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The Three Finger Economy

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  • The Three Finger Economy

    On Tuesday, I drove over the San Francisco Bay Bridge to check on the status of our Harrison Street project in South San Francisco. I took the Cesar Chavez off ramp heading west towards Harrison Street. As I was traveling down Cesar Chavez Street in my truck with lumber racks I saw the usual groups of Mexicans day workers standing on each corner hoping someone would stop and hire them for the day. As I approached a street corner with a group of Mexicans day workers, one Mexicans day worker shoved his hand out in front of his body holding up five fingers. I quickly realized that he was willing to work for $5.00 an hour. He also quickly realized that I wasn’t slowing down to hire him and pulled his hand back to his chest and then thrust his hand forward again holding up four fingers. About 100 feet further down the street another Mexican day worker saw what had happened and quickly held up three fingers. I chuckled to myself and went on to check the status of our Harrison Street project.


    Today I received the bid results on a 13,799 SF Walgreen’s commercial building in Sanger California that I bid the carpentry rough frame on. The winning bid was $103,000. My bid was $162,000. I’ve been out bid before, but this time I ran the numbers again for this project and I could have done the project for $103,000, if I was willing to take a huge lost on the project or have my workers work for $3.00 an hour. My lumber and hardware cost for the project was $74,000. With a 10% profit, that only left $18,700.00 for the carpentry rough frame labor… $1.35 SF for labor.

    The next time I see anyone holding up three fingers, or less, I’ll have to hire them if I want to stay in business through the year here in the San Francisco Bay area.

    Sim

    (note: San Francisco's minimum wage is $9.75 an hour, or 9 and 3/4 fingers)
    Elucidation of the stuff is self evident
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  • #2
    Re: The Three Finger Economy

    Originally posted by sbebuilders View Post
    Today I received the bid results on a 13,799 SF Walgreen’s commercial building in Sanger California that I bid the carpentry rough frame on. The winning bid was $103,000. My bid was $162,000. I’ve been out bid before, but this time I ran the numbers again for this project and I could have done the project for $103,000, if I was willing to take a huge lost on the project or have my workers work for $3.00 an hour. My lumber and hardware cost for the project was $74,000. With a 10% profit, that only left $18,700.00 for the carpentry rough frame labor… $1.35 SF for labor.

    The next time I see anyone holding up three fingers, or less, I’ll have to hire them if I want to stay in business through the year here in the San Francisco Bay area.

    Sim

    (note: San Francisco's minimum wage is $9.75 an hour, or 9 and 3/4 fingers)
    I like that- how do they show a 3/4 finger?

    I was just in talking to one of my suppliers and he told me some of the things happening to his customers. The common thread is that a lot of customers seem to have a taste of blood right now, and appear to think that everyone in construction/building is hurting enough that they can take advantage of them.

    The worst story is a cabinet shop- totally legit shop, licensed, bonded, everyone is legal, but the owner is a Russian guy and won't go near a courthouse. Job was a $35k kitchen, he let the customer bargain him down to $20k, they signed a contract and he came in and bought the materials. Customer calls up and says the job is off unless he'll do it for $5k less.

    Another's customer was a month late paying, then calls & says they can't pay the rate charged "with the market as it is" and says the value of the job has to be less "considering the market."

    And more like it. That's the attitude that's going to do two things; 1. it'll run some of the weaker companies out of business and, 2. it'll drive down the reputation of those left standing because we'll all be carrying the stain of their last actions.

    What's really got me worried is what's going to happen over the next 3 or 4 years as all the bargain house flippers work really starts coming to light and driving up insurance rates. I'm betting that the industry will be pretty strong at that point and everyone left standing will be fairly able (but not happy) to absorb the insurance increases.
    http://www.lavrans.com

    "He uses statistics as a drunken man uses lamp posts; for support rather than illumination." -Andrew Lang

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    • #3
      Re: The Three Finger Economy

      Sim:

      How can you make money as far away as Sanger, even San Francisco for that matter? Do you send your men or hire locally, how do you control quality if you hire locally?

      Originally posted by Lavrans
      I was just in talking to one of my suppliers and he told me some of the things happening to his customers. The common thread is that a lot of customers seem to have a taste of blood right now, and appear to think that everyone in construction/building is hurting enough that they can take advantage of them.
      It's always been that way. I can recall a friend from college days hiring me to build him a house, his father owned some Orinda land where he had a home, he had subdivided the property and given one lot to his daughter and the other to his son to create a family compound. The daughter promptly built on her lot, but the son waited a few years. In 1975 we were in a downturn, and after signing the contract he told me that he had waited until the market was bad figuring I'd give him a lower price. Everything came out well, I was busy and didn't lower my price, in fact in those days I didn't even know the market was down, he even invited me to several parties there over the years.
      You will ask what goal the U.S. is pursuing? .... their external debt is huge, and ruining other countries is their customary method. Even ownership of the global 'printing press' is no longer helping. Nor is full control over NATO, None of that if enough for the 21st century colonizers. They don't just need to preserve the dollar as the only global currency but also to get their hands on the economic wealth of other large powers and regions. - Sergei Naryshkin

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      • #4
        Re: The Three Finger Economy

        Remember: You can't compete successfully on price. There is always someone willing to do the job for less than you. And it doesn't work to take a loss on each project and try to make it up on volume....

