
- Claims for loss and expense
- Technical issues
- ISO and BIM
- Legal issues
So, there we have it. We are here to provide you with not only great free advice via our articles, Wise Up Wednesday emails, and our web site, but we also provide practical hands-on help to apply the right strategies, principles, and techniques at the appropriate time, to make your business even more successful.
I’ve been assisting specialist contractors just like you, to resolve payment and all sorts of other problems for the last 32 years. And Streetwisesubbie.com has been providing services to our members for the last 14 years.
We are pretty confident that we can help you too, so please feel free to call our friendly team and speak directly to an expert on 01773 712116. As a UK-based flooring contractor, initial advice is free.