ForConstructionPros.com

Price vs. service is a conflict contractors face regardless of the work they do, but for contract sweepers, where equipment costs are huge and margins are especially tight, bidding work too close to the break-even point or bidding work below cost (inadvertently or not) will prevent a company from growing and can push a company precariously into the red.

So, is it ever good business practice to base your bid on price? And if it is, under what circumstances should you do that? What factors do you need to take into account when basing your bid on price? When confronted with a low-bid-gets-the-job prospect how should you handle that customer? How does service fit together with price, and how can you work the two together to both get the bid and satisfy the customer?

One of the first things to recognize is that markets differ, so how each contractor approaches his market needs to account for those differences. Debbie Jacketta, Jacketta Sweeping Service, Salt Lake City, for example, says that roughly 10% of her market is low-bid-only work, but in Memphis, TN, where Carl Barton operates Aardvark Sweeping Service, he estimates half the market is low-bid. But Uri Ben-Yashar, owner of East Coast Parking Lot Maintenance, Pawtuckett, RI, frames the issue differently. “Everyone is price focused,” he says. “What you’re really asking is, ‘What part of the market would give up quality for price?’ because everyone is price sensitive.”

Ben-Yashar estimates 25% of the market East Coast serves would give up quality for price. “Often that happens because the local store manager makes the decision on who the contractor is and his year-end bonus is tied to the savings on that store. So he’s going to give up quality to put a couple of bucks in his pocket.”

Gabe Vitale, C&L Sweeping Service Corp., Jackson, NJ, says publicly held companies and real estate investment trusts are another customer that is more price oriented than service oriented “because all they’re concerned about is return to stockholders.” Barton says national accounts are the biggest low-price customers, so Aardvark Sweeping doesn’t even deal with them. “I’d estimate that fifty percent of customers want service and fifty percent want price,” Barton says. “We don’t deal with the ones who want price. That’s somebody else’s market.”