Get Ready, Complying With the RRP Rule Will Get Much More Expensive
EPA to raise RRP fees
Businesses complying with the EPA RRP Rule should plan ahead for increased costs. Because of EPA's mismanagement and lack of accountability regarding the RRP Rule, the actual costs to administer and enforce the rule have so far dramatically exceeded the fees collected from complying firms. To address the shortfall of funds EPA plans to raise the fees related to the rule. This will likely mean that the cost of firm certification and firm re-certifications will dramatically increase. And, because the RRP rule is required to be self funding, it looks like EPA will need to raise the fees high enough to offset their losses since the program began, as well as their ongoing costs going forward.
The increased costs will definitely add to the advantages non-complying firms have been enjoying so far, further punishing legitimate businesses for complying. I also predict the increased fees will promote more illegal work, therefore more kid will be needlessly poisoned because many in our our government are incompetent.
The amount of the EPA RRP fee increases is not yet known
Because EPA did not do an accurate estimate of program costs and revenues when they set their original fees, money coming in to support rule administration is not coming anywhere close to the actual costs. If EPA were a for profit business they would already have gone out of business when it comes to RRP. But, because the EPA and its leadership are not held to the same standards as for-profit businesses and business leaders, not only will they be allowed to continue operations, those at EPA who are responsible for the RRP rule get to keep their jobs and paychecks, despite such dismal performance. And, rather than concentrate on fixing their business plan to create financial health, EPA can simply charge their customers more money. The problem is that their customers, those who must comply with the rule, do not have any other options they can choose from to do business with.
Here is a summary of information to help you understand what has happened and what to expect going forward
Note: Info below is from an EPA Office of Inspector General Report dated 2/20/13 titled "EPA Is Not Recovering All Its Costs of the Lead-Based Paint Fees Program”
- EPA had not conducted a formal cost study to determine its actual program costs before establishing fees.
- According to the report, EPA is losing money on the RRP program.
- Based on the agency’s estimates since the RRP rule went into effect in 2010, the total loss will amount to around $16.4 million by 2014.
- Fiscal year 2010, the first year of the rule, actually netted a profit of $8.9 million, but costs are exceeding fee collections by $25.3 million for 2011 through 2014.
- The report pointed out three issues contributing to the EPA’s unrecovered costs.
- The agency has not conducted recommended biennial cost reviews to ensure that fees are in line with costs. (Think WAG: "Wild Ass Guess")
- The fee structure also does not take into account all the indirect costs needed to recover the cost of administering the RRP program.
- RRP firm participation is lower than the EPA projected.
- The report says that by not recovering all of its program costs, “the federal government did not collect funds that otherwise could have been available to offset the federal budget deficit.” (In business speak this means they contributed to the deficit by operating beyond their means.)
- The OIG recommends that the March 2009 fee schedule for the lead-based paint program be adjusted “to reflect the amount of fees necessary for the program to recover the costs of implementing and enforcing the program.”
- The report indicated that the EPA agrees with the recommendation and "intends" to take “corrective actions".
- According to the report EPA agreed and plans to conduct a biennial cost review of the RRP program in Fiscal Year 2013.
Wrapping this up!
Here is what the EPA Inspector General had to say:
“The President’s Budget Message for FY 2012 states that reducing the long-term federal deficit must be a priority. The federal government is looking for ways to save money and cut unnecessary costs. We believe that EPA could help the federal government in this endeavor by collecting more lead fees to recover more of its costs"
So to save money and cut unnecessary costs, does your business raise its prices too?
Is It Time For A New Way To Professionalize The Remodeling Industry?
Trade associations and even individual remodelers have been trying for years to improve the professionalism of the remodeling industry. I’ve been involved in this effort myself now for over 20 years. I definitely think all the effort has been worth it. Not because I think all the effort has made significant improvements, I really don’t think they have. Rather I think all the effort has been helpful in preventing the situation from becoming worse. That’s my opinion from my perspective. Your opinion may be different. If it is please feel free to respectfully express it below in the comments area of this blog post.
Unfortunately I think our industry has become excellent at being mediocre.
