I’ve written before about middlemen in the construction industry: those who collect leads from building owners and sell them to contractors. I’m not fond of them. You can read previous articles here and here and here.
There is another type of middleman in the construction industry, and that’s facility and property management companies, who are retained by property owners to maintain and manage their buildings. They are paid by the property owners and often hire contractors to do the work.
A contractor who was working for one of these firms sent me a copy of a notice he received explaining changes in their business relationship. I’ll confess right up front that I haven’t done a lot of contracting with facility or property management companies. However, I do know a one-sided relationship when I see one. Excerpts from the notice:
“Our new strategy and partnership program will help us raise industry performance standards to win new business against competitors delivering less value to their customers. To support these new initiatives, starting July 12, (we) will begin deducting a Partner Network Subscription of 2.5% with a maximum charge of $35.00 from each submitted invoice. This fee will apply to all contractor invoices. While not insignificant, the cost is modest compared to charges by other national providers, and represents an important investment in growing the business we do together.”
So, 2.5% of your invoice is deducted from your payment to pay for the invoice. The contractor has to pay if they want to get paid. How is this right? They go on to refer to this fee as an “important investment in growing the business we do together.” Who do they think they’re kidding? Try telling your suppliers that you’re going to deduct 2.5% off the total if they send you a bill. It’s absurd.
In my opinion, it should go the other way. The contractor should be adding a fee to his invoice because they have to invoice.
“Many of our customers now require Before and After Photos to address Value Leakage and validate work performance. Starting on July 12, (FMC) will lead the industry by requiring Before and After Photos on each Work Order. Failure to properly capture and submit Before and After Photos will result in a deduction of 5% of your Invoice.”
Along with having to pay a fee if you want to be paid, there are new requirements added to your work. If you don’t meet those requirements, you’ll pay another 5% of your invoice price to the management company.
The amazing thing is that the facility management company referred to this as their “New Partner Program”. It’s a unique definition of partnership: one partner sets the rules and the other partner has to agree. I’m not sure it’s a partnership I’d want to be in.
The letter explains the need to reduce costs for building owners and to improve quality and response times (value leakage). That makes sense. But why is the contractor the one who loses?
It’s easy to push cost savings down to the low man on the totem pole, the one doing the work. In this relationship, contractors are at the bottom of the food chain and they lose. If a facility management company is concerned about poor quality or slow response times, they should hire contractors who are paid accordingly, and not nickel-and-dime them just because they can.
You should be paid for all your work, not just the time spent getting dirty on the job. If you’re required to take and submit appropriate before and after photos, you should be paid for that time. If you are charged to submit an invoice, raise your prices to cover that charge. If you’re working for someone who doesn’t want to pay you for what you’re doing, look elsewhere.
Okay, that’s my opinion. Maybe there’s something I’m missing. Can anyone shed more light on this relationship, or explain why this partnership is a good thing?
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations as needed.
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