When It’s Time to Call a Contractor

By: Jeffrey S. Lapin, CPM(r)

Property managers are often faced with the decision as to whether to use in-house maintenance personnel or call a contractor or vendor. These decisions are more prevalent when the property is a multifamily structure because it is more common to have on-site maintenance folks in this environment than at say office buildings or other commercial properties.

The tendency to use our maintenance folks to do “everything” is dangerous but understandable. It often stems from certain owner’s (incorrect) perceptions that all repairs or maintenance tasks are equivalent. Such owners may be even be persuaded by their experience in self-managing smaller apartment complexes in the past, during which they or their on-site manager’s spouse did all such work and never called contractors. But as property management professionals, it is up to us to educate and inform so that the right thing is done from a risk management perspective.

The decision as to whether to use employees of the owner or the management company to perform maintenance tasks or to contract out with a qualified third party for this work must be made as part of the process of assigning maintenance duties under your Maintenance and Risk Management program. If you are now asking “What program?”, read my article entitled Good Maintenance Procedures Can Reduce Risk at our Properties at http://www.jeffreylapincpm.com).

This decision is less critical and results in less risk for lower skilled work such as painting or landscaping maintenance (assuming it does not involve the use of tall ladders). More highly skilled work however, such as maintenance of HVAC or electrical systems at the property, which involve more risk to the owner (including financial risk if maintenance is not done or done improperly), should be outsourced in many cases.

An Honest Skills Assessment

Often, the decision comes down to an honest assessment of our worker’s skills. The skills assessment piece requires the property manager to have an in-depth understanding of what training, tools and experience each in-house worker has. It is not sufficient however, to simply ask what they can and cannot fix. Most of us overstate our knowledge and experience when asked by a supervisor – it is a natural human tendency.

I suggest that for all such personnel, a written skills assessment be used, accompanied by an actual supervised evaluation by an experienced technician. Such information should ideally be gathered during the hiring process so that we do not hire someone to do work for which they are not sufficiently qualified. But if you already have personnel on staff and you are not sure of their level of skill and experience, now is the time to make these determinations. File such information in the employee’s permanent personnel file, along with a detailed, written job description listing the exact tasks that this employee is approved and more importantly, not approved to do.

Once we know with certainty for instance, that Bob is very skilled at air conditioning repairs and that before working for us, he was a certified AC mechanic, we can safely include such repairs in his written job description. But of course, this is rarely the case. More often, Bob will be a hard worker, willing to try anything but not necessarily qualified to do every task needed. This is where the property manager, on-site manager or supervisor needs to step in and make the decision to hire a professional.

Cost/Benefit Analysis

Even when our on-site folks have the requisite skills to do a particular task however, we still need to determine if having them perform that task is best from a cost/benefit perspective.

Be aware that what may seem to be a cost saving measure may actually end up being much more costly in the long run. If maintenance is done poorly or not often enough, or a worker is injured as a result of attempting to do work that he/she is not qualified to do, the intended economies disappear rather quickly.

For example, if an in-house worker is attempting to make repairs to the electrical system at a property and ends up injuring himself in the process, he or his estate may sue the owner for negligence. These cases are not easy for the owner to defend as more often than not, the owner will not be looked on sympathetically by a judge if he/she is viewed as being motivated solely by cost savings.

Another example is a worker who is not injured but fails to fix the problem correctly and actually causes the equipment to fail prematurely. That equipment may be a costly item that now has to be replaced long before the end of its useful life. Again, the marginal savings of having the maintenance person do work for which he was not qualified are nonexistent.

A good rule to follow is if the job requires specialized knowledge, governmental licensing and/or significant risk, it is usually better to transfer the risk to a qualified contractor who has the appropriately skilled personnel, specialized tools and sufficient insurance to accept the risk. There are exceptions of course, but following this rule usually results in the right decision.

Another element in this decision is the flexibility allotted by utilizing contracted labor. If the building is sold or the owner decides to change management companies and the maintenance is being performed by employees of the management company, people will likely lose their jobs. Similarly, if a large repair job requires extra technicians to assist the primary technician, the contractor can likely just schedule that extra labor for the specific job. If work is being done in-house, extra bodies may not be available.

Educate the Owner

Finally, a critical part of this process is educating our owners, clients or our supervisors about our decisions to use in-house labor or contract the work and how we made them. This may require showing them your written skills assessment and explaining your other decision making criteria.

Some owners think that the profit, overhead and parts mark-up charged by most contractors can be avoided by using the owner’s or manager’s employees to do the work. But you must explain that this is a false economy in cases where the worker’s skills are not up to the job or where the unseen costs exceed the benefit. Moreover, if parts or material mark-up is excessive, consider purchasing parts directly if the contractor is willing to stand behind the parts you purchased. If not, are you really saving anything when that part fails?

The real cost of using in-house labor when you factor in taxes, burden, benefits and vacation coverage plus tool purchase, uniform purchase and cleaning and training costs often rivals the cost of out-sourcing the job, especially when you consider the risk mentioned above.

Having on-site maintenance workers is a luxury and does save considerable dollars and time in many cases. It would hard if not impossible to operate many properties without such personnel. But there are definite risks associated with having such staff do more than they should.

Risk management is a key and critical part of the property manager’s job. The risk of using our valued in-house personnel to do tasks for which they are untrained and unqualified is just too high relative to the perceived (but often false) benefits. Your job is not to do it the way it has always been done or to ignore your better judgement.

The property owner hired you or your company because you have the expertise to properly manage all aspects of property operations. You may have to overcome some preconceptions by the owner or your supervisor. But if your analysis is sound, and your reasoning is valid, you should be able to persuade them that certain things are best out-sourced to a qualified third party. If not, a word to the wise – document, document, document.

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s