In response to my column, "The business of civil engineering and land surveying," Henry Boesch, P.E., an old friend from Illinois, offered the following account about an expensive lesson he was forced to learn a long time ago, when both he and his business were young. Boesch suggested that I share his experience with younger practitioners.
About 25 to 30 years ago, Boesch and the company he was involved with were thrilled to be chosen to do an airport subdivision on a half-square-mile tract of farmland in Illinois. The owners/developers were two realtors and a sod farm owner, a seemingly credible group that expressed confidence in the firm and gave it free rein in the design. The firm provided an aerial survey, a land plan, and a traffic study, and developed what it considered a beautiful project with minimum earthmoving not too flat nor severe relief and good soil.
"We had room for a 3,500-foot runway capable of large jet use in an emergency with a 2,500-foot daily-use length delineated to keep flying cowboys off the neighbors’ roofs," Boesch said. "Roadway geometrics allowed individuals to taxi from their garages with care, using the on-site roadway network to the runway. We were fortunate that a subdivsion in a nearby municipality also had an airstrip as a part of the development. Its residents were generous in sharing their viewpoints and design suggestions with us."
Everything proceeded smoothly. Almost all of the necessary approvals were obtained, and the neighbors were content. As an added plus, a nearby airport was to close soon, eliminating some of the development’s competition. All aspects of the job suggested that sales prospects were excellent.
"Since things were going along so well, we allowed our unpaid invoices to mount up, having received verbal assurances that money to pay us would be available soon," Boesch said. "But when the total reached almost $100,000, we became concerned and began to press for payment."
The developer replied with a large smile: "No money."
The firm explored filing a lawsuit only to discover that one of the realtor partners had owned the property for a number of years and had been playing games with it. So many creditors were standing in line that, if the firm sued and won, the money would have been gone long before its claim could be honored. All it would have had to show for heavy legal fees would be a Pyrrhic victory: winning in principle, but winning no principal.
"Naturally, we stopped all work on the project," Boesch said. "Fortunately, our own creditors had faith in us and allowed us to pay them off over time, which we did. However, The Almighty had the last word on the subdivision. A wetland was discovered on the property (we still believe that was inaccurate), costing the developer $135,000 to make [the land] useable. We ultimately signed off on the project, agreeing not to sue them for the $100,000 they owed us, while they agreed not to sue us for the $135,000 wetlands costs.
"Since that time," Boesch continued, "we almost always have requested substantial retainers for all projects, especially those that involve new or questionable clients. We took the attitude, ’Take it or leave it.’ Legitimate people, serious about development, have no problem with a large retainer. The ones who won’t pay a retainer turn out to be no-pay, slow-pay, or nit-pickers who are impossible to satisfy. We try our best to avoid such clients and a substantial retainer up front is the best insurance against loss."
According to Boesch, a good project is really like parenting a child: A developer becomes so involved and in love with it that basic business requirements are sometimes ignored or forgotten. Legitimate developers, however, understand this and are well aware of their obligations and responsibilities. It is the "outlaw fringe" that causes problems. Try to avoid them by conducting background investigation.
Firms can also exercise other self-protective measures when large projects are involved. Boesch’s short list, based on years of experience, include the following:
- Always ask for references and follow up on them by making inquiries.
- Don’t let unpaid invoices mount up. Stop work if that happens.
- Don’t be thrilled or fall in love with a job. Remember, you are involved in a business that depends on getting paid for work if it is to be a successful enterprise.
I say "Amen" to all of the above. I also have discovered during my long career that getting a retainer is usually wise and easy. However, the current national economy might cause greater difficulty in getting paid. It is becoming more difficult to conduct a successful business these days.
What problems in receiving payment for completed work have you encountered?
Alfred R. Pagan, P.E., is a consulting engineer in Hackensack, N.J. He can be reached at 201-441-9719; or e-mail him at email@example.com.