And, it appears, the majority of remodeling consumers have even settled on the fact that they will need to accept mediocre performance from their remodeler if they want to get work done on their homes. Let’s face it; there is even a majority of home owners who literally care about nothing more than total price when they go about selecting a remodeler. In my opinion most consumers spend more time researching options about the purchase of a television before they choose one than they do before choosing a remodeler.
Maybe we need to think about why consumers spend so little time and effort choosing the right remodeler.
Has our industry not offered to educated consumers properly so they know how to differentiate between remodelers? I think it has. Let’s face it many good remodelers and the trade associations they belong to have been trying to do so for years and although all the effort may have been successful with some consumers, there are still plenty of illegally operating and poor quality contractors working on homes every day. If consumers were not willing to hire them they wouldn’t be working.
I think it’s time for some radical tactics to change the situation.
I’ll through a few out here to get the conversation going. Feel free to offer your opinion on them or to offer your own.
Unless there is skin in the game for the consumer on this issue why would they change their attitudes and behaviors? Maybe we should make it mandatory that consumers only hire legal and legitimately licensed contractors for home improvements. Also, why not make them responsible for the due diligence required to make sure their contractor meets these requirements. And, if they choose to work with an illegal contractor, leave them on their own. For example leave them no ability to take the contractor to court. In fact, why not arrest and fine the home owner for hiring an illegal contractor?
How about before any real-estate is sold why not require a comprehensive inspection and inventory of the home be done? By doing so we could document the condition and configuration of that property. The next time that property is sold, the same inspection should happen again; plus any changes in status should be identified and listed. Then the property owner should have to provide proof that any work done that required a building permit and final inspection sign-off was actually obtained. If it’s a pre 1978 home all required RRP paperwork must be provided as well. If any of this can’t be provided by the seller, the property can’t be sold. And, if such information cannot be provided the entire property must be brought up to current building code standards and be dust wipe tested for lead paint contamination before it can be sold.
The likelihood of implementation of the two scenarios I offer above is slim to none
I’m sure everyone reading this would have their own reasons why. Current politicians would never support such strategies because if they did they would never get reelected. If all home owners had to pay the full legal price of home improvements the majority of Americans could never afford to own a home and homes would probably never become an investment. I all contractors had to be legal the majority of current contractors wouldn’t do it, many probably couldn’t dfo it.
Reasons or excuses?
To me it seems that all the reasons why we can’t professionalize and legalize the remodeling industry are really just excuses. Because our industry doesn’t have the guts to do it, often for selfish reasons, it will likely never happen.
If we don’t do it ourselves we may be at the risk that the government will try to do it and force it upon us. Just think about the RRP rule if you don’t agree.
And, if this home buyer who bought a flip gone wrong gets his way we might all regret our industry didn’t take our destiny into our own hands…
What say you?
The Marketplace is Improving; Are You Sure You Are Working With The Right Vendors?
The marketplace seems to be picking up for contractors. Many are reporting increased leads and sales. With increased demand for the products contractors need to build their projects we will definitely see supply and demand challenges with local lumberyards, the big boxes and specialty product vendors. This supply and demand challenge is one of the reasons many in the construction industry are predicting as much as a 25% increase in cost on many building products. Although contractors need to be aware of these increases as they price their projects, I suggest they also need to make sure the vendors and suppliers they purchase their materials and products from will be prepared for the increased demand.
If you are a contractor who has been buying on price from vendors who have been selling on low price to get your business, you might want to think twice. If that vendor has a good business, low or no debt and is using efficient business systems and technology to keep their costs low, you may be OK. But if your vendor has very high debt, has cut back on staffing, equipment and service, just so they could sell at low prices, their business may not be prepared for a surge in sales as the economy improves.
Choosing and keeping the right building product dealers for your business and your customers
Here are some things to think about regarding the vendors you are currently using. This same list can also help you decide which vendor or vendors you should work with going forward:
- Many lumberyards and specialty dealers are short staffed. To save money and to stay in business many of these businesses have reduced staff during the recession and often times the people they let go were the higher paid employees. If this is a tactic any of your suppliers used they may have let go many of their most knowledgeable staff. The remaining staff, often less skilled and far less knowledgeable about building products, construction and contractors, will be challenged to serve contractors as the number of contractors doing work and buying materials picks up.
