Plus, there’s been significant price escalation, because once trade contractors build up their backlog, they start raising their prices. Heifner says the contractors know they’ve got all the work that they can handle, so they won’t lose sleep if they don’t get the job.
Heifner doesn’t expect to see the supply growing to meet the demand for skilled construction workers any time soon.
He says construction isn’t viewed by milliennials as glamorous. There are construction managers getting a college degree, but a lot of younger people don’t look at being a pipefitter, electrician or plumber as a good career choice.
“It seems to me, and this is just my personal observation, that the average age of the people in the trades seems to be getting older, and I don’t see the influx of younger people coming into it,” Heifner says.
Although he says people, like Columbus Mayor Andrew Ginther, recognize the need for increased job training in these areas to try to put people back into the workforce, that won’t be realized in the near-term.
Delivering as promised
Renier’s challenge has been made harder by the nature of its business model — where the customer relationship is critical.
Renier is a commercial construction company that works on negotiated contracts with business owners, providing design and construction services.
Typically those business owners have multiple facilities throughout the Midwest, which is why about 50 percent of Renier’s work is now outside of Central Ohio. The company actively seeks out clients who are either expanding their footprint or continuing to upgrade and renovate their current facilities.
Heifner says the company wants to turn business relationships into personal friendships, so it commits a significant amount of time to each customer.
“Some of our competitors locally, they have a comfort zone to working in Central Ohio. They don’t want to go out of town,” he says. “And I’ve always said, ‘Well, if we have a client that wants to build on multiple sites and locations, why shouldn’t we go and take care of them to develop, again, that long-term relationship?’”
From the time Renier finds an opportunity with a client to the time it takes to work with that client to design, engineer and complete due diligence, it can be six months to a year before the construction itself starts.
These kinds of working relationships aren’t formed over a lunch or casual meeting in somebody’s office, he says. In fact, the company has two clients that returned after going elsewhere and realized the value that Renier provides.
When you don’t focus on the transaction, but on a long-term relationship, Heifner says you have to consistently deliver — regardless of how difficult it is to find talented contractors that can meet your schedule.
“We have a staff meeting on Monday morning, and we review all of our current projects in the field,” he says. “The first thing I want to know A) ‘Is the customer happy?,’ B) ‘Are we on schedule?’ and C) ‘Are we on budget?’ — in that order. A lot of our competitors put it the other way around.”
Doing the due diligence
With the supply of skilled contractors unlikely to change in the short term, Renier has had to adjust how it operates and put in more work upfront. Heifner says they are doing a much more thorough job of screening the trade contractors, especially those outside of Ohio.
“We’re spending a lot more time understanding their business, their backlog, their availability of manpower, and we’re not going to award a contract to somebody that hasn’t demonstrated to us beyond a shadow of a doubt that they have the manpower and the wherewithal to complete the project on our schedule,” he says.
At the same time, it’s important to check out the contractor’s financial wherewithal. If skilled contractors are already overworked, you don’t want to work with companies that don’t have a preferred background check, or are involved in liens, litigation or lawsuits.
Your reputation will be a reflection of what they do, so even though it’s harder to find talent, you can’t relax your expectations.
It’s a matter of being vigilant at all times, he says, and recognizing the amount of time and effort that is required to address the problem.
“It’s like when the banks all went through Sarbanes-Oxley and they had to put on staff to manage compliance,” Heifner says. “We have twice as many estimators as we had five years ago. Well, the workload has increased somewhat, but the amount of screening that we’re doing to try to find good trade contractors has increased significantly.”