McKnight On The Town

More or less?

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EC2-17 Pg34Installing electrical equipment bought by someone else doesn’t help your bottom line or risk profile. Wes McKnight puts the case for retaining supply.

Over the past few months I have heard reports of an old question being asked by developers, private clients and builders.

They want to know: “How much is the price if we buy the switchboards and the lights?”

In the 1990s I attended a NECA conference in the United States. I’ve never been a big one for conferences, but the Americans love them. There were thousands of contractors from around the country, and the smallest probably had about 100 staff.

Delegates told anyone who would listen how big their company was and what projects they were working on. I seem to remember that at 4am in some bar in New Orleans a guy was claiming to be wiring the space shuttle.

At the conference I discovered that in large commercial and government construction projects the customer almost always procured the lighting, switchboards and mechanical plant.

Back in Australia I talked to mentors and colleagues who worked on large projects, and only a few of them had encountered that type of contract.

However, in the intervening years many of us have been confronted with the question during contract negotiations.

In the new-home market, lighting and appliances being supplied by the home owner has been the norm for years. This works well, even if the cost of ‘assembling’ lights and fans are rarely captured in the installation cost paid by the customer.

This works well to a point, but do we really want to be in the plumber’s position? Every domestic item the owners use is supplied by them via the company Reece or similar.

My concern is that we are a technical trade. Paint can be procured and given to a painting contractor: no one dies and buildings don’t burn down.

One real issue here is where does the liability land?

  • Customers expect that products issued to the electrical contractor will be covered by the installer.
  • Manufacturers expect that liability will rest with whoever connects and installs the products.
  • Electrical contractors expect that, because they haven’t procured or paid for the items, someone else will have the cover.

At the point of the contract negotiation it is often the case that sub-contractors, in this case electrical contractors, are not thinking of liability. They are focused on getting the financial aspects right. The value of the deletion for product supply is the focus.

Once the equipment is delivered to the site, accepted, and installed by the electrical contractor it becomes part of the electrical installation.

The contractor takes responsibility for the equipment if this is not dealt with in the contract. The illumination levels of light fittings, and switchboard suitability (capacity and electrical integrity), are just two examples.

As electrical contractors we should be free to negotiate away certain supply components of projects, but we can’t allow this to affect product quality.

We must be able to vet any proposed products, and reserve the right to refuse them. After all, it’s our name and licence that will be put at risk by incorrect or shoddy gear.

I recall several requests to remove the supply of certain items from our contract. My reply was along these lines: “Well if you want to start buying lights and switchboards you should become an electrical contractor.” This is not a recommended response!

The customer needs to be made aware of the electrical contractor’s risk in not being part of the procurement process.

Our training enables us to determine the right products, and our licence ensures we comply with requirements. This should always override economic pressures.

Parties that don’t have the training, or the licence to protect, will always be susceptible to economic pressures. They face only one risk, and that is going over budget. Our future is at risk.

As I have discussed many times, more suppliers are providing more products more easily than ever before. Authorities are battling to ensure compliance of these products, with no enforced inspection regime.

It’s hard enough for electrical contractors to ensure that their own product purchases comply. How would part-time economically driven decision makers guarantee compliance in the electrical products they buy?

By whittling away our input into projects or installations for individual companies’ short-term gains, we all lose. At what point does our net total spend on a project increase? Variations aren’t the answer, and should never be.

Customers do not enjoy spending more than originally thought when half-way through a project. Surely we don’t want to be the trade that causes a blowout in the budget.

So where will electrical contractors find expansion or growth if this trend continues?

We need to be constantly on the lookout for ways of increasing our services on projects and installations. This could mean:

  • design, plus incorporating and project managing specialist sub-trades (builders don’t want to handle four technical trades instead of one);
  • adding a maintenance agreement after the defect liability period; and
  • helping to finance capital items, thereby allowing the end user to shift repayments from capital cost to operating lease.

Electrical contractors must lead this development.

Industry associations cannot do it. They can train, advise and suggest, but if companies are not able to identify and develop new markets then the traditional base will keep being eroded.

We will need new training around these new areas, and that will come as markets are developed.

The decline to the lowest common denominator will only exacerbate the race to a poorer economic outcome for the industry as a whole. By natural extension that will lead to a poorer technical outcome for the customer. Something has to give.

So we need to turn the reduction in services we provide into a net substantial increase. Growth is imperative, and we can take a lead from the big electrical wholesalers.

Safety wear was never part of their branch offerings years ago, and now many of them carry a full range. You could say the same about CCTV systems. What about air conditioners? Wholesalers realised that they had to branch out from their established product range.

I leave you with this thought. Before we reduce our offer or quotation, why not spend an hour or so with the blinkers off and look at the project as a whole.

Ask what more we can do – not less.

About Wes McKnight

Wes McKnight

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