With capital projects becoming more sophisticated and complex, qualified contractors are busier than ever. These in-demand contractors enjoy a “seller’s market” in which they can choose the owners they work for. This combination of capital project complexity and market competitiveness differs from years past when contractors would take the work they could get and comply with owners’ demands. In many ways, qualified contractors in fast-evolving markets such as data centers, pharmaceuticals, and semiconductors have the upper hand.
Legacy contractor management systems were not built for this current environment. These tools are vestiges of a past when owners could force excessive enrollment costs and lengthy – and often irrelevant – risk assessments on their contractors. But in the new economy, these tools create so much enrollment friction that they become a hindrance to mitigating risk.
In this article, we will explore the top four costs of enrollment friction and provide strategies to minimize their impact. By implementing these strategies, owners can streamline the enrollment process, enhance contractor relationships, and improve project outcomes.
The Top Four Costs of Enrollment Friction
Excessive costs that are charged back to owners
Enrollment fees can become a considerable financial burden, especially for smaller companies with limited resources. The registration fee alone can be thousands of dollars, even for companies with only a handful of employees. When fees are excessive, they get passed back to owners. These charges can quickly grow to millions per year across an owner’s portfolio of contractors.
The cost of low completion rates
Lengthy questionnaires with hundreds (or even thousands) of questions, often asking for policies outside many contractors’ scope of work, are a major deterrent to enrollment. Some are so arduous they require an outside consultant. Many small and midsize contractors simply cannot complete the enrollment. At Highwire, we’ve met owners who can get only half of their contractors enrolled. Or they assess only their general contractors, but not the subcontractors actually doing the work. These practices create enormous gaps in risk and hinder owners’ ability to mitigate them.
The administrative cost of forcing compliance
With so much friction, owners constantly have to deal with contractors who refuse to enroll. The owner has to expend valuable time and energy chasing down non-compliant contractors. They can compromise with contractors by offering a waiver, but this can be a slow process itself, and the potential risks still need to be addressed. We’ve seen owners experience a project delay because contractors weren’t compliant, and they had to find a replacement at the last minute.
The cost of strained partner relationships
Contractors raise numerous questions and grievances to the owner. Some users of legacy contractor management systems cite that half of their inbox consists of complaints from contractors and requests for waivers. Some contractors simply pull their bids and quit the project, limiting the owner’s pool of qualified contractors to only those willing and able to enroll.
In a tight market, the contractors can pick and choose the owners they want to work for, effectively making legacy contractor management systems a competitive disadvantage.
Four Ways to Minimize Enrollment Friction
To minimize enrollment friction and avoid the associated costs, consider implementing the following strategies:
1. Make the enrollment process more efficient
The user experience must be simple enough for anyone to complete enrollment with little to no training. It should take less than an hour for any contractor to complete a risk assessment. The best way to improve efficiency is by asking only relevant questions and requesting only essential documentation.
2. Have a dedicated team of enrollment specialists
Partner with a vendor that has customer-focused enrollment specialists to help manage contractor registrations and onboarding. A team of specialists is better equipped to support contractors who are experiencing difficulties navigating a new system and also provide peace of mind for owners knowing their contractors are in good hands.
3. Make sure your contractors are charged fairly
Ideally, the smallest contractors – and typically the riskiest – should not have to pay at all for an assessment, since they are the most difficult to enroll. A contractor with only three employees should not have to pay thousands of dollars to qualify for work. High costs needlessly eliminate some contractors. It creates a barrier that shrinks your available labor pool, forces you to compromise safety policies, or cover the costs yourself.
4. Make enrollment valuable to contractors
Most importantly, give contractors a valuable reason to enroll besides just meeting your compliance requirements. By enrolling, contractors should gain insights into their company that help them mitigate risk. The insights should be relevant to their scope of work so they can focus on improving areas that impact success.
Successful contractors should be rewarded and promoted for doing great work. A system that makes their successful track record visible to future employers is more valuable than a “yes” or “no” on a project-to-project basis.
Contractor Success
Eliminating enrollment friction is a pillar of Highwire’s vision for Contractor Success. Progressive companies that adopt Contractor Success with Highwire have a competitive advantage over those plagued by enrollment friction. The most successful companies experience high enrollment rates, low internal administrative burden, better partner relationships, and more complete views of risk.