On Record – December 2009

|  December 01, 2009 |

I’ve been surveying a small group of contractors each month since July, asking them some quick questions about what they see happening in their businesses, what their fleet plans are in the coming months, and where they stand on hiring/retaining/laying off employees. The survey is designed to be easy and painless – respondents usually spend less than three minutes answering it – and it ends with an open ended comment section.

Most respondents take the time to comment. In mid-October, they reported the good: “It appears we were the successful bidder on two projects, and one will run to February 2010,” said one respondent from Texas. “This certainly takes the pressure off the first of the year.” And the not so good: “Some of the public bid opportunities have 25 site contractors bidding on them,” said a Florida contractor.

Since I share everyone’s responses (anonymity preserved) with the rest of the panel, I’ve gotten some interesting feedback. Some express appreciation for getting opinions from contractors across the nation. Others request that I ask additional questions. But one comment made me pause: “My own assessment is that it may be a long time until we return to the climate for site contractors we had just a few years ago,” said a Pennsylvania contractor. “We may need to adjust to a new normal as the times may never return exactly like those we had grown accustomed to.”

Even in good times, contractor bankruptcy rates could raise eyebrows. In the 1990s, Dun & Bradstreet reported contractors were second only to restaurants in the rate of business failures.

But that was then, and as our Florida contractor noted, these days the competition is beyond fierce. Another panelist in August said, “We are getting beat by as much as 50 percent on some bids. Contractors with debt are bidding jobs simply to create cash flow. When this catches up with them, probably this winter, it won’t be pretty.”

Jobs can turn quickly turn south even in the best of times, so this survival bidding puts huge pressures on the marketplace. One nasty side effect is our industry will have its image further pounded as some contractors become Day of the Dead extras, going through the motions on jobs that are not only out of their geographical markets, but out of their expertise. An industry friend, talking about a recent road project in his small town, said, “Obviously the contractor was in some other business because it was the worse seal coating job I’ve ever seen.”

While poor performance is definitely not a given if you’re lucky enough to be a low bidder, it’s inevitable at these bid prices there will be contractors that leave behind a mess – and the bonding companies will not be the only ones cleaning it up.

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