Manpower Woes And Rising Costs: We’re All In It Together
I recently paid a labor rate of $130 per hour at my local Ford dealership. As I paid the invoice, I was thinking about how much more difficult and demanding our kind of work is than that of an auto mechanic.
A broad skill set is needed by industrial workers like tray mechanics, yet their billing rates are not even half of my local auto mechanic! Currently, and for the foreseeable future, our industry needs to realize all labor rates must be variable. I’m not just talking about the base wage rate, even though that’s the biggest increasing cost for us contractors. I’m also talking about all the other costs contractors are encountering, such as expensive transportation costs, high material costs and dramatic rises in insurance rates.
Good contractors limit economic risks. I’ve been warning plant owners about this problem for a year or more, yet I still encounter decision-makers who don’t believe there’s a problem and want to do business as usual. They don’t take into account that good contractors don’t have to (and shouldn’t) take any economic risks in today’s business climate. Contracts with “risk factors” will be considered unattractive to good contractors. Contracts with “risk factors” include a lump sum, not-to-exceed and other contracts with so-called “incentives” that can often work against the contractor.
Good contractors don’t cut corners or get greedy. Good contractors won’t cut corners to meet a lump sum or not-to-exceed contract because they know their quality and safety records are at stake. Good contractors don’t get greedy when times are good because that will come back to haunt them when the amount of work trends downward.
Consider the skilled labor shortage. You can’t pick up a business magazine or newspaper without seeing an article about the “lack of manpower.” I even read an article that talked about the lack of skilled manpower in India, a population of over 1 billion people!
The lack of talented or skilled manpower is affecting many countries and industries including the rail, mining, drilling, chemical, welding, textile, IT, biotech, healthcare and even the animated film industry.
Stick to core competencies. Many general contractors want to be a one-stop-shop. Now is the time for good contractors to stick with their core competencies and utilize specialty contractors where their manpower may not be as efficient. There is currently plenty of work, and reputations can be enhanced or eroded. That’s why good contractors are sticking with what they know: their core competencies.
When contractors have a work backlog, it allows them to attract and retain highly skilled managers and personnel.
Starting earlier saves owners money. Some of our more innovative customers are now booking contractors for their projects a year or more in advance. This is a win-win for both contractors and customers. When contractors have a work backlog, it allows them to attract and retain highly skilled managers and personnel.
When owners work with the contractors earlier, they can have the supervisors perform planning and construct-ability studies to find more efficient ways to execute the project. This can save the owner time and money when the project is in execution mode.
Work to understand one another’s conundrums. There is tremendous pressure on owners to meet market demands and many regulations. But it also helps if decision-makers within the refineries understand contractors have problems. It is more imperative than ever to be understanding and thoughtful of one another’s changing business needs. We are in this together: labor woes, rising costs, increased market demands and all.
For more information, contact Whitney Strickland at (281) 506-7152 or email firstname.lastname@example.org.
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