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Show Harvard -4- special class of skilled managers who tend to follow the work rather than to be fully employed by any single company. The bidding contractor must therefore concentrate his efforts to achieve cost economies on maintaining a low overhead organization and to depend upon figuring out a better way of performing the particular job in question than that which will be used by his competitor. If he cannot come up in some way by having a lower cost than his competitors, the only other way that he can get the work is to offer to perform it at a lower profit margin. He cannot stand the carrying cost of idle personnel or idle equipment and, as a result, he is often faced with the alternative of taking a job at a cheap price to keep men and equipment working or to maintain his profit margin, lose the job, and dispense with the men and the equipment. The bidding contractor is characteristic of the industry, and many of them have made substantial profits, particularly in times of heavy demand for construction work. It is also obvious that such a highly competitive situation leads to high business casualties, and the failures are many. The ability to predict costs of performing the work accurately and to operate the work within the cost predicted is absolutely imperative, and this knowledge of costs to produce a non-standardized product, for each job is different, necessitates an organization that is time-tested and experienced. Another type of contractor that is found in substantial numbers in the industry we can characterize as the speculative home builder and, if he is large enough, the tract builder. His operation in some ways is more closely related to those common to other industries, for he has both a production problem and a merchandising problem. He must appraise the market for new homes, purchase the land, erect houses, and speculate on whether he can sell the completed houses at a profit. The most successful speculative tract builders are those that are best able to gauge accurately the demand for their products and to sell the houses |
