DEAR BUILDERS, DREXEL HOPES THIS IS A TOOL YOU MIGHT USE TO PROTECT YOUR BUSINESS!

THIS IS A LETTER TO BUILDERS IF THEY HAVE BEEN CONSIDERING AN ESCALATION CLAUSE.

Hurricanes, owls, beatles (the bug not the band), tariffs, snow, fire, labor, tariffs, and plethora of more can cause lumber prices to escalate. And in the day and age of “just in time” and “instant information” culture, the peaks and valleys are soaring more than ever.

This graph should pretty much freak you out. I hope it does. Hit the low at bid and the high at ship…and you might find yourself out of a business as the supplier or builder. It’s that serious. How do you protect yourself without losing all credibility with your homeowners and “ripping up contracts?”

It’s time to protect the homeowner, builder, and supply chain with commodity escalation clauses.

We are not a lawyer or take any liability in these contractual situations, but we do hope to provide guidance to you, and your homeowners to protect all parties.

“Escalation clauses specify that if building materials increase, by a certain percentage for example, the customer would be responsible for paying the higher cost. Including such a clause allows all parties to be on notice that the contract costs could change if materials prices change due to supply constraints outside the builder’s control.” — Jeff Turner, Sept, 2020, NCHBA.ORG

We have provided an ESCALATION CLAUSE FOR SPECIFIC BUILDING MATERIALS as provided to us by the North Carolina Home Builders Association. It is a one-page document that is transparent to the homeowner and client. It may not be perfect for you, but it’s a good starting point.

The start of a contract to build due to extended business workflow might be 6 months! That is far too big a risk for any vendor, builder or homeowner in fluctuating markets! It would only make sense to price at time of shipment, but how can you do that in a contractual way?

There are common methods to use an escalation clause. Let’s explore an article.

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Common methods

“There are several methods commonly used when setting the escalation. The simplest is the “invoice” method, in which you use a supplier invoice or similar document to substantiate a materials price change.

A second option is the index method, under which you use a widely accepted, published price index to support your claim. Such indices are typically available for materials such as lumber, cement and steel. However, the DOL warns that any given index might not be available for a particular time period, because either price information wasn’t supplied by enough survey respondents to meet publication standards, or the index was discontinued due to a decline in the commodity’s importance in the marketplace. It’s also possible that any particular index won’t accurately account for localized cost variations.

A third option is a hybrid approach. Under one such approach, the triggering event is specified as an increase under both the invoice and index methods. Under another hybrid approach, the invoice method is subject to a limit based on a widely accepted index.

In any case, the rationale behind these hybrid approaches is to provide a check and balance on invoices by ensuring that the supplier’s prices aren’t widely different from market prices. Work with your CPA to determine an accurate method of calculating any materials price escalations.” – https://www.smith-howard.com/could-including-an-escalation-clause-in-your-contract-help-with-your-materials-costs/

Another way to call it is “trigger points.” Based on certain criteria we must charge x more because of x.

Simple and easy to understand. I think that is one of the keys in any good contract.

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Check with your CPA and attorney what option would be best for you.

How do you explain that it indeed benefits the HOMEOWNER? Won’t they see this as a smoke and mirror tactic?

I believe honesty is the best policy. We all WANT to build this home! However, if we don’t have this clause, you might be OVER PAYING for materials as our supplier and myself as the builder have to take this risk factor into play. By putting it as an escalator clause, we are being honest with you. We hope we don’t ever have to use it, but we may and we want to be clear on that, and if you are not comfortable with that, we understand if you no longer want to build. However, with the cost of money over time, I don’t ever feel that is a good idea for most. Also, we can make changes to the home in other areas to offset the cost. And for most it is a quality of living issue, and let’s not delay that!

It’s not a cure-all. Communication is the key between you and your supplier and homeowner. The more you know the better it will be for all!

