A Market Role Reversal

CBRE, Daly City, Bay Area, Bay Area Rapid Transit Station, BART Station, AMG Development,

Construction site real estate The Registry

The success of today’s market created an inverted relationship between those providing and those purchasing services.

THIS ARTICLE WAS PUBLISHED IN THE ‘Q’ – THE REGISTRY’S PRINT PUBLICATION – IN JULY 2015

By Adam Felson

[dropcap]L[/dropcap]et me discuss with my team and we’ll get back to you,” he said to my surprise. I knew things were busy, but I never imagined a contractor turning down the chance to bid on my seven-figure project. In my career as a construction project manager, I’m used to contractors being quite grateful when I call asking for a bid. This call had felt like I was asking for a favor. I felt like I had to convince the contractor that the project was going to be worth his time, quite the role reversal from what I have been accustomed to hearing.

I recently got contacted by an old client of mine who was trying to make some modifications in his office suite. “Nobody is calling me back. I can’t seem to get any contractors’ attention to take a look at what we’re trying to do,” complained the office manager.

Felson
Felson

In today’s roaring economy, contractors, consultants and other vendors in the construction industry have the luxury to be selective with which projects they select. Instead of jumping to every new opportunity, service providers ask more questions that may include finding out more detail about their competition or the financial backing of the client before committing to spending time on a bid. You can tell the economy is roaring when if feels like the vendors are doing more of the qualifications and interviewing than the clients.

Scott Reay, of Principal Builders, says his firm thinks strategically before agreeing to bid on a project. “We ask ourselves,” Reay explains, “is this someone we have worked with in the past or got through a referral?” The firm is careful not to take on opportunities that might pull their attention from performing their best from their long-standing clients—which represent about 70 percent of their workload today.

With the market being as hot as it is, how can you get the attention of contractors and other construction related consultants without paying a fortune?

“Who else is bidding on the project,” a contractor recently asked me when I reached out about a new job I had. Reconsider that long list of bidders. While intuition tells us that the more bidders we get, the better price we will get, a strong market allows bidders with a deep pipeline to be in control. When asked to compete on projects with too many bidders, vendors often will spend less time to get a handle on the project and will pad their number because they know their chances are slim. Alternatively, a vendor may “respectfully decline” a project altogether because she didn’t want to spend her resources winning business if she can get enough other work from repeat clients who want to work just with her. In today’s environment, negotiating an agreement with one trusted vendor may be more financially beneficial and can allow for the customer service you are looking for.

It’s also critical to be careful not to waste people’s time with unclear project requirements or ask for contractors to give budgets on projects with small chances of actually happening. When vendors have a deep pipeline they can afford to have a choice of people with whom they work for, and indecisiveness can lead to frustration, a lack of vendor responsiveness and potentially inflated pricing. Contractors and consultants prefer working with clients who know what they want.

Most importantly, as a client, keep your relationships to service providers strong. Not only should your contractors, consultants and vendors be trying to stay in front of you to win future business, but you as the client need to keep in touch with people you will need to call upon as service providers in the future if you expect them to be responsive. It doesn’t hurt for you to take out your contractors and vendors for lunch every now and then.

A raging economy should not necessarily result in a loss in service and inflation of pricing to clients in the construction industry as long as they approach their vendor relationships more openly as project partners.

Adam Felson is the Director of Project Management for Colton Commercial & Partners, a full-service, San Francisco-based boutique real estate firm. Mr. Felson can be reached at afelson/at/coltoncommercialsf.com.

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