- Building product suppliers who have high debt may not be able to finance the cost of increasing their inventories to keep up with the predicted supply and demand challenges as the economy improves. If this happens at your supplier you may find that many products, even common commodities like framing lumber, will be out of stock. Imagine going to the lumberyard first thing in the morning to get the materials you need to frame a deck or reframe that kitchen, only to find out you can’t get what you need. To keep working that day you might have to pay for longer lengths than you need, or might even have to drive to a different supplier in the hopes that they will have what you need so you can work that day. Remember, if you lose two hours chasing materials, in reality you also lost two hours of productive time on the job. That would mean you lost a total of four hours you could have billed your client for if the materials were already at the jobsite.
- Lumber and building materials dealers who cut back on staff may also be challenged to help you sell to your customers. If you had a customer who wanted to see the door, cabinets or windows you recommend, will you be able to send them down to your local supplier to see the products they are looking for? What is the condition of the showroom? Is there going to be anyone there to make and take the time to meet with and help your customer? Will the person working at that dealer have the sales skills, product knowledge and knowledge about you and your business to help you make the sale?
The risks of low price
Selling on low price typically puts any business on a path to failure. Sure, it may seem to help things at first when money gets tight. However, unless they can ramp up their businesses, and do so before the market place improves, they will be forced to play a game of keep up and catch up as their customers’ needs and demands for products and service increases. Working with a low price vendor might seem attractive, but can you be confident they will have what you need when you needed it? If they require a deposit on special order items, are you confident they will still be in business by the time you expect delivery of what you ordered? What will your customers think of you and your business if their project start date gets delayed and or the completion date gets extended because you can’t get what you need from your vendors to keep their project and your business on schedule?
Choosing the wrong vendors by saving a few bucks on materials may cost you and your construction business lots of wasted time, money and the valuable referrals your business has enjoyed from what used to be happy customers. I highly recommend you choose your vendors wisely!
Should You Participate In LinkedIn Discussions If They Are Moderated?
Recently I have noticed that several different discussions in the groups I follow on LinkedIn are now being moderated. When I submit a comment I get a message that my comment will be reviewed by the moderator before it is posted. I have decided I will no longer participate in these moderated discussions. The problem is I haven’t yet figured out how to tell if a discussion is being moderated until I hit the submit button. Does anyone know if there is a way to tell if a specific discussion or group is moderated?
I understand that some moderators with good intentions may be trying to eliminate the non-professional comments and personal attacks. If you frequent LinkedIn groups with contractors as members you have probably noticed that there are some members who resort to foul language, unprofessional comments and even personal attacks. I have also noticed one particular commenter who seems to always find something wrong with someone’s opinion and proceeds to kill the purpose of any discussion simply by participating.
Top two reasons why I have decided not to participate
- First, my feeling is that they are not discussions if someone can decide whether or not they want my comment to be part of the discussion. I say this because I have noticed both on LinkedIn and on several different national newspaper sites I visited and commented on the moderator limits the comments to only those that support their own opinions and or to control the direction of the conversation. We live in a free country where our freedom to express our opinions differentiates us from many other countries on this planet. It pains me to see that some are trying to take that freedom away from us to serve their own purposes and or to purposely mislead readers.
- My second reason is because unless comments are posted instantly, and someone reading the comment can in turn instantly respond with another comment, it’s not a discussion. Instead it becomes a collection of thoughts. Think about it. Unless the moderator is sitting at his or her computer waiting for the next comment, there will be gaps in time between when the submit button is clicked and the moderator reviews the comment to decide to post it or not. This being the case I have already noticed that the comments, when eventually approved, become out of order and out of context. That’s not a discussion.
I think both reasons above are actually starting to reduce the conversations at these sites and is already compromising our industry’s ability to openly share information and help each other. This is a very bad thing for our industry.
I see and offer three options to address this concern about discussion moderation.
- LinkedIn could make it obvious to group members which discussions are moderated. I think this should be done in an obvious way right within the discussion’s description at the top of the page. If every discussion posted to the group will be moderated, I think that needs to be obvious as well. Also, to avoid wasting time, I think all moderated discussions should somehow be flagged within in the emails we all receive as group members letting us know about new discussions and new comments on existing discussions. If done this way we can decide for ourselves if we want to participate or not, in a discussion and or a group.
