PAVING · CIVIL AND EARTHWORK · FIXED BY STEP 07

Base course in month two, retention released in month twenty

You place base and binder early so the site has something to drive on, then come back a year or two later for the surface. The bid priced one mobilization.

WHY IT'S A PAVING PROBLEM

Most subs finish their scope, punch out, and get released while the job is still moving. Paving is the trade whose scope is deliberately split across the entire schedule, so the money earned first is released last. The second trip also drags a full equipment package back to the site: paver, two rollers, a skid, a tack distributor, and lowboy moves, all charged against a single bid line that priced one mob.

WHAT IT COSTS

The size of it

5 to 10 percent of the first billing stays locked up for the life of the job, and the return trip runs $3,000 to $8,000 of unrecovered cost that never becomes a change order because it was never priced as a separate mobilization.

OVERHEAD AT $1M–$5M

14%

CFOS target 13% for paving.

GROSS MARGIN AT $1M–$5M

20%

CFOS target 23% for paving.

NET PROFIT AT $1M–$5M

CFOS target 10% for paving.

Paving mobilises twice on a building job and usually gets paid for one. Aggregate base and the binder lift go down early so the site has a working surface, then you leave and come back for the wearing course and striping after the building is finished, because the surface lift can't survive construction traffic. On a mid-size commercial build those two trips fall 12 to 24 months apart. Retention on the month-two billing isn't released until final acceptance of the whole project, and the GC won't close you out early because paving is one of the last items on the punch list.

WHAT TO DO

Three moves, in order

STEP 01

Price the return trip as its own bid line with its own mobilization dollars, so the surface lift trip is sold rather than absorbed.

STEP 02

Track retainage by billing period on every job, so you can see which dollars came from the month-two invoice and how many months they have been outstanding.

STEP 03

Ask for early release of retention on completed base and binder work in writing the week you demobilize, while the GC still needs you to come back.

THE FIX

Step 07: Monthly cadence

Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month.

CFOS-07 · CHAPTER 7

The monthly close that takes a contractor 5 hours

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

BENCHMARKS

Paving 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

Profitable on the P&L, out of cash

Your P&L says you made money and your bank account says you didn't. Neither is wrong.

SAME TRADE

What else costs paving contractors money

PAVING · CFOS-04

You bid the binder in February and buy it in September

You priced the lot in winter, the GC's schedule slid, and the tons you're buying now cost more than the tons you sold. No GC on a private hard bid writes escalation clauses.

PAVING · CFOS-01

The half inch that goes uncaught until the plant statement posts

You sell square yards and you buy tons, so an overrun in the mat never reaches the pay app. It reaches the scale tickets, and most of those never get reconciled.

PAVING · CFOS-05

One paving day spends a month of material in eight hours

A production crew burns a month of material before lunch, on COD terms, weeks before there's a pay application to put it on. Your best quarter is your worst cash quarter.

PAVING · CFOS-06

Grade wasn't ready and the day is still paid for

The plant slot gets bought days ahead, along with eight to twelve trucks and a full crew. When the grade isn't ready at six in the morning, all of it is spent and none is billable.

PAVING · CFOS-01

The lab sets your price weeks after you already billed it

Nothing gets produced until the job mix formula is approved, and nothing is fully priced until the cores come back. In between, you're booking revenue at a number that isn't settled.

SAME MECHANISM, OTHER TRADES

The same mechanism in other trades

CIVIL

Your retainage is waiting on 70 percent grass

You finished grading in month three and utilities in month six, and the last 5 to 10 percent of your contract is locked behind a seed bed that has to hit 70 percent cover.

CONCRETE

Done in June, Retention Releases When the Building Opens

Footings, foundations, and slab-on-grade are the first real dollar volume on the site, so you bill most of your contract early and then wait on a building you left a year and a half ago.

DEMOLITION

Demo Goes First And Gets Its Retention Back Last

You work five weeks and wait twenty months for the money. Your retention rides the prime's substantial completion on a building you left before the foundation went in.

QUESTIONS

What paving owners ask

When do I get retainage released on base course paved two years ago?

You place base and binder early so the site has something to drive on, then come back a year or two later for the surface. The bid priced one mobilization.

What does it cost?

What do I do first?

Price the return trip as its own bid line with its own mobilization dollars, so the surface lift trip is sold rather than absorbed.

What are paving contractors supposed to be making?

Paving runs 20% gross margin, 14% overhead and 6% net profit before taxes at $1M–$5M. The all-trade average is 7%, so this trade is 1 point below it. The CFOS target is 10%.

Which part of the system fixes it?

The step is number 07, monthly cadence. Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month. It comes from chapter 7 of CONTROL: The 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 paving contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, run by the same author.

What a fractional CFO does for paving contractors

AUTHOR

JOSH LUEBKER

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

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