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structuring of fuel surcharge

Discussion in 'Lawn Mowing' started by PTSolutions, Feb 28, 2008.

  1. PTSolutions

    PTSolutions LawnSite Silver Member
    from OH
    Messages: 2,331

    hey guys, im working on putting a bid together for a chain of restaurants in my area. i am offering them a price with for 1yr contract along with a price for a 2yr contract. what i am afraid of is the fuel 2 years from now skyrocketing. i want to include a fuel surcharge into the 2 yr. contract price. my question is what is the best way to do that? do i do it monthly? say if fuel price were higher than avg. during a month, then do i add the fuel surcharge onto next months bill? how do you guys do it?

    *how i do my billing for them:
    i have added together my total service costs for lawncare and snowplowing+ice control and came up with a price, i take that price and divide by 12 months, so i will be getting a monthly check from them every month for the same amount.
  2. Marek

    Marek LawnSite Bronze Member
    Messages: 1,388

    We did a 5 percent across the board raise 2 years ago and will be doing another this year, not sure of the percentage yet.Its not just fuel its everything your oil tires parts belts its all going up so its not just a fuel surcharge that you need to look at.
  3. PTSolutions

    PTSolutions LawnSite Silver Member
    from OH
    Messages: 2,331

    well, this bid is being put in for the 2008 lawncare season and 08-09 snow season. i have taking this year's prices into consideration. it is next years plowing season i am really worried about. thats the main reason for a surcharge.
  4. Runner

    Runner LawnSite Fanatic
    Messages: 13,497

    This will be a good subject, as they are already predicting $4.00 a gallon and above by summer. Tat is just for THIS year,..who knows what the fall and next season will bring.
  5. BeautifulBlooms

    BeautifulBlooms LawnSite Senior Member
    Messages: 613

    We have a 3% of the monthly bill surcharge for any month where fuel spikes above $3.50 a gallon.

    Do you really want to speculate on where gas will be down the road? I only bid one year agreements, unless you know exactly everythingt hat will happen next year Iw ould refrain from giving a bid for 2 years. I would give them an estimate and reconfirm when the time comes.

    I am not into the snow removal side of things but are you sure you want to give a flat rate for snow removal. If you did that based on last years #'s here you would have gone out of business this year trying to keep up with the snow. Again I do not do snow removal but it looks like there is potential to really hurt your company by bidding snow as a flat fee per month.
  6. millenium_123

    millenium_123 LawnSite Member
    Messages: 186

    I agree with Mike that I would try to avoid doing a 2 yr contract, but if you do, just make sure your bid is high enough to cover all your expenses if they were to increase. You have to look at more than just the cost of fuel.
  7. grassman177

    grassman177 LawnSite Fanatic
    Messages: 9,795

    we employ an adjustable surcharge and have done so since 2001. as price goes up so does our charge. it is worded in our contract wich is auto renew unless otherwise re-negotiated. this way it covers all aspects of change for the future pricing. we have had extrememly little balking about this practice as our actual cut rates have pretty much stayed the same. jsut a thought!!
  8. PTSolutions

    PTSolutions LawnSite Silver Member
    from OH
    Messages: 2,331

    our snow removal fee is flat rate for 20 or less pushes, anything over 20 gets charged per push. im covered for that aspect.

    i know i havent explained my full bid and contract, but there are reasons for that. ive said it before and ill say it again, ive covered myself well for high expenses going into the following year and have considered giving them this as an estimate with room to reconstruct the bid.

    what i really want to know is how you guys kick the surcharge into effect? i like the idea of making it a percentage of the monthly bill, but you stated it goes into effect when fuel spikes over 3.50 a gallon. does that mean that if it only goes over for a couple days then you tack on the surcharge? or do you avg. it out over the month?

    my idea would be that the surcharge gets tacked onto the month following a month that had high gas prices.

    the only thing im stuck on deciding is