- If group members are behaving in an inappropriate and or unprofessional manner, there should be a defined way to have their ability to participate in the current discussion instantly terminated. And, if they have been terminated from a certain number of previous discussions, perhaps they should be permanently removed from the group, maybe even from LinkedIn.
- The last one I offer is the one I hope doesn’t become the default choice. With this third option those of you who feel the same way about this as me will have no choice but to discontinue our participation and or membership in a group that allows moderation of comments before they are posted.
We can be frank, but we must remain professional
I hope those of you reading this see my purpose in writing this as a genuine attempt to protect the value we get and enjoy from productive and professional discussions at social media sites and online discussions. To protect and facilitate discussions where all members can openly share advice and opinions without the risk of attacks and being subjected to foul language. As one frustrated commenter put it, LinkedIn should be a place where we can safely ask questions and as true professionals safely help each other improve our businesses and our lives. If you have a suggestion to help accomplish this, I hope you will add it to the list I offered above.
What say you?
If you agree something must be done about this concern please make others aware of this blog post so they can speak their views as well. Although I will post this blog to LinkedIn discussion groups, I cannot know for sure or control whether they are being moderated or not. If you find this article via LinkedIn, rather than post your comment on LinkedIn, post it here. I promise I won’t moderate the comments you leave here at my blog, every comment will be posted right away. I have and will however delete inappropriate comments and or comments with foul language. My blog use policy can be viewed here.
How Contractors Can Make More Money, Faster and By Doing Less
With only so much time in a day, contractors need to maximize the revenue and or gross profit they earn each day in order to cover business overhead costs and contribute to their desired net profit goals. Selling and producing more work is certainly one option to consider. However, why not implement ways to increase the selling price and earn more gross profit without having to do any more work in the field or add anymore labor costs at the job site.
Options to consider
If you want to increase your sales volume and earned gross profit you can either produce more work or increase the selling price of your projects. Here are a few things to consider:
- Producing more work at the job site means you will need more labor and the project will take longer. Finding and keeping more employees busy can be challenging.
- Increasing your selling price doesn’t have to be limited to raising the prices of what you sell. Increasing your selling price can also be accomplished by increasing what is included in the selling price.
- Assuming you mark up everything you sell, if you find the right prospects and sell them higher price point products than you have used in the past, your average sell price goes up and the gross profit earned on each job goes up as well, without adding more labor or days to the project schedule.
- Also, consider that selling product options can be another way of increasing the sell price and earned gross profit, again without having to add any more time, do any more work or add any more labor to get the work done.
Here’s one example of what I am talking about
At a recent Remodeler Summit event I participated in for Marvin Windows and Doors at their Warroad MN manufacturing facility, contractors learned about Marvin’s new option of prefinishing the interiors of their window and door products. By selling this option to their customers, contractors can increase the cost of each window they sell by offering an additional service to their customers. And, they can do so without increasing the production time of a window project and without having to add any additional on site labor to their projects. The windows are prefinished at the factory, under controlled conditions and can either be prepainted or have a clear finish applied. Because the prefinishing is done off site, all the mess of prepping and finishing is avoided, no extra job labor is needed and the smell of any finishing products is avoided at the job site. Selling prefinished construction products can be a win-win, both of the contractor as well as the homeowner. Selling prefinished products means more gross profit earned for the contractor without doing any more work. The home owner benefits because more work is done in less time, with less mess and disturbance to their home and their daily lives.
Here’s one more example
At a tour of Reliable Truss and Components Inc., a division of National Lumber in Mansfield MA, I found out they offer prefabricated custom structures and components. Using this service contractors can have components of their projects prebuilt and even prefinished in a controlled factory environment. The components are then delivered to the contractor’s job site ready to install. Partnering with a vendor who can offer this type of service helps the contractor earn more money by doing less work in several ways.
- The contractor can earn gross profit on the labor as well as the product being provided by the vendor.
- At the same time, the contractor can be earning gross profit on the labor and the products being installed by his own crews while they get the project ready for installation of what is being built off site.
- Some vendors, including Reliable Truss, will also come prepared with the equipment needed and help your crew install the prefabricated and prefinished items at the jobsite.
It just keeps getting better!
