Con or con-struction?: the case of Nye Contracting.

Sigmar, Lucia S.

CASE DESCRIPTION

The primary subject matter for this case concerns the development of a communications strategy for a scenario where expectations have diverged between a contractor and a client concerning prior verbal and written agreements. Secondary issues include the ethical obligations of contractors to their clients, contractor expertise in bidding jobs, and effective communication between the contractor and the client. This case was designed for use in an undergraduate business communications course, but can also be easily adapted for use in an undergraduate business law or business ethics course. It could be taught in a 1 1/2-hour session and is expected to require 2 hours of outside preparation by students.

CASE SYNOPSIS

Alex and Lauren Stewart, new to the Houston area, retained the services of a general contractor to make repairs to the home that they had just bought. Although they took great care in researching, specifying the work, and hiring Nye Contracting, they encountered problems from the start with the contractor, his various crews, interruptions and delays in the work schedule, and poor quality work. The last straw for the Stewarts was Nye's demand for additional money for materials to complete the job. He also threatened to place a lien on the Stewart's home until the additional money requirement was met. At this point, the Stewarts feel compelled to document their refusal to pay additional money to Nye and to hold Nye to the terms of their initial agreement, to clarify their position to his demands, to document the extent (percentage) of the work accomplished to date in order to calculate what percentage of the agreed-upon wages should be paid to date, to specify what jobs still need to be done, and to document the deterioration of their business relationship with Nye for possible legal action. Alternatively, however, the Stewarts are considering more positive communication in the hopes of convincing Nye to complete the job he agreed to perform initially and to maintain goodwill.

INTRODUCTION

The Benning Corporation bought John and Elise Montgomery's 8-year old, two-story, 5,000 square-foot Houston home in the upscale golf community of Pinehurst as a part of a relocation deal. The house stayed on the market for approximately three years, and because it was largely unoccupied during this time, regular maintenance was not performed leaving the house in need of many repairs.

After careful consideration of the improvements that it required, newcomers Alex and Lauren Stewart made a low-ball offer on the property which was accepted by The Benning Corporation.

The Stewarts wasted no time in addressing two major problems with their brick veneer home. Non-structural, interior water damage had been caused by deterioration and rot of the caulking and exterior wood trim in and around the door frames and window casings, and doors. And the concrete floor in the attached garage had developed one large crack and several smaller ones due to the settling of the structure in the substrate soil. After setting a detailed scope of the work on these two projects (one for the exterior wood replacement, painting, and caulking and one for the garage floor), Lauren set about contacting contractors in the area, and after initial interviews and bids, and contacting references, selected Joe Nye Contracting for the two jobs to be performed simultaneously by his work crews under his direct supervision.

Prior to beginning work on the project and at Lauren's request, Mr. Nye had provided a signed copy of the scope of the project, the two-week time frame, and his estimate for the work, along with a copy of his liability insurance and licensure. He and his workers had signed a warranty and indemnification agreement required by the Stewart's prior to beginning the job on May 1. In addition, Nye had further agreed to be on-site to supervise his workers. The Stewarts were confident that they had done the necessary due diligence for the project and placed their trust in Mr. Nye for a quality job. And, as requested by Mr. Nye, they had paid a materials draw of 50%, the remaining 50% to be paid upon completion of the project.

The First Week

Mr. Nye and his work crews arrived on the property as scheduled on Monday, May 1, to begin work. Problems began almost immediately. Materials were not on site, instructions were not given to the crews whose primary language was Spanish, and Mr. Nye left, presumably to supervise work elsewhere. The Nye Contracting workers, left to their own devices, made halfhearted attempts to remove caulk, scrape paint, and chip out the cracks in the garage during the morning, but by the afternoon, had gathered in small and talkative groups in the backyard, on the patio, and in the driveway.

The next morning, Lauren approached Mr. Nye about the lack of materials on site, his lack of supervision the previous day, and his distracted workers. He responded that the workers had no need of materials yet in this first phase of the job, and apologized that another job had required his immediate attention the day before, but that he would be on site to supervise and direct his crews from now on, that these were individuals who had been with Nye Contracting only a short time and were unfamiliar with the company's work ethic. The next few days went better than the first: Mr. Nye supervised his workers (with only brief absences to obtain materials as needed) as they prepped word surfaces, replaced trim, caulked, and laboriously chipped out the cracks on the garage floor.

