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Utility Companies Bids/Contracts

Discussion in 'Business Operations' started by allseasonslawncare, Feb 13, 2004.

  1. allseasonslawncare

    allseasonslawncare LawnSite Member
    Posts: 20

    I am in early negotiations with an electric utility company to bid for mowing/brush hogging around 20 of their facilities. Of the 20... 3 are weekly mows... and 17 are brush hog jobs, each to tentatively be done 4 to 6 times per year. Their facilities range in size from 2 to 10 acres. Several of their facilities are a 2-hour drive for me to get to.

    I do not currently have a tractor and brush hog. I am evaluating tractors and hogs... and have found several suitable options. I will probably be investing somewhere in the $30,000.00 range to be able to do this. I am also including a couple attachments that will enable me to perform snow removal. Obviously, i do not intend to purchase anything until i know i have an agreement secured.

    I have several questions i would like to ask. If anyone has words of wisdom for my questions... it would be greatly appreciated!

    Anyone else out there currently doing this type of work... and if so, what kind of hourly rate are you basing your proposal upon? What is your general geographic region(midweat, east coast, west coast, south... etc)? I would hate to undercut the going rate so much it would be hard to get back into a competitive range again... for me or my competition!

    Do you figure your extra mileage into your rate... and if so...do you have a formula you use?

    Is there any standard for length of contract... such as 12 mos, 24 or 36... etc? And, is it foolish to make such a sizeable investment equipment wise if you are not guaranteed income after an initial 12 month period, etc?

    Are there options to how i could bid this proposal?

    Again... any help you can provide will be very much appreciated!!!
  2. sodzilla

    sodzilla LawnSite Member
    Posts: 219

    If I were spending that much money just for this job, I would want a longterm contract. I would hate to make that kind of an investment for equipment and lose the job the next year. Then you set there with $30,000 worth of stuff not being used.
  3. J&R

    J&R LawnSite Senior Member
    Posts: 835

    Here in Chattanooga the TVA power board Sub stations. They give you 3 year contract.
  4. allseasonslawncare

    allseasonslawncare LawnSite Member
    Posts: 20

    Well... the 3 year contract was what i had in mind anyway. Unfortunately, i think i'm gonna have to educate the engineer i'm working with on this. He was just handed this responsibility at the first of the year and has no experience in this area previously. His predescesor made some kind of big promotion and dropped most of his responsibilities on unsuspecting subordinates... big surprise huh! The engineer did tell me( take it for what it's worth) that by bidding successfully for him i would attain a "Preferred Contractor" status... hmmm.... does that actually mean anything?!!!?

    I am nervous about spending such a large amount of money and not having work for this equipment next year at this time... hence the reason for needing a multi-year contract. Hard for equipment to pay for itself if it is sitting idle!!!
  5. promower

    promower LawnSite Bronze Member
    Posts: 1,232

    I would consider this a classic scenario of putting all your eggs in one basket. If this falls through down the road this could crush your buisness unless you had other jobs where you could use the equipment. Might want to try and give a small discount for paying up front for the first year so you dont need to finance so much. Also how many of the jobs are far away if its only a few it might save you some money to contact a LCO in the area to do those ones so you dont need to travel so far.
  6. lawnMaster5000

    lawnMaster5000 LawnSite Senior Member
    Posts: 589

    I would not make such a sizeable investment unless you can pay for your investment in addition to your pay in half of the contracted period. This will allow you to have profit for the second half of the contract period and use that profit to further build your business. Remember about depreciation and other expenses.

    Aside from the money issue, I would never take a job that requires me to transport that type of equipment anywhere near two hours. I may consider it if and only if I was able to subcontract those remote jobs to companies that are currently operating in that area. I just dont see how the utility company can pay enough even on ten acres - to make it worth an additional 4 hours in just transportation. For me those four hours would cost over $200.
  7. allseasonslawncare

    allseasonslawncare LawnSite Member
    Posts: 20

    promower & lawnMaster5000

    Thanks for your words of wisdom... i appreciate the advice!

    I am DEFINITELY trying to stay away from putting ALL my eggs in one basket! I have considered other possible jobs that i could use this equipment for such as... snow removal... gravel/dirt works... material handling... and of course the more traditional landscaping type functions (we are also including a front-end loader, box blade, etc). However, even with all of these possibilities... these are not guaranteed income sources as a contract job is... hence the reason i feel a multi-year contract that not only pays off the equipment but as you said lawnMaster... pays enough profit to be able to grow my business as well.

    I hadn't considered a discount as an incentive for them to choose our business, but when you think about it... it's crazy enough... it just might work. It would definitely help to have some of the contract money up front... that would make it much easier to finance the equipment!! When you say "small discount"... is there a percentage that might be standard to start with??

    I have mentioned the possibility of subcontracting to a couple of the more local LCO's on the distant properties... but they seem hesitant to agree. I'm not sure yet if it is due to their insurance requirements or what. I know they have some strict regs on insurance requirements, etc. They have not totally ruled it out yet... but at this point it's not looking like an option. I am going to keep after it though.

    PLEASE keep it coming... this has all been helpful information!!!

    Thanks again!
  8. Grounds Control

    Grounds Control LawnSite Member
    from 01748
    Posts: 52

    how about renting the equipment you need? that way if you lose the contract you dont own anything. beside you wont have the other issues......storage,maintenance, etc.....

    if you get the contract the next year (or if you sign a multi year deal) you'll have some hard figures to base a purchase off of.
  9. allseasonslawncare

    allseasonslawncare LawnSite Member
    Posts: 20

    Renting/leasing has been a consideration. I have begun to explore that option as well. I am curious to hear of anyone elses experience with renting/leasing.

    Are there things i need to consider when renting or leasing... etc.?? Any other pertinent information you can offer would be appreciated!
  10. D Felix

    D Felix LawnSite Bronze Member
    Posts: 1,898

    When my father was just getting started with his side business 10+ years ago, he started out mowing. He's still doing a lot of that.:D

    One of his early contracts was mowing power substations for the local utility. We had several (something like 7-10) that we would mow at, two different loops. Some were several hours to do with a tractor running a 6' finish mower and a WB Toro. Others it took longer to load/unload the WB than it did to mow.

    I know he figured in drive time. There's no way you can't, especially if you have 2 hours or more to drive.

    The tractor was used for many years for mowing, he went through 2 finish mowers with it. Now he's got a 72" Bush Hog ZTR and a 62" Toro WB. The tractor has been retired to jobs around the house.:)

    If you are looking at an investment of $30k for equipment, I would certainly want a multi-year contract. Have you looked into used tractors? You may be able to find one with 1000 hours on it that will suit you fine, for 2/3's of the cost of new.

    One thing to keep in mind that no one has mentioned yet is, how long will it take you to get paid after invoicing? I know one reason Dad quit mowing the substations was that it would take anywhere from 30-90 days to get a check after he invoiced. He would get paid, it just took a long time. Check into that before you decide.

    Good luck. I would try to find a used tractor, if I were you. It's already lost value because of deprieciation, but not enough to where you couldn't turn around and sell it if things didn't work out.



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