Both examples above can help contractors earn more money in less time. Both examples offer ways contractors can get more work done without having to add any additional talents or skills to their crews. Both examples also eliminate or reduce the need to find and bring in sub contractors to do work the contractor’s own crews either don’t have the talents for or might not be cost effective at doing.
I bet more and more contractors will be thinking this way as the increasing costs of labor and the lack of available skilled labor puts pressures on their businesses and their profits.
How Should Remodelers Be Prequalifying and Selling To Generation Y?
A recent guest blog posted here at the Design Builders Blog was written by a Generation Y member. The author, Mark Brown, offered some advice for contractors on how to work with Gen Y employees. His blog created quite a discussion with over 38 thoughtful comments as of posting this blog from contractors and employees from all generations. One contractor praised the blog and the discussion but also brought up another very valid consideration for contractors and remodelers: How to sell to Gen Y clients? The answer to that question is probably a very big conversation and a very involved one as well.
One thing is for sure. Trying to force Gen Y to buy remodeling (or anything) the way you have always sold to other generations isn’t going to work. That said how about bringing the answer down to a few simple but big picture considerations to help get the conversation started and offer some direction. With a new direction in mind, you can then seek out and get the remodeling sales training you will need to sell to this new customer type.
If you can’t beat Generation Y, why not join them
The members of Gen Y are used to getting information instantly and for free. Almost every one of them has a smart phone and can Google any subject or topic to find instant answers or information, all at no cost to them. And they can get that information at any time of the day or night they want it. That desire and internet content available about anything you can think of has definitely defined how Gen Y does their research and makes their remodeling or home improvement buying decisions.
For contractors who have always sold to the generations born prior to Gen Y, the idea of providing instant and free information about a remodeling project for some young kid who isn’t ready to buy or make a decision without first checking you and your suggestions out online using social media throws a monkey wrench into any veteran contractor’s long standing selling process. Those changes probably also all but kill a contractor’s sales closes rates when it comes to Gen Y remodeling and home improvement prospects.
“The reality to recognize is that Gen Y isn’t going to change. So, contractors need to change how they both market to and sell to Generation Y if they want to do business with them.”
Save yourself a lot of time, give them what they want
If your construction or remodeling business doesn’t have a web site, stop reading right now or recognize and commit to the fact that you better get one up right away if you want to sell to Gen Y. Done right, and it must be done right, a contractor’s web site offers a place to give Generation Y, and any other generation for that matter, the information they need to work through their decision making process and prequalify your business as a good option for them to consider. If you’re strategic and you put the right information on your site, you won’t need to waste your time doing live sales calls with someone who would never have bought from you anyway and or who isn't far enough along yet in their decision making process to make any commitments that will include money.
What Information Should a Contractor’s website have on it?
Good question. It has a lot to do with how Generation Y makes remodeling decisions. I’ll offer some advice and suggestions on that topic in a follow up blog to be titled “If you don’t or won’t offer Generation Y Prospects what they want they will go away”
How Will The Fiscal Cliff and the Elections Affect Remodelers?
The threat of a year-end perfect storm of expiring tax cuts and massive defense and domestic budget cuts could push the economy back into a recession. A recent article on the Fiscal Times website offers some insight into this possible reality and points out that many voters are clueless about the cliff and are in for a shock. Another article posted on Reuters warns the cuts could cause the loss of nearly 1 million jobs across the country. Remodelers trying to work on business planning, marketing and budgeting for the New Year may also be in for a shock if they make decisions without first considering the cliff and the outcome of the elections.
Making any business decisions in a down economy can be difficult and risky.
Unfortunately in addition to a bad economy we also have a lot of uncertainty about what the government will or will not do. I think the problem, at least for those who keep an eye on the economy and the political arena, is having any confidence in making long term investments and decisions. The fiscal cliff could really challenge the economy if across the board cuts are made as planned. And because the current administration has not clarified or committed to what will be cut, we don’t know how or in what market areas the economy will be affected most. Unfortunately, true discussion about all this by our elected leaders won’t even get started until after the elections.
The economy and remodeling could take quite a hit if our politicians can’t come to an agreement. And, even if they do come to an agreement, what will it be and how will it affect the economy? If it gets pushed off into the future again, it will leave all businesses including remodelers in this unconfident position for a long time. If consumers remain unconfident, and or get laid off as a result of the cliff, they probably won’t be spending money on remodeling.
