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Bryan Hancock#4 Off Topic Contributor
  • Investor
  • Round Rock, TX
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Scaling Builders - What Is Their Capacity?

Bryan Hancock#4 Off Topic Contributor
  • Investor
  • Round Rock, TX
Posted Sep 30 2015, 14:40

Our development company has grown by leaps and bounds over the last several years.  We now have the fortunate first-world problem of having far too much work.  I have been turning down projects for about 6 months now trying to give our operations part of our business a chance to catch up with our capital raising capacity.  This is finally starting to pay off and our builders are catching their breath.  

This summer in Austin there were historic floods that have seemed to set the industry back several months.  Needless to say this has impacted many of our projects and the timelines for contractors have stretched considerably.  Many of the builders lost subs to jobs where they were restoring flooded projects and in general the subcontractor pool in Austin is very small for skilled labor.  The skilled carpenters who can do detailed finish out work are especially hard to find.  

One of our new builders has on-site supers and has a 40-year track record of building projects in Austin.  He knows how to navigate the city and can build projects on time, on schedule, and on quality.  This is VERY hard to find right now.  I'm worried we're loading him up with too many projects though and that he'll get expensive soon if we give him too much work.  

My question has to do with locating builders like this.  We have set up some meetings with local contacts that introduced us to builders with full crews, supers, etc. and the necessary overhead to handle our scale.  It is hard to develop a relationship with the builder quickly enough to meet our scale though.  I would like to do one project with the builder, see how things go, and then layer on more projects if things go well.  You have to go through a full cycle with a builder to know how they'll fare on inspections and what their finish out work looks like on the back-end.  Does anyone know of a good way to accelerate this process?  We have part time staff that can vet the builders and know what a quality builder's work should look like.  We also know what stuff should cost and in general what a good production schedule should look like.  

Also....do you provide incentives for work being done on time and penalties for work coming in late?  How do you handle things when there are floods or non-planned-for events like extended rain that delay a project?  It seems good to give folks an incentive to build things faster, but not at the expense of quality.  It also seems unfair to hold people accountable for things beyond their control and I don't want builders walking off the job for punitive contractual penalties and forcing us to get someone else to warranty their work.

Any thoughts on these items?  

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