Steel Advice - The Fabricator's Resource
Watch out for the slice and dice!
Steel fabricators beware! Our fellow competitors from out of state are soliciting local companies to take on the fabrication of their work.
First, it is hard to fathom any steel fabricator has so much work that they are forced to subcontract it to their competition. What is the hidden motivation here?
Second, unless the understanding is that the fabricator/customer is going to pay you on a weekly basis to support the payroll and purchase the materials themselves, taking work from them is the very same thing as becoming their bank. You will be financing their job while you wait for your money based on pay schedules you have no control over.
Joint check you say? What if there are not any funds to write a check for?
What is happening now is that some of those fabricators who had screaming low numbers at bid time are now making efforts to subcontract their work.
If you see this coming your way, take a look at the bid results you received at bid time before you get on board with supporting your competition, no matter how friendly they are.
OK. We know from our bid results that our number was low bid. Weeks have gone by and our attempts to reach the person of interest at the contractor's office have gone unanswered. We are trying to make decisions on how aggressive we want to be on projects we are now bidding based on our recent history. Now we are having difficulty with making any decisions because we don't know what is going on with the work we know we are low on. What is really going on here?
A couple of things. One is that the contractors generally will not move forward with making decisions about their subcontractors without a notice to proceed or a contract from the owner. The contractor is working just as hard as everyone else is trying to get work, and return phone calls to fabricators on past bids are a low priority. The position of the contractor at this point is the same as ours. They are just as frustrated with not knowing when a job is going to move forward.
The other thing that we see happening is that the contractor, once they do get their notice to proceed is value engineering the project. Our bid for the steel may be viewed as just a budget to work with, and they are looking to manipulate what information they have to save money. Bid packages are being split up and requoted by the low two or three fabricators. One fabricator for the structural steel, one for the stairs and rails, and maybe even one more for the remaining miscellaneous steel. It's crazy, but the contractors are doing it in order to create profit.
Even though we may have included a qualification like "This proposal is based on receipt of order for all bid items or none", everyone is so hungry these days that they will waive qualifications like this to keep work in the shop. Some fabricators are being asked to provide unit pricing for adds and deducts in the different pricing categories, but this style of estimating is dangerous for both the fabricator and the contractor as their pricing may be used out of context. This practice sets the stage for both provisional and financial trouble.
Not all the contractors follow this "slice and dice" practice. There are still some contractors who recognize the financial disadvantage caused by the management nightmare in splitting up bid packages. Pricing is as low as it is ever going to be right now and shopping is a waste of time.
An added feature to all of this is that we see projects out for bid a second and sometimes even a third time, as the owner's representatives are trying to get the project within their anticipated budget. These projects are good ones to stay away from, for if the budget is blown, chances are that the money will flow like molasses in January.
That is odd....I thought I bid this job!
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