NOVEMBER MEETING PREVIEW
Are You Pricing Your Job Or Product
Properly To Achieve Your Annual
Profit Goals?
By: Ted See
The Tascon Group
Many contractors do not accurately
calculate their burden when bidding. Inaccuracies in calculating
burden leaves them either under pricing or overpricing their products.
The first can lead to massive losses; the second, massive losses.
Yes, both take money right out of their pockets.
The dual overhead burden rate method of job costing/pricing is considered
the most accurate method developed to determine a company’s
burden rates. Most companies unwittingly use a burden rate that
allocates only a portion of their actual burden costs. Unfortunately,
most don’t know how to calculate their real “costs of
doing business” and the burden rates they use are “rules
of thumb,” those used by others or from some other source.
Hence, for those jobs and/or products that use a disproportionately
higher percentage of an incorrectly calculated burden component—i.e.,
direct labor—they will be overpricing their work and probably
won’t be awarded any of these contracts and lose the chance
to make money. Conversely, for jobs and/or products that use a disproportionately
higher amount of other burden components- i.e., materials, equipment,
subs, etc.—they will be under pricing their work and lose
money. Unfortunately, they won’t even realize it since jobs
and/or product hard costs are typically checked and controlled by
comparing the estimated hard costs to the actual hard costs as a
job progresses or a product is manufactured. I call this phenomena
“profit fade” and its negative effects are insidious
Companies that don’t calculate their burden as their true
cost of doing business will always experience this profit fade,
have trouble maintaining their margins and achieving their profit
goals. The sad part is, they won’t realize it, much less understand
why and how to avoid it.
A more complete explanation and details on how to be more
profitable are simple and will be provided at CSI Madison’s
upcoming November 2011 Chapter meeting. In the meantime, please
direct all questions or comments to Ted See at tsee@thetascongroup.com;
608-827-6349 or to the Madison Chapter CSI in c/o Alan Kim, Jr.,
akim@vonbriesen.com; 608-661-3964.
GOVERNMENT CONTRACTOR
IMMUNITY…PRICELESS
Attorney Alan G. B. Kim, Jr.
von Briesen & Roper, s.c. – Madison, Wisconsin
We know the old saw…”some things money
just can’t buy.” So it is with protections from liability
to which contractors may be entitled on public works projects.
The government’s immunity from liability for certain types
of errors and omissions is as old as our country itself. “The
King can do no wrong” was a common premise upon which the
Western legal system was built. But over the centuries, the ability
of citizens to sue the government for the government’s errors
and mistakes has been penetrated to a certain degree. Still, the
vestiges of the government’s immunity from its errors lives
on, including within the public works construction arena. In Wisconsin,
those protections have grown to extend to certain public works
contractors. That doctrine— the “government contractor
immunity” doctrine--continues to be alive and well in Wisconsin.
In a recent case, a general contractor was engaged by a Wisconsin
municipality to perform certain road and curb and gutter repairs.
As a matter of course, the work required protective barricades
and signage. The municipality’s project plans and specifications
identified the type and location of the barricades to be used.
The general contractor hired a subcontractor to provide and perform
the barricading and signage work. The subcontractor placed the
needed barricades pursuant to the plans and specifications. During
the project, a pedestrian tripped on the leg of a barricade, fell,
and was injured. The pedestrian sued the subcontractor alleging
it was negligent because it failed to properly place the barricade
and warn her of its dangers.
The government contractor immunity defense was asserted. The argument
went that the municipality’s plans and specifications were
clear and were followed. Therefore, everyone following the plans
and specifications should be immune from the plaintiff’s
lawsuit. The Court agreed and confirmed that the general contractor
should have no liability.
In its ruling, the Court reiterated the long-standing principle
that Wisconsin’s municipalities are exempt from liability
for acts involving their exercise of discretion or judgment. Prior
court decisions ruled that the type and location of road signs
are discretionary acts and that barriers or barricades constitute
“signs.” Here, the Court said the municipality would
be immune from liability if the accident happened because of the
negligent type and location of the required barricades and sign.
Likewise, the Court stated that the general contractor would also
be immune from liability if the municipality’s plans and
specifications were reasonably precise, the general contractor
performed according to the plans and specifications, and the general
contractor proved that it was unaware that the plans and specifications
posed any reasonable danger. After considering the facts, the
Court ruled that the general contractor was immune from liability.
But the story does not end there. The government immunity protections
flowed deeper—down to the subcontractor. To the extent the
general contractor was absolved of liability, so was the subcontractor.
Hence, the Court also gave a pass to the subcontractor, even though
the only connection the subcontractor had to the municipality
and its project was through its subcontract with the general contractor.
The upshot is that there are potentially valuable liability protections
to which general contractors and subcontractors on public works
projects may be entitled and which insurance premiums simply cannot
buy. General contractors and subcontractors should therefore try
to position themselves, including through their contracts, to
maximize the chances of being able to benefit from these protections
should a claim arise.
return to top
|