At Drexel Building Supply and our manufacturing facilities Drexel Systems, we try to keep our people informed to help you. And we try to buy it right to always offer you the best price you can find. We work directly with mills and will buy long, buy short, buy right. Our team has decades of experience and strong ties with North America’s best mills. You are in good hands. Yet we can not control the ups and the downs of the market. If you ever want to talk about pricing or anything else, call me Joel Fleischman @ 920-979-4045 or via email joel.fleischman@drexelteam.com

Supplying Happiness takes a journey where only God saw the path to follow.

P.A.U.L.S. – People Advanced in Using Lumber Systems.

It all kind of started with lunch. With one of my all time favorite builders. In fact, truly, our first builder at Berlin Building Supply. A perfectionist in framing homes and a guy that didn’t want to change the world, but surely wanted to change YOU. For the better. He even helped us do our very first addition in our Berlin yard.

A craftsman, not simply a carpenter.

So, I am sitting there having lunch with a customer and a friend, as well as my brother in law Craig Johnson. P.K. we call him, Paul Krause, was the builder I was meeting with. He surely thought he was buying lunch that day, but I tricked him and picked up the tab. Our conversation ebbed and flowed as it always had with P.K. We talked about life, the quality of it, the fleeting nature of it, and the joy of being a dad. We talked sports (he was a loyalist yet complained more about the loyal teams than anyone I ever met). And we talked building, construction, and the business of it.

I had a nagging question for him, then I sputtered it out. Offsite construction. What did he think about it? A one man builder, a craftsman, what he thought about robots assembling the structure and then installing it on site? Paul was a real thinker and I was truly curious what his answer would be. I would hope he would “see the future” as I have, but I respected his opinion and if he didn’t I would have to re-think what I thought I knew.

I’ll never forget his answer. As I talked P.K. truly teared up, he was a thoughtful caring soul, I’ve seen that teary-eyed look before. He said, “Joel, you have to do this. I need, we need it, as an industry. It’s exactly what will save the little guy and help us all.” ….and he added. “Joel, I will never be around to see it, but promise me you will do it, you and Drexel can pull it off, you might be the only ones to pull it off.”

You see, it was the last time I would see or talk to Paul. He was dying of cancer and we all knew it. Paul explained how good cancer was, that he got to say goodbye, enjoy every moment, connect with everything on this earth and appreciate it all. Like I said, Paul was one of the good ones on earth.

So I got in the car and later that evening slept on it. I woke up assured of my beliefs. Forward with offsite construction (you might call it panelization) and when we pull it off, we will call it P.A.U.L.S. in his honor. It needed a name that didn’t associate things with the past like panelization, fabrication, or automation. Those things have failed us somehow. PAULS it would be.

And so it is. And we will help others. And P.K. you will help us change the world.

What is a PAULS home?

Paul understood it was best to consolidate his purchases through Drexel. Easier and more value to do it that way.

Use our design Services

Framing Lumber package. Now with offsite construction as PK said we should. Stairs, floors, windows & doors in walls, and roof, we supply the labor

Siding and Shingles

Millwork and Doors

Cabinetry and Tops

and Flooring (in markets where we sell it).

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And as thank you for any and all PAULS clients and builders:

For each PAULS home here in Wisconsin built we will donate a home to those in need around the world. Our first community will be in Haiti.

And we will start with 8 homes, 8 families, one for each of our locations. And we will start right now, Christmas 2020.

You see in Haiti, the needs are real. The housing is poor. We can give them a home, we can supply jobs to build and maintain them. We can help more. Each time we build here, we build there. There are hundreds of families in need.

There will be a website soon, to apply to be a PAULS home. At that point, we will review your application (just verifying it was a PAULS house) and you will be given a host family and we will sponsor a new home for them, as a thank you on our behalf to you.

“There is no place like home.” – Dorothy, Wizard of Oz.

Let’s meet the first PAULS families, all 8, one for each of our locations.

