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How an IT company from Milwaukee was looking for a contractor to refurbish property and saved $ 97,000

When choosing a contractor to repair property, you need to check the website of the construction company, become familiar with their portfolio, and study reviews. But this kind of research is superficial. Reviews can be bought and a portfolio can be dressed up. In this case, we will describe how an IT company from Milwaukee verified the property refurbishment service provider, and how this helped them save almost $100,000.

The source data

Company information: IT Company A develops software, mobile applications, provides DevOps services, and is engaged in QA-testing. The company owns two offices with a total area of 284 square meters.

Problem: The management of the organization decided to conduct major structural repairs of their property. A tender, in which 18 construction companies participated from Wisconsin, Minnesota, Iowa and Illinois, was announced. Most of the potential contractors were ruled out right away for various reasons: someone had a bad reputation, someone asked for too much money, someone had a weak portfolio. A construction company from Wisconsin was selected out of the three potential candidates. The company asked for $97,000 for its services. Before signing the contract, IT Company A decided to perform an additional verification.

Objective: Secure cooperation with the contractor.

Tasks: Verify property refurbishing service provider.

What did we do?

  1. Verified registration information. The company had been operating since 2016. It was registered in the state of Wisconsin, as the representatives of the contracting company initially stated. The company had changed its name once, and the representatives of the contractor did not hide this information, explaining that the changes were caused by rebranding and the implementation of a new marketing strategy.
  2. Studied the financial condition of the company. The high indicator of debt load struck a warning note: over the past year, the profit growth of the of the potential contractor decreased by 46.98%, and the debt load increased by 42.22%.
  3. Analyzed the company's participation in tenders. Over the past six months, the candidate participated in tenders 5 times and won 2 of them. Additionally, representatives of Company A verified who exactly the potential contractor collaborated with. Private and public companies were among their clients.
  4. Verified licenses and permits. There, was the first surprise. The contractor had an expired license. It expired on July 10, 2018. The verification was done in October 2018. It became clear why the company had not participated in tenders since August 2018.
  5. Verified the head of the company. We drew attention to the fact that he managed four more companies simultaneously. This fact did not affect the decision about the candidate directly, yet it was rather suspicious.
  6. We verified the information about possible risks. The organization was not going through any liquidation or bankruptcy proceedings. However, the main point that influenced the final decision of the IT company’s management was that there were four court cases opened against the potential contractor. Two of them hadn't been closed yet. The lawsuits were filed because of the failure to fulfill obligations under the contract. The company handed over a half-constructed project with many violations.

Conclusion

The IT company’s management carefully studied the information provided after the verification and made the logical decision to not sign an agreement with this contractor in the amount of $97,000. Thanks to this, Company A simply continued to search for another contractor, and avoided court proceedings they would have gone through if they had signed the contract.

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