Subcontractor Strength Will Drive Industry’s Ability to Meet Demand, Overcome Challenges

Owners, developers and general contractors get a lot of notoriety for construction projects, especially in these infrastructure-focused times. However, the subcontractor is truly the one under the microscope, as this group requires the most care and attention to ensure the owners and operators are able to meet accelerating demand and public expectations.

The challenges in the current environment are many. Inflation and supply chain disruptions are highly detrimental to specialty trades in the mechanical, electrical, plumbing, drywall and other areas. Reports show that the construction industry, in particular, has seen an increase of over 20% in the cost of supplies and building materials in the last year alone and, in some cases, over 90% since the start of the pandemic. While these costs are passed along to the owner, the subcontractor still retains significant cash flow risk. This truth is amplified in a volatile market. As if the cost was not enough, equipment and material shortages coupled with rising interest rates only compound the problem—and tenfold for small businesses.

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Westbrook Service Corporation

… Brian King, president and CEO of Westbrook Service Corporation, became just the third majority owner since the company’s founding in 1949. Brian and his team have dedicated themselves to creating a company culture that is so profoundly different that it leaves a lasting impact on the lives of Westbrook employee’s and their community. They have accomplished this by creating stability for the team in a way not often seen in the construction/service industry through competitive pay, consistent hours, low health insurance premiums/deductibles, eight paid holidays and annual bonuses.

The company has also prioritized carrying out Westbrook’s company culture into the surrounding community and beyond by using Westbrook’s resources to volunteer with local and global nonprofit organizations like No Child Hungry. Within his time as majority owner, Brian has successfully unified a once divided company through positive culture and values, instilling a sense of teamwork and camaraderie that is visible in Westbrook’s work.

Subcontractors are likely to feel the greatest pressure from supply-related issues. Inflation combined with supply chain shortages require subcontractors to prepare earlier for projects and, when possible, purchase materials upfront. However, the consequence of this preliminary preparation equates to further strains on cash flow. In an effort to remain aligned on schedules and budgets, subcontractors frequently buy all of a project’s materials as soon as a contract is signed—if not before.

It’s a huge cash expenditure for a segment of the industry that is notoriously cash poor; it’s common to see a subcontractor with over $100 million in annual revenue struggle to make payroll. The response from the subcontractor has been to take on more projects, each bleeding into the subsequent one and paying for its equipment and materials. The risks are high if those payments are in any way delayed—and a big reason why studies reflect contractors failing more often in good times than bad. Without cash, subcontractors have to use business savings, lines of credit or even personal savings to get projects moving forward.

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