Remodelers need to be very cautious about investing in capital assets.
If the current tax deductions for capital asset purchases go away, the cost of those assets will in effect increase. Waiting to make such purchases is a gamble. If remodelers invest in capital assets now before the deduction possibly goes away, the question to ask is whether they will be able to meet the payments on those assets and or actually be able to make use of them if the economy does not improve or gets worse? If they wait to see what happens they may miss out on the tax savings if the deductions are eliminated. Making the right decision is hard without knowing who will be elected or which party will be in control after the election.
Should remodelers consider hiring more staff if they are seeing a work backlog building up?
In my opinion, as long as they are selling work at a price that meets their overhead costs, remodelers must decide if they will use the gross profit to hire office and management staff and reduce their workload, hours and or stress; or work all those hours and keep the gross profit as their own compensation. On the other hand if they are not selling at prices high enough to support the overhead, hiring more staff or buying more assets are not sound financial options. I suggest waiting to see what happens with the elections and the cliff before making any long term business investments. If you have money you are willing to invest, I suggest using it to improve your marketing and sales skills. Those are investments that can help a business regardless of the economy and can even give you an advantage over your competition when it comes to capturing the limited amount of work available during a down economy.
Harsh Realities About Retirement for Remodelers and Their Employees
The harsh reality I am pointing out in this blog post is the fact that for most remodelers and their employees a comfortable retirement is really just a fantasy.
For these individuals, ignoring this fact so far during their careers is the reason they are lacking adequate funds to retire and my prediction is that they will continue to ignore this fact. However, remodelers are not alone. Most Americans are in this same predicament. When they reach retirement what will their lives be like and who is going to pay for their living and medical expenses? One answer; the next generation of working tax payers, assuming they have jobs. With such a financial burden on the next generation, they too may be destine for the same harsh reality.
Business owners are obviously too busy running jobs to even think retirement. Employees are often living and thinking day-to-day, often working for cash. This is a huge mistake. While you may love what you do, your body may not allow you to do it forever. Consider the day when you will no longer be physically able to work in the field and or your declining physical abilities will result in lower productivity and therefore reduced compensation.
Just the facts
Here are some harsh facts that I hope will wake up those who are currently sleeping when it comes to retirement planning. These facts and others can be were found in an article on the Fiscal Times web site titled “5 Shocking Predictions about Retirement in America”
- In the U.S. seventy-seven million baby boomers are slated to retire in the next 20 years, with approximately 10,000 reaching retirement age every day. At the same time 401(k) accounts have been drained by the recession, pension systems are strained, and Social Security coffers are near a breaking point.
- According to a study by the Transamerica Center for Retirement Studies 54 percent of workers in their 60s said they haven’t saved enough to sustain themselves for the rest of their life.
- The Employee Benefit Research Institute recently found that just 14 percent of those surveyed were very confident they will have enough money to live comfortably in retirement. Even more shocking, sixty percent of workers reported that the total value of their household’s savings and investments (not including the value of their home and any official retirement benefit plans) was less than $25,000.
- Another report from the financial industry think tank LIMRA, found that 49 percent of Americans aren’t saving for retirement at all.
- The Employee Benefit Research Institute (EBRI) reports that for those who are 10 years away from their planned retirement age, more than a third have saved less than $25,000. That’s $875K away from the EBRI’s suggested $900,000 that a typical person would need to live out his or her years.
Will your children be able to support you?
Oh, and if you are assuming that the government will be footing the bill for your retirement, that doesn’t look very good either. The latest annual trustees’ report for Social Security predicts that the program’s trust fund will be depleted by 2033, three years earlier than they estimated last year. When the fund runs dry, the government will only be able to pay 75 percent of the promised benefits to retirees. This of course assumes our children will have jobs and earn enough to generate the taxes the government will need to meet the 75%.
- Are you confident in your abilities to earn enough for your own retirement?
- Are you confident that the government will be able to finance the lifestyle you want to live when you can’t work any longer?
- Are you motivated to do something before its too late?
Don’t fall into the trap of running your business to the point that it runs you and your employees into the ground!