Your Water Heater Deposit Goes Out Eight Months Early
The domestic hot water plant is 30 weeks out, the rep wants a big number at release, and the unit doesn't get set until the mechanical room is finished at the very end of the job.
Electrical gear gets long lead attention from everybody, because energizing the building is on the GC's own critical path and the release date appears in his schedule and his phone calls. Plumbing source equipment sets after the building is basically built, so the release date goes untracked upstream until the unit is late and the CO is at risk. That leaves the longest lead time and the last billable activity attached to the same package, with the plumber financing all of it alone.
The size of it
Five figures per package leaves the account six to nine months before it can appear on a pay application. Slip the release and the job strands at 90 percent complete with full retention still held while everyone waits on one skid.
Release long lead plumbing equipment in the first quarter of the job and you're funding the largest single purchase on the contract against a building that has no mechanical room yet. Packaged domestic hot water plants, triplex booster skids, duplex sewage ejector packages, large RPZ assemblies, and medical gas source equipment are built to order against an approved submittal, commonly 20 to 40 weeks out, and the manufacturer's rep wants 30 to 50 percent at release. Your early work is underground and underslab, which bills at a fraction of that equipment value, so the pay applications in the months right after release are small. The equipment gets set at closeout, so it can't be billed as installed until the last months of the schedule. The money goes out in month two and comes back in month eighteen, on the same line item.
Three moves, in order
Step 06: Project management
Billing dates, change orders, and notices, written as standards that work without anyone chasing them.
What else costs plumbing contractors money
The same mechanism in other trades
What plumbing owners ask
How to pay for long lead plumbing equipment before you can bill it?
The domestic hot water plant is 30 weeks out, the rep wants a big number at release, and the unit doesn't get set until the mechanical room is finished at the very end of the job.
What does it cost?
Five figures per package leaves the account six to nine months before it can appear on a pay application. Slip the release and the job strands at 90 percent complete with full retention still held while everyone waits on one skid.
What do I do first?
List every long lead package on every active job on one sheet with its release date, deposit amount, and set date, then read that sheet as a cash calendar for the next six months.
What are plumbing contractors supposed to be making?
Plumbing runs 25% gross margin, 16% overhead and 9% net profit before taxes at $1M–$5M. The all-trade average is 7%, so this trade is 2 points above it. The CFOS target is 12.5%.
Which part of the system fixes it?
The step is number 06, project management. Billing dates, change orders, and notices, written as standards that work without anyone chasing them. It comes from chapter 6 of CONTROL: The Construction Financial Operating System.
Everything on this page is something you can install yourself, andCONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for plumbing contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, run by the same author.
Wrote CONTROL, the 8 step system behind these figures. More about the author.