1. Campbellsport
2. Berlin
3. Kiel
4. Brookfield
5. Wrightstown
6. Little Chute
7. Columbus
8. Amherst

If you would like to be a PAULS customer or be a PAULS advocate and supporter or have any questions at all,

feel free to contact me, Joel Fleischman, 920-979-4045, or joel.fleischman@drexelteam.com

“And give thanks for everything to God the Father in the name of our Lord Jesus Christ.” – Ephesians 5:20

ACCENTUATE THE POSITIVE.

1. sets your mood.
2. sets the mood for others.
3. plenty of time left to digest the negative.
4. Often, see the negative for what it is, minor, or actually a positive.

Here’ are two snippets sent to me last week.

Interesting take on “greatness.”

When policies and large government get involved, it almost always leads to a level of hypcrosicy. How can yo be fair, and just to 330 million people in America. A truly uneviable task.

First, what is hypocrisy? Saying one thing then doing the other. I also believe it is making a mandate of one thing in an effort of helping, although realizing it really isn’t. If you read the Gospels of Jesus, you can see if you want to get Jesus riled up, be a hypocrite. I am not sure any problem drove Jesus more than than being a hypocrite.

So follow me here.

MILWAUKEE MARQUETTE AND THE UW-MADISON BADGERS played basketball this weekend. Maskless. They competed.

In other parts of the state, most actually High Schoolers and youth played this weekend. With a VERY STRICT MASK policy. Although it limits their breathing and they touch it 100 times during the game. It is forced on them. So it is unhealthy because their breathing is hampered. That has been documented by our health department. And is INEFFECTIVE, because they have to adjust it so much. So whatever is on their hands is now breathed in. Actually a horrible mistake.

But that… is only slightly hypocritical.

Here’s the real travesty.

In all of Dane County and all of Milwaukee County…there is NO basketball being played. Not allowed in the gyms full lock down.

Now, maybe you have no interest in sports, or understand how many young men (and women) think, act, and feel.

For many of these youth, hoops is their OUTLET, THEIR CONNECTION, THEIR DRIVE. School is something to do, to get to play sports.

Now many of these youth, haven’t had school since March 2019, and now no sports they love.

What’s their outlet now? Drugs, sex, and worse I assume.

But it is in the name of COVID, AND VIRUS REDUCTION.

Yet, our wealthy, our talented, our elite… the ones we see on TV, don’t wear a mask.

It tells us as humans, that you must strive for MONEY, FAME, WEALTH, TO BE ABLE TO DO WHAT YOU WANT… TO BE ABLE TO LIVE FREE… TO LIVE MASKLESS. But the worse off you are… you are told what to do, and limit many activities. Hopefully “relief” free meals, free healthcare, free money as a Covid package is on the way… in a manner to assist you…as the elite live freely.

TGIM!

Many of us read inspiring stories. Listen to David Goggins. Tell ourselves we must do more. That’s a huge problem. Most of us OVER ESTIMATE, what YOU can get done in a day. We over-promise, over commit. We actually take on stress and burdens (monkeys if you will) that aren’t even ours. We are super heroes we tell ourselves. And then we let people down, due half-ass work, forget deadlines, and then convince ourselves the only way to fix that… is… wait for it.. COMMIT TO DOING EVEN MORE.

There is a solution, a positive out come of this.

Although we OVERS ESTIMATE what we can personally do, we UNDERESTIMATE what OUR TEAM CAN DO FOR US. Is it trust? Lack of good communication skills to have people guide you? Or just a personal lack of connection with your team? Ego and pride? I am the best, no one can do it like me syndrome?

Also, we OVERESTIMATE what we can do in a day or a week. We way UNDERESTIMATE what we can do in a few years. Make a long term plan (yep, take the time to do it) and see what you want to be in a few years… then move towards that, always with the future in step, but never overwhelming.

It’s not easy. But life isn’t meant to be easy. Just worth it. Focus on the process, not instant results.