August 7, 2019

Construction doesn’t end at closeout

Construction doesn’t end at closeout

When we think about the final moment of a completed project, it’s easy to imagine a scene where the general contractor—after turning in a dozen or so neatly organized and aesthetically pleasing binders—shakes hands with the owner as the sun sets gloriously behind them. The two are smiling and nodding while trumpets sound nearby. After weeks to months of painstaking time and energy spent compiling all necessary project data to hand over to the owner, the GC is cleansed from their arduous yet very necessary task. Atlas has served his time holding up the heavens. The closer has shut the door on the cleanup hitter and innocuous organ music soundtracks the crowd’s slow shuffle to the parking lot. The Looney Tunes “That’s All Folks!” wipes across the screen.

It is finished!

Except… it’s not. Not even close.

There may as well be a giant floating asterisk above the GC and owner shaking hands, because that moment of literal “handover” is only a symbol of completion that will not truly arrive for quite some time. To be specific, it won’t arrive for another calendar year after that handshake, at the absolute earliest. While closeout gets all the press for being the thing nearest to catharsis in the construction project lifecycle, it’s a bit of a fallacy.

The true final phase of construction, of course, is the warranty phase.

When we think about the project lifecycle phases for typical construction projects, most would include initiation, planning, design, demolition, construction, commissioning, and closeout. Even “closeout” as a phase name has a climactic sort of ring to it. We’re closed! We’re out! Not so fast. There’s an implicit final phase, and it’s one that is so readily an afterthought. The warranty phase is the period following closeout where the general contractor is on the hook for all installed systems and equipment that do not live up to their obligated standards. The actual final moment of construction is much less dramatic than the earlier handshake scenario. It’s the small, subtle moment when the general contractor looks at their calendar, realizes that yesterday was the final day of warranty, and exhales.

To be clear, the general contractor’s relief isn’t because they pulled a fast one on the owner and all the shoddy gas heaters can explode now without any financial repercussions for the GC. Rather, their relief is born from the fact that the warranty phase is so difficult that it makes closeout, by comparison, seem like a week-long trip to Bora Bora. Fine, that’s a step too far, let’s go with a trip to Maine (no offense, Maine).

To illustrate the warranty phase’s less-than-ideal status, a general contractor recently surveyed their clients. They asked them to rate each phase of construction on a scale of 1-10, with 10 being a weeklong trip to Bora Bora and 1 being the cinnamon challenge on a first date without any water nearby (our interpretation of the numbers’ values, not theirs’). The phases tallied were: pre-construction, course of construction, closeout, and warranty phase. The averages were as follows:

Pre-construction: 8-9

Course of construction: 8-9

Closeout: 5-6

Warranty: 2-3

If you read our “Is closeout always this terrible? Asking for a friend” blog, you’ll likely agree that closeout would have received lower scores if the warranty period didn’t exist. But alas, it's all relative.

The most important takeaway from these statistics is that these clients dishing out 2s and 3s are more than likely continuing clients on other projects. We can assume this because this particular general contractor’s clients are 93% returning customers. Generally, a GC’s returning clients are within the 70-90% range. This fact is staggering for several reasons, chief among them: keeping clients is paramount to prolonged success, and anything that would incentivize clients to look elsewhere must be remedied immediately. Why? Simply put:

Repeat business > winning new business

Keeping clients happy and coming back for future projects is vital considering the probability of winning a job in bid is very low, about as low as finding a couple honeymooning in Maine (no offense, Maine). Not to mention, terms will be significantly worse in a bid vs. negotiated contract including profit margin. When a GC is lucky enough to win a bid, the owner selected them because it’s most advantageous to them. This is in contrast to a scenario where the owner and GC do what’s in each other’s best interests in light of a previous and still-ongoing business relationship.

That’s where Buildr comes in. Buildr helps ease the warranty phase by helping to manage all warranties for the general contractor while enabling the GC to share a very easy-to-use portal with the owner for submitting warranty claims and tracking warranty progress.

Full transparency, fast response time, no dropped balls.

With all the money saved from retaining clients, just imagine how many non-Maine vacations one could plan.