All in Agreement: Bay of the Pigs
The game of professional golf is better officiated than any other game. The rules are strict and highly enforced. Tiger has had to play the game by the rules and has been extremely successful. He plays fair.
Two months ago, I attended a meeting in Palm Springs and played in a "best ball" golf tournament. After each person hits the ball, the team of four golfers picks the best-hit ball and then all four hit from that spot. You repeat this process until the hole is finished.
All the four-person teams started with a certain amount of points and then wagered those points at each hole. At the first hole, I convinced my team members to wager only 1,200 points. They agreed and we easily pared the hole.
"If we're going to win this thing, we're going to have to wager a lot more than 1,200 points," said team member Jeff Miller, co-owner and vice president of KHS&S Contractors West Coast.
As we continued playing, Jeff and my other teammates convinced me to wager all of our points. We were going for broke at each hole. We were doubling up our point's hole after hole. We finished somewhere in the neighborhood of 10,000,000 points. We turned in our score and were announced the first place tournament winners. I was in a big hurry to catch my flight back to Seattle and was preparing to leave when someone handed me an envelope. I put it in my pocket and later opened it to find $500.
Kutilda Woods and my golf partner Jeff Miller have similar competitive personalities. Tiger's mom feels that one must win fairly at all costs. Miller quickly sees opportunity and determines what it will take to get there fairly. Obviously, Tiger and Miller think a lot alike when it comes to winning fairly.
This little piggyFor years, I've been pounding into readers' heads that contracts are not fair and will most likely never will be. Not only are subcontracts unfair, the bidding process can be unfair. It's not the process but the people involved who don't play fair.
Consider the people you submit your proposal too, as well as the people you compete against. Do you have a competitor in your area that's a "pig"? A pig is a competitor who wants every job in town. A pig will undercut your price at every opportunity.
Some general contractors use pigs as opportunities to save a little money while working with someone they can control. When a GC identifies a subcontractor as being a pig, all the GC has to do is wait for the pig to either lower its price or include something the low bidder did not. When this happens, the GC not only puts money in his pocket, he also forever has the pig in his pen. The minute the pig acts up, the GC simply says, "Hey pig, you weren't low and I got you this job."
This situation reminds me of a scene in the movie "My Big Fat Greek Wedding," where the mother says, "Your father might be the head of the house but I'm the neck and I can get the head to turn anyway I want." The GC has control of the pig and worse yet, the GC wins by pitting pigs against subcontractors. The question is whether or not a subcontractor is willing to become a pig.
Residential pigsHow many times have you heard a homebuilder say the price was just a little higher than a competitor's? The first question out of your mouth is to ask how much higher. The builder says approximately 5 percent. You then ask if the competitor included sales tax, to which the builder will most likely say "no." The builder just baited you; he opened the door to the pigpen. You could now say that you included sales tax to get the job. That gets you in the pigpen with the builder. You get to play with the hogs now.
Not all GCs and competitors play the pig game but it's important to identify who plays it. It's not rocket science and once you figure out who is playing what game, you can choose to join or not. One solution to the pig game is to call the pig and the GC and tell them what you believe is going on. Normally, they will deny everything. At least you were able to vent your frustration and decide on a strategy for the future.
If your same competitor always gets the job, you should consider the fact that no one can be the low bidder that many times in a row. The odds should tell that you're wasting time. If you want to play the game, you can propose ridiculously low prices to see if the same competitor ends up with the job or you can propose ridiculously high prices to cause your competitor concern.
There are many ways you can play the game. You can win if you have a warped sense of winning.
Pig in a pokeThe saying "pig in a poke" began in the 14th century and means taking an unknown risk. A poke is a paper bag. What's in the bag is concealed from the buyer. You buy whatever is in the bag, unseen.
When you bid a job, you assume many things. You assume that the GC will use your bid if you are the low bidder. You assume the GC will not allow your competitor to lower his or her price after the bid. You assume that the owner and GC will pay you if the work is done correctly. You assume the GC will be reasonable and fair. You assume a lot.
Your bid of $20,000 or more simply means you are giving the GC and the owner $20,000 or more in credit. You just became the bank because you pay for the material and labor to complete your part of the work. You assume you will be paid back at some point, plus profit. Not only have you given them a $20,000 or more credit line, you've assumed the risk of spending more than your bid and the risk of not being paid.
In addition to the credit you've extended, the owner and GC have extended your resources. Your resources consist of the people who work for you, your relationships with suppliers, and all the equipment you own. When you bid a job, you're offering credit and all of your resources to a GC who may or may not appreciate them.
Your ability to finance jobs until paid and to provide excellent workers is a tremendous resource. Would you prefer that your workers work on marginally profitable jobs or jobs that have the potential of being very profitable? Leveraging your financial and labor resources is no different than making a good investment. Investing in marginal projects and general contractors is foolish when you have the option of investing in good projects, GCs and owners.
Find themIf you want to put your resources in the very best investment opportunity, you're going to have to get out there and find the best place for them. It's ridiculous to waste your resources on pigs and GCs who like to play in the pigpen. If you don't take your resources seriously, then you will most likely lose your resources.
Do you consider your resources valuable? Do you think your resources are less valuable than a GC's or for that matter your competitors resources?
General contractors can be one of your resources. However, a pigpen-playing GC should be viewed as a liability and high risk. If you place your resources in the hands of swine, you stand a good chance of losing your resources.
Consider all the resources you have and decide if you want to enter the pigpen and play in the slop. Your resources are gold, not fertilizer. Be careful how you spread them. Learning to value your resources will help you make the right decisions.
What does Tiger Woods, his mom and Jeff Miller have in common? All three clearly see opportunities, highly value their resources and play to win. They also know, as we should, that pigs will never fly and that pigpens are dirty.
Remember: Teamwork begins with a fair contract.
If you read this article, please circle number 343.