Flat Fee Construction: An Opportunity for Innovation

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When you hear construction and The Great Recession in the same sentence, you wouldn’t expect it to be good news. But I read an article today in the Wall Street Journal that has me brimming with excitement over what the future holds for our industry.

Given a choice between going out of business or keeping their construction businesses alive, contractors are striking flat fee deals with banks to build/finish the houses of failed development projects.  Sure, the contractors quoted in the article mention that such contracts “help stop the bleeding” but how long would you expect any business to continue to work just for the sake of keeping the lights on? The strongest contractors will innovate in order to improve (create) their profits.

Where will the innovation come from? Well, I hope jobsite technology gets a good, hard look (OK, I’m biased). But you can’t predict these things. Maybe it’s more efficient use of materials or labor, new contract structures or creative insurance policies. Who knows? Every penny gained through innovation goes directly to the bottom line. Now’s the time to try things!

Given the large inventory of unfinished work in the now infamous markets of Florida, Arizona, California and Nevada, flat fee contracts with banks offer contractors a solid alternative to the bare-knuckled bidding wars that are taking place for government projects. Contractors in these markets can work in familiar territory to improve themselves.

What about you? What are your recession-inspired innovations?

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2 Responses to “Flat Fee Construction: An Opportunity for Innovation”

  1. osha 10 Says:

    I am a recession inspired innovator. Our construction company has been going slow, but with OSHA training being made mandatory in Nevada, i’ve started up an OSHA training company to help balance us out. Also, bidding has become much more stream-line. We are cutting out alot of the little things that we use to be able to include in the bid.

  2. nedpelger Says:

    I’ve worked a flat fee approach for the last 14 years and found it to be great for me and my customers. Then everything can be completely open book, changes get dealt with fairly on all sides and everyone walks away from the project feeling they got a square deal. Which means they are much more likely to walk back to me for the next project.

    Ned Pelger
    ConstructionKnowledge.net

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