        Go visit the customer on the job you lost, be friendly, and be sure he knows that you would welcome a call from him to discuss options if things don't go well on the project. You won't get a call every time, but you will more times than you'd expect...
        HERS Rater • BPI Building Analyst • BPI Envelope Professional
        Certified Green Building Professional • Certified Existing Home Advisor
        General Building Contractor • Asbestos Certification • Hazardous Substance Removal Certification • EPA Approved Lead-Safe Contractor • Locksmith
        PMP • ESEP • CISSP

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        • #5
          Re: The Three Finger Economy

          Originally posted by Lavrans View Post

          Another's customer was a month late paying, then calls & says they can't pay the rate charged "with the market as it is" and says the value of the job has to be less "considering the market."
          That is asinine. Thankfully, I have not come across that mentality yet. I am sure I will; but so far so good.... Maybe I will try it at the grocery store in the AM....

          Otherwise - I do not see how in CA this day in age a commercial contractor could hire illegal labor on a project like that. Residential and house flippers; sure. But commercial???
          “Racism is man's gravest threat to man - the maximum of hatred for a minimum of reason.”
          Abraham J. Heschel (Jewish theologian and philosopher, 1907-1972)

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          • #6
            Re: The Three Finger Economy

            I have to agree with BeachBoy, I can't compete on price and really don't even want to. I am lucky that my clients are hiring "me", which means how I conduct business and the quality of my work. There are plenty of people who will never be someone I will work for, but there are enough people that become my clients. My job is to separate them. I wish everyone the best of luck in these diffucult times.

            Don

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            • #7
              Re: The Three Finger Economy

              Sounds like the "winning" bidder on the Walgreen's building is going to be in default shortly. Just a guess, but I'd say the lumber supplier will have to lien the job eventually, as it sounds like the framer will never have the money to pay them.

              Sim, on a job like that, for you, would you have all of the lumber on the job before having to pay your supplier, or do they collect for each delivery?

              I'm expecting supplier terms to start changing. There are a couple of ugly stories going around here lately, guys who are hung out because they performed on a job only to bill later and go unpaid.
              Bailer Hill Construction, Inc. - Friday Harbor, WA
              Website - Facebook

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              • #8
                Re: The Three Finger Economy

                Originally posted by David Meiland View Post
                Sounds like the "winning" bidder on the Walgreen's building is going to be in default shortly. Just a guess, but I'd say the lumber supplier will have to lien the job eventually, as it sounds like the framer will never have the money to pay them.

                Sim, on a job like that, for you, would you have all of the lumber on the job before having to pay your supplier, or do they collect for each delivery?

                I'm expecting supplier terms to start changing. There are a couple of ugly stories going around here lately, guys who are hung out because they performed on a job only to bill later and go unpaid.
                Don,

                On our commercial jobs we have all of the lumber on the job site before we start. The commercial TJI or TJL (open web joist) take 10 weeks to order and we need to install the commercial joist within a week or two of starting the job. Same thing for our GluLam beams, but they only take about 3 weeks to order. All of our material billing is monthly. So we have about 60 days to pay for the material. However, all of our suppliers have a interest pentaly for 30,60,90,180 days listed at the bottom of their invoices. In commercial projects we use AIA DOCUMENT G703 billing. This type of billing allows for billing of materials stored on the project, before their installed.


                To answer some of the other questions from other members, I was being sarcastic about hiring someone for $3.00 an hour. The lowest paid capenter I have on the payroll is $15.00 an hour.

                In comercial framing it's all about price in 90% of all the commercial projects here in the SF Bay Area. The general contractor that I bid for knows my company puts out the best rough frame, but then it still boils down to price.

                Walgreen's is building 1 new store a week across the United States. When the plans are ready for each new Walgreen's store, Walgreen's finds 5 general contractors to bid on the project. Each general contractor has at least 3 framing contractors bid on the job. So each new Walgreen's store has at least 15 framing contractors bidding on the job. The bid of $103,000 was the winning bid for the general contractor I was bidding for. However the general contractor I was bidding for was not the low bidder on the new Walgreen's store. So the framing contractor that did get the job might of had an even lower bid. I thought the $103,000 bid was a going out of business bid.


                Sim
                Elucidation of the stuff is self evident
                http://www.sbebuilders.com/tools
                http://www.raftertools.com/
                http://www.raftertools.com/iPhone/plus/

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                • #9
                  Re: The Three Finger Economy

                  Occasionally I'll see someone hold up one finger to me. Does that mean they want me to hire them for $1/ hr? I always thought that meant something entirely different.

                  Tom
                  Tom

                  "Whoever ceases to be a student has never been a student." George Iles

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