ENVIRONMENTAL REMEDIATION · CIVIL AND EARTHWORK · FIXED BY STEP 01

Task caps on fund work turn good hours into bad debt

The fund approved a set number of hours and tons, the site turned out to have more, and you kept going because the excavation was already open.

WHY IT'S AN ENVIRONMENTAL REMEDIATION PROBLEM

Your customer of record may be a gas station owner, but the payer is a state program with statutory eligibility rules, and correctly performed work outside the approved task is simply a cost the fund doesn't recognize. No other trade can do everything right in the field and still end up with a scope that's ineligible. Job cost has to be coded to the fund's task structure from day one, because that's the only format in which you'll ever be paid.

WHAT IT COSTS

The size of it

Work performed in good faith becomes an ineligible cost or an unfunded receivable, and you end up financing a state agency's budget cycle on a line of credit priced for a construction company.

OVERHEAD AT $1M to $5M

16%

CFOS target 15% for environmental remediation.

GROSS MARGIN AT $1M to $5M

23%

CFOS target 25.5% for environmental remediation.

NET PROFIT AT $1M to $5M

CFOS target 10.5% for environmental remediation.

On state fund petroleum work you perform against a pre-approved budget and per task caps, and anything outside them isn't payable until the fund approves a change order. State UST trust funds and petroleum reimbursement programs pay against a letter of commitment and an approved task budget. Extra tonnage, extra monitoring events, or a second mobilization each require a formal change order routed through the fund, which is a separate application with its own review queue and not a conversation with the site owner. These funds are also appropriation dependent: California's UST Cleanup Fund had no cash left in 2008 and suspended claimant reimbursements in the millions until legislation restored it in 2009.

WHAT TO DO

Three moves, in order

STEP 01

Read the letter of commitment and the task budget line by line before mobilizing, and set your cost codes to mirror the fund's task numbers so eligible and ineligible costs never share a bucket.

STEP 02

Stop at the cap and file the change order application before you perform the extra tonnage or the extra monitoring event, even when the hole is open and the crew is waiting on you.

STEP 03

Track fund receivables on their own aging schedule with the claim submittal date on each one, and check the program's appropriation and payment backlog every quarter.

THE FIX

Step 01: Job cost structure

Seven cost categories and three levels of granularity, built so the estimate and the ledger use the same words.

CFOS-01 · CHAPTER 1

Job cost codes that match how you bid the work

What this step changes, what it depends on, and how to tell it's installed.

BENCHMARKS

Environmental remediation by revenue band

All 7 bands are published. The CFOS target is beside the figure up to $10M to $25M, and the 4 bands above that are labelled modeled.

ACROSS EVERY TRADE

Cost codes the field ignores

You have 200 cost codes. The crews use four of them, and one is called Miscellaneous.

SAME TRADE

What else costs environmental remediation contractors money

ENVIRONMENTAL REMEDIATION · CFOS-06

Your disposal outlet is booked before the dig starts

You mobilized, the excavation is open, and the only permitted facility that will take the material is 400 miles away and booked three weeks out.

ENVIRONMENTAL REMEDIATION · CFOS-02

An open hole is rented equipment with no production

The cut is finished, the sidewalls are trimmed, and your crew and your machines wait there while a lab decides whether you're allowed to backfill.

ENVIRONMENTAL REMEDIATION · CFOS-04

One TCLP result can multiply your biggest cost line

You priced the dirt as non-hazardous off borings somebody else drilled, and the TCLP came back failing for lead.

ENVIRONMENTAL REMEDIATION · CFOS-01

Closure letters come quarters after your crew leaves

The soil left in the spring, the crew has been on three other jobs since, and your final draw is stuck behind a state agency's review.

ENVIRONMENTAL REMEDIATION · CFOS-07

The landfill gets paid in 15 days, you get paid in 90

You wrote checks to the landfill, the hauler, and the lab inside three weeks, and the pay app covering all of it is still with the consultant.

SAME MECHANISM, OTHER TRADES

The same mechanism in other trades

CONCRETE

Ten Jobs Used Those Forms, One Job Paid for Them

Your yard is full of panels and shoring, every job report says you made money, and the bank account disagrees. The form buy was charged to job one and jobs two through ten absorbed none of it.

DEMOLITION

The Scale Wants Cash Today, The GC Pays In Sixty Days

Almost everything a demolition job costs goes out in the first two weeks, and the first pay application hasn't even been submitted yet.

FLOORING

You bankroll the mill six months before you get paid

The mill wants a check before it ships, the GC won't pay for stored material, and your cash is stuck in a warehouse for four months waiting on a space that isn't ready.

QUESTIONS

What environmental remediation owners ask

State UST fund won't pay for work over the approved task budget?

The fund approved a set number of hours and tons, the site turned out to have more, and you kept going because the excavation was already open.

What does it cost?

Work performed in good faith becomes an ineligible cost or an unfunded receivable, and you end up financing a state agency's budget cycle on a line of credit priced for a construction company.

What do I do first?

Read the letter of commitment and the task budget line by line before mobilizing, and set your cost codes to mirror the fund's task numbers so eligible and ineligible costs never share a bucket.

What are environmental remediation contractors supposed to be making?

Environmental remediation has 23% gross margin, 16% overhead and 7% net profit after taxes at $1M to $5M. The all-trade average is 7%, so this trade is right on it. The CFOS target is 10.5%.

Which part of the system fixes it?

The step is number 01, job cost structure. Seven cost categories and three levels of granularity, built so the estimate and the ledger use the same words. It comes from chapter 1 of CONTROL: C.F.O.S. Construction Financial Operating System.

OR HAVE IT HANDLED

Everything on this page is something you can install yourself, and CONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for environmental remediation contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, led by the same author.

What a fractional CFO does for environmental remediation contractors

AUTHOR

JOSH LUEBKER

MASTER ELECTRICIAN · 150+ PROJECTS · $2.1B+ MANAGED

Wrote CONTROL, the 8 step system behind these figures. More about the author.