Building on cooperation with “CNC”

On a perfect residential job site, all the different subcontractors are working together in harmony, coordinating their schedules, collaborating to keep costs down and never charging a builder because some other crew damaged their work. This “Contractor Fantasyland” is, in fact, a real-life business model that has been in existence for two years now. It’s called Contractors in Collaboration, and if you call any of its members, they’ll say pretty much the same thing: “We’re just a group of business owners who will work together to save you time and money.”

CNC, for short, is not one company. It’s more like a constellation of companies, based in Southern California, that currently includes County Line Framing, West Coast Drywall, Trimco Finish, J. Holt Plastering, Martinez Construction (concrete work), Dynamic, Masters & Associates (electrical contractors), HCI Railing Systems, Turn Key Tubs and Soltis Landscape Services. There is no CEO or executive staff, and each member company operates independently. But they also do jobs together, as part of the CNC team, and that’s where things get interesting.

“There are four or five trades that dictate the speed of any job,” said Michael Mahoney, a VP and CFO at Dynamic. “So why don’t we coordinate and bring the job in faster?”

The original CNC members met through the California Professional Association of Specialty Contractors. They were all reputable companies that often crossed each others’ paths on building sites and heard the same complaints from their clients: charge-backs, cost overruns, low-bid contractors who never finished the job.

CNC decided it would market itself as an a la carte menu of trade services: A builder could choose as many, or as few, companies as he wanted. Discounts apply with each additional trade. Although each company has a separate contract with the client, all scheduling and charge-back disputes are worked out within the group.

“If the Martinez [concrete] guys crush our pipes, I call them and then fix it and send them an invoice,” Mahoney said. “We have agreements between us.”

Weekly meetings are held on site to discuss scheduling and collaborative value engineering. Working with the architects and owners, the CNC trades will make suggestions if they see an opportunity to do things quicker or cheaper. Change orders are not required; their goal is to deliver the project on schedule or maybe ahead of time.

Dynamic does plenty of business outside of Southern California that doesn’t involve CNC, as do the other firms. There’s no shared purchasing, although his vendors — HD Supply, Delta, Moen, Kohler and others — sometimes supply him with leads. So do the other CNC members.

Mark Louvier of Trimco, the finished carpentry firm, focuses on doors and exterior trim. Each member of CNC is like a can opener, he said. “We always ask [the client] ‘Do you need a landscaper? A drywall [installer]?’ Even if they have someone, you never know what’s going to happen. Somebody stubs his toe. Or people just don’t show up.”

Trimco is working mostly on multi-family projects these days. Huttig Building Products, one of its vendors, supplies window flashings, millwork and doors. Huttig president and CEO Jon Vrabely noted that Trimco, like other door shops in Southern California, prehangs and installs its own doors. Huttig sells them a “knock-down” unit with all the components they need.

“It’s much more efficient,” Vrabely admitted. Although Huttig makes more profit selling prehung doors, “Everybody in the supply chain needs to be thinking about how to be more efficient,” he said. “We should be taking costs out of the supply chain.”

The CNC model is not unprecedented in the LBM industry: SelectBuild, the construction trade arm of BMHC (now BMC), offered builders framing, concrete work, electrical and plumbing, and a number of other services. During the building boom, it served 17 of the nation’s top 25 production builders. But the housing slowdown eventually caused BMHC to dismantle the division in 2008.

Michael Mahre, the former president of SelectBuild who now works as senior VP corporate development for ProBuild, noted that SelectBuild and CNC “share the [same] objective of process efficiency.”

But Mahre takes a dimmer view of the collaborative aspect of the organization. “Internal disputes will arise with no single person accountable for resolving internal issues,” Mahre said. “Other collaborations have been attempted and failed because the trade partners could not resolve internal disputes. Building a house is a complicated process. I believe it requires command and control discipline to be executed efficiently.”

CNC, which has lasted two years in the middle of the nation’s worst housing crisis, thinks it can resolve these issues. Mahoney of Dynamic said the association is very careful about who they let in. “The people who are left in this industry who have the same work ethic and core values have not done it by luck. They’ve done it by sticking to their principles,” he said.