Much aligned and overdone, the term honesty is in many cases an assumed trademark of the majority of industries. However, there are those industries that have been burdened with the reputation of dishonesty and underhanded operations, deals and partnerships.
Unfortunately construction is one of these industries.
You, as the purchaser of a new home must understand this perception of the industry and honestly navigate through its implications. There are several different protocols that are deemed corrupt and commonly witnessed within the construction industry. I know that there are several readers of this discussion that might be getting a little antsy as they read this, in anticipation of exposure, embarrassment or are in denial, especially if you are the builder. However, if you are the purchaser, this information is invaluable to ensure that you are provided the most honest and accurate representation of the cost of your project. It is important that the audience meant to benefit by this discussion understand the industry that they are getting themselves into.
To understand the underlying negative issues that this industry is involved with a brief summary will allow you to start to understand the issues and allow you to make a more educated choice of builder. To properly make decisions and survive the construction process the understanding of an industry that has evolved forever, and basically been managed and owned by less than the most moral and ethical individuals of society, is mandatory. Having said this let me summarize a rundown of the general scenarios that could be interpreted as somewhat unscrupulous or simply dishonest.
- The Set Up: This general identification of a trait within the construction industry has several different variations on the theme. However it is what it is, meaning a set up.
Several general contractors have organized with a plan of simply taking turns regarding projects within their area. These general contractors and it can happen, less frequently with subcontractors, is nothing more than a weekly, monthly or any consistent meeting of the leaders of several construction companies. Opportunities are compared and the cost of the proposals discussed. The company that is next in line for the project, based upon the internal conversations of all parties, is made the low bidder. Each of the other contractors simply support the agreed upon low bidder with escalated values. The actual estimating portion of the deal is usually done by the accepted low bidder to eliminate any wasted time and effort by other members of the clan. This occurs with general contractors, subcontractors, and material suppliers and is common within the industry. Of course it can be argued that this is common business practice within all industries, however, the building industry can succeed in escalating prices to values that are unrealistic.
- Third Party Coercion: This is the general identification of an entity involved with the project, that has objectives other an honest and vanilla presentation of their project and the development of efficient and competitive values for the work. Third party coercion can mean a number of different venues, all of which end up wasting valuable time, energy and money by the contractors that think they have an honest and level playing field.
This coercion can be a financial uptake by this third party from the contractor selected to perform the project, financial loan assistance to the contractor selected, financial support in terms of payment details and time allocation, etc. The bottom line is that normally Third Party Coercion involves exchange of money by the involved parties, and unless you are in the mix and on the right side of the transaction, it simply wastes money, time and energy from viable contractors thinking they are getting a fair shot at a project. The identity of the third party could be the developer, the bank, the financial supporter of the builder, the subcontractors themselves or a combination of all these entities. Normally the purchaser is the party that losses and ends up paying the escalated costs.
- Special Interest Involvement: The construction industry is noted for its ethnic heritage as well as its ethnic favoritism. The Italian American has run the concrete construction business in NYC for the last several decades, the French Canadians have dominated the drywall business throughout the Northeast, the Portuguese have dominated the masonry construction on the East coast and the Mexican population has dominated the labor and cleanup industries. In many cases, there remains an element of special interest loyalty that tends to unbalance the alleged level playing field. This special interest association can cause an escalated value for the construction of the project. Awareness by the purchaser to this fact is essential to determine if the correct values are being quoted for your project.
- Family relationships: In many instances when a contractor starts a small company in hopes of success, this contractor is supported by financial help, which in many cases comes from a family member. If this occurs, in many instances the family support is a part of the situation being bid. The Developer could be the father of the new contractor, the mother in law may own a high end boutique that has an addition being constructed. In any of these cases, once again the field is not level and the ability to honestly and competitively priced projects is compromised. Again the purchaser’s awareness of this situation is valuable when negotiating the final value or the home.
- Minority Segregation: Since the early 60’s the governmental insistence that minority programs for Blacks, Hispanics, Portuguese, etc be so expanded that many projects have government restrictions on who can bid, what the percentage needs to be, etc. This is all well and good as an effort to integrate all portions of society in the construction marketplace and allow a level playing field for everyone. Unfortunately this minority priority, as I call it, has now come full circle and instead of a level playing field, it has become unbalanced to the minority side. This has caused black architects to select only black contractors, Portuguese Banks to only provide loans to Portuguese contractors, etc. The industry is now ripe with several instances of non level playing fields due to uncontrolled and expanding efforts to insure that the minority representation within the country has been allowed equal access to construction projects. As I have stated before, this acknowledgement and information is valuable to the consumer to ensure understanding and allow the most educated and knowledgeable negotiations as the final value for the project is closed.
I can identify many additional issues that involve dishonest activity as well as unlevel playing fields within the construction industry. However, it is difficult to identify each and every method, process, deal and agreement that has resulted in someone’s interpretation of dishonesty.
Is the construction business any more dishonest than other industries? Unfortunately I hate to admit it, but I think it is. I honestly feel that the construction industry is one of the most corrupt industries within America today. Due to the general nature and characterization of the majority of the leaders within the construction industry, the term dishonest, is so relative, that it has been lost in the fog, and the actual identification of an honest contractor and a dishonest contractor has been totally obliterated within our industry. I have witnessed for myself situations where the payoff to an owner is as obvious as an open briefcase each and every Friday morning for over 3 years. I have witnessed government officials that have taken open bribes in return for awarding projects, I have seen vendors for light fixtures offer payoffs to architects for the privilege of being named specifically within their specs, I have seen architects and owners receive portions of monthly requisitions, if they are positive in their monthly approvals of the requisitions, I have seen union members and leaders take money for looking the other way, or simply not reporting labor issues, I have seen OSHA officials paid not to file complaints and forget to fill paperwork, I have witnessed many times over the favoritism of local building officials to certain contractors, etc. etc. etc.
In summary, the construction business is inherently corrupt and is ripe with dishonesty and lacks the integrity that we were all naturally born with. I have personally witnessed too many instances to either remember or bother relating. The industry is basically run by individuals who can strong arm the weak or maneuver around the competent with threats of violence or financial mayhem. It is not managed by the smartest or the sharpest; it is managed by the clever and the arrogant, and certainly not the most ethical nor moral amongst us.
This discussion was meant to provide an accurate representation of the industry you will be getting into as you manage your new construction project. Additional discussions within this website will offer the most reliable methodologies to circumvent these inherent issues.
It must be understood that there are honest, moral and hardworking contractors out there and it is extremely important that the home purchaser take the time and effort to select the proper contractor for your project.
This will be discussed in further discussions within this website.