By Friday morning, the "house" crew was ready to begin painting, and the "garage" crew was still chipping. Mr. Nye had brought the necessary painting supplies for the job that morning, but told Lauren that he was unable to stay as he had problems at another job site which would take him away all day Friday and Saturday. He would, however, be back on site on Monday morning with additional materials for the garage floor. He then lined out the day's work with his crews, and left. When Lauren arrived home later that evening, she was appalled at the mess left in the driveway: paint cans left open, paint spatters on the pea gravel driveway, brushes unwashed with cans of solvent nearby, the garden hose uncoiled and white paint residue on the hose and spray attachment. Inside the garage, concrete debris and empty tubes of caulk and cans of paint, blue tape, hamburger wrappers, paper drinking cups, beer cans, and plastic littered the floor. Ladders were still set up in backyard, and more lunch litter was on the patio table. Lauren left the mess as it was, determined to talk to the crews on Saturday morning about cleaning up after themselves at the end of each day.

On Saturday morning, only three workers out of the entire "house" crew showed up; the "garage" crew did not show up at all. In halting Spanish, Lauren asked the workers to clean up after themselves and provided large trash bags for that purpose. The three workers complied willingly enough, and Lauren proceeded to walk around the house to look at the painting that had been done the day before. Some of the work had been neatly done, but she was again appalled to find that most of the work resembled the work of a five-year-old: white paint spatters and drips on the red brick veneer, drip marks on the window casings and doors, and uneven paint coverage on the trim and doors. In some cases the caulking, too, had not been smoothed, making a bumpy and uneven surface for the paint. Lauren called the crew's attention to the problems, and found herself supervising the three throughout the day so as to avoid additional mistakes. She resolved to discuss the situation with Mr. Nye the next week.

The Second Week

On Monday, neither Nye nor his crews showed up at all. Or Tuesday. Or Wednesday. Lauren's attempts to contact Mr. Nye by phone were unsuccessful although she left repeated messages.

On Thursday morning, a very apologetic Mr. Nye with two new work crews showed up on the Stewart's doorstep. He explained to Lauren that he had been having problems with the previous crews and had fired all but two of them, but that the new crews were prepared to finish the job as quickly and as efficiently as possible. He also apologized for the sloppy work that had been done and assured her that they would remove the white paint from the driveway and brick veneer and correct any problems to her satisfaction. He had also brought the epoxy filler for the garage floor so that the new "garage" crew could complete filling the cracks.

For the next two days, the crews worked diligently and cleaned up at the end of each day, even though Mr. Nye was not available to supervise them. For the most part, Lauren assumed that role to avoid further delays on the project. The crews attempted, unsuccessfully for the most part, to remove the paint residue from the brick veneer and to correct the sloppy caulking and painting errors of their predecessors. The "garage" crew had finished filling the cracks and sanding the lines, and had swept and cleaned the floor in preparation for the first coat of marine-grade epoxy primer and paint on Monday morning.

The Third Week

On Monday morning, Mr. Nye arrived early with his crews. While the crews were setting up, Mr. Nye explained to Lauren that he had miscalculated the materials expense in the original bid for the specified two-part epoxy paint and that he would need an additional $1,500 for materials to complete the project. Lauren explained to him that his bid earned him the job, and that as an experienced contractor, he should know the costs associated with construction projects. The epoxy paint was a fundamental requirement of the garage job from the outset. And further, that given the delays and problems with crews and the quality of the work, she didn't feel particularly inclined to continue to pay for his mistakes in terms of time or money. When she pressed Nye to explain exactly where he had miscalculated materials in the original bid, his response was vague, saying only that the epoxy paint had been much more expensive than he had originally thought. Lauren told him that she'd discuss the situation with Alex that evening and would get back with him the next day.

The following morning when Nye arrived on site, Lauren told him that she and Alex had agreed that they would hold him to the original bid for the work. Nye's face reddened with anger as he took a couple of steps towards Lauren, and with closed fists threatened to place a contractor's lien on the property until he was paid the additional amount. He promptly collected his crews and his materials and left the Stewart residence leaving the work on the house and garage uncompleted.

Lucia S. Sigmar, Sam Houston State University