Intermediaries and compliance verification: Learning from them and finding answers

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The ISNetworld.com home page. This successful regulatory compliance verification business has become controversial in Ontario's architectural, engineering and construction community.
The ISNetworld.com home page.  This successful regulatory compliance verification business has become controversial in Ontario's architectural, engineering and construction community.
The ISNetworld.com home page. This successful regulatory compliance verification business has become controversial in Ontario’s architectural, engineering and construction community.

I’ve been working for the past few days on a story about third-party compliance verification services such as ISNetworld.com.  These organizations serve as intermediaries between project owners and suppliers (including contractors subs, and suppliers) on health, safety and regulatory compliance matters.

The compliance verification companies have become a hot topic in Ontario and their circumstances reminds me of the “intermediary” challenge we’ve also experienced when publishing special features and profiles in our publications. The difference here is that the intermediary relationship isn’t voluntary, and that creates both marketing opportunities for the intermediary organization, and frustration among the businesses who find their direct relationships with owners has eroded as the intermediary steps into the picture.

In theory (and in many cases in practice) the third-party verification services — which started in the highly regulated heavy/petrochemical industries in the U.S.) serve an important function — helping owners ensure that their suppliers truly observe all the rules with the correct documentation. The problem: the automated processes and sometimes one-size-fits-all solutions truly increase paperwork and processing challenges for the suppliers, adding to the compliance costs without providing any real value (or enhanced safety or compliance observation, for the legitimate contractors caught in the web.)

Once an owner signs on with these services, of course, the compliance companies have achieved a marketing dream — all of that owners’ suppliers and subcontractors need to sign on as well, and pay the fees.  Since the compliance verification business collects fees from both ends of the equation, this can be a highly effective marketing model (for the compliance business).

As well, in researching the story, several suppliers reported receiving may emails selling add-on services, training and other stuff — promotional emails that clutter their in-boxes and (most seriously) cause them to disregard the real, substantial warning messages where compliance issues might not be in order.  If they accidentally delete these real messages in the midst of the promotional communications, they could find they stop receiving notifications and bidding opportunities from the owner-company.

Clearly, the compliance verification businesses have put themselves right where any effective marketer wishes to be: In the middle of the supply chain, achieving a mandatory service.

These observations relate to our publishing model of producing special features, where we obtain the owners’ consent and then a list of sub-trades and suppliers, from which we can communicate advertising information offers for special editorial features.  Obviously, we don’t imply or assert that the suppliers need to advertise, though some publishers have been less-than-ethical in suggesting that not advertising in their publications could harm suppliers’ relationships with owners or general contractors. The intermediary relationship/role can become a source of hostility and frustration, if not handled correctly.

I don’t have any simple answers to these matters. Perhaps disturbingly, a new kind of business — third-party businesses who assist companies as consultants in working with compliance verification organizations — has sprouted up, I think just adding to the costs. Obviously, businesses which can find a way to step in the middle and create revenue from both ends of the supply chain have a real marketing advantage, and if you can structure your own marketing model this way, you may find lucrative opportunities.

Beware, however, of the risks of pushing too hard and exploiting relationships as an intermediary. Undoubtedly, relevant industry associations will step into the picture. Here, the story (from our perspective) goes full circle. While we continue to sell supplier-based advertising features, we do our best to provide real value to the advertisers, readers and industry. I took on the compliance verification story to raise and explore these issues.

If you’ve had experience with compliance verification services, please feel free to comment or communicate with me at buckshon@constructionmarketingideas.com.

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