March 8th 2018 – It’s #WomeninConstructionWeek! This week the industry is celebrating the hard-working women who work in construction and is finding ways to encourage other women to follow suit. We’ve seen some great stories so far this week – @GoBuild featured an 18 year old welding student who is the first, and only, female in her class, @ConstructionDive told us about Stacy Pray who built her project management firm from the ground up, and companies all over the country (@StoryConstruction, @GGABuilds, @ChrisTelConstruction, @ForresterConstruction) have shared stories about the ladies that work hard to keep their projects moving forward.
With a strong construction forecast for 2018, the construction industry needs to be able to attract a whole lot more people in order to keep up with demand. BuildPay stands behind the initiative to encourage and support women entering the trades or running their own construction companies, as well as men, minorities, young people, old people, space aliens, and whoever else we can get. Beggars can’t be choosy.
The bottom line is that construction is hard – you battle the elements, fatigue, clients for decisions, owners for payment, subs for work, suppliers for credit – so attracting the best people can be difficult. We’ve read all the policy documents and recommendations that are meant to help the industry. Small businesses and minority- & women-owned businesses (M/WBEs) can benefit from government programs to appear more attractive in bidding. In New York, the requirement is that all public projects have to have 30% of the work awarded to M/WBEs.
And that’s great! On paper.
The reality that we’ve seen is that many M/WBEs don’t have the wherewithal or capability to get involved in these large public projects. New York City spent $2.9 billion on public construction projects between 2012 and 2015. Heavy construction projects on streets, bridges, and sewers valued at over $6 million comprised 86% of that $2.9 billion. Of the over 81,000 construction companies in NYC, there were only 32 that qualified as M/WBE and had the wherewithal to bid on a $6 million contract (source, source).
The limiters that come into play are mostly about payment. Many M/WBEs don’t have the working capital to buy the materials, lenders aren’t willing to work beyond certain limits, and material providers can’t afford to sacrifice their payment waiting for the job to pay out. The prime contractor that accepted the government project is still forced to abide by the 30% rule, but his options for hiring M/WBE subs are scarce and may end up costing additional time and money. Meanwhile, a company that had the wherewithal and the time to take on the project could’ve been finished already and saved us all some money – but they didn’t qualify as an M/WBE so they were never considered.
The mandates that New York City enforces for M/WBEs are noble, in theory. But they don’t address the root cause of the problem. Instead of mandating that X% of projects should be performed by M/WBEs (which can limit both M/WBEs and non-M/WBEs), the industry (and city) should be turning to financial technology to manage payments to the entire project payment chain.
BuildPay’s payment technology was built to connect the entire project – from the funder to the supplier – in one payment-central platform. Materials are purchased with a card that links directly to the funding account, payments are made directly to the subs and suppliers with approvals from the prime contractor, GC, or owner. The need for working capital or extending trade credit is eliminated. Prompt payment attracts the best quality contractors and gives every business – small, large, new, woman-owned, or minority-owned a fighting chance to be the best bidder. Risk is reduced, and trust is restored.
Construction is hard. Battles for payment give the industry a bad reputation despite the possibility for high profit margins. If your payment was guaranteed, who could you get to join the construction revolution? #GotPaid