Over decades of supplying material to contractors I have observed owners hire builders with questionable reputations to save a few bucks. Many of these owners do not realize that they are responsible for the actions of the contractors they hire, especially the payment for materials used on the job.

Professional builders realize that they must get proof that the material consumed was paid for. Years ago I paid a roofer for a small job on an apartment building only to discover that he never paid for the shingles used on the job.  He went bankrupt and I had to pay for the shingles a second time when the building material supplier put a lien on my apartment.

Building committees for churches and volunteers organization are often unfamiliar with this responsibility. Here is some advice from observing these problems.

1.       Reputation counts.  Get meaningful references.

2.       Be sure they have liability insurance.  Verify it. If your contractor is too small to have workmen’s comp coverage, be sure your homeowner’s or liability insurance will cover your risk.

3.       Always require proper proof or a lien waver to be sure the material suppliers were paid.  If you do not they will lien your property and you will pay for the same materials a second time.

4.       Be very suspicious of large upfront fees. If the contractor wants proof that the money is available to pay him set up an escrow account with your lawyer.  For small jobs you may need to pay for materials upon delivery, but require a waiver to be sure the supplier was paid.

5.       The time and money spent for clear plans and specifications will save you money, aggravations and misunderstandings later.

6.       If you cannot get an experienced contractor to serve on your committee, hire one to supervise the job or at least get advice from a lawyer with experience in construction law to advise you BEFORE you start the project.  It will be money very will spent.

In  the American Metal  Market magazine Commercial Metals Company’s (CMC) metal fabrication division noted a drop in earnings to a $’17.3 million LOSS  in the most recent fiscal  quarter (three months ending Nov 30) from a profit of $66.6 million in the same period a year ago. Tonnage is down 32% and prices are down 34%.

Most metal fabricators are seeing similar results.  This highlights my previously stated point that our primary economic problem is not lack of credit but a lack of profits. Entire lines and companies are being mothballed until there is some uptick in construction and there is simply too much inventory to see this happening anytime soon.

For a few months I received auction notices for large fabrication shops about every week.

Imagine the impact of Commercial Metal’s report multiplied by thousands of companies.   My eyes tell me unemployment is getting worse, while the Bureau of Labor Statistics tell me it is getting better; I believe my eyes.

This excess inventory of buildings and housing was created before this administration, and the hardest thing to do at this point is nothing, but this is probably the best long term solution.  Efforts to prop up prices while inventory is still too high will only kick the problem down the road.

One idea would be tax credits for demolishing old buildings. This goes against my grain of economic common sense, but it would solve a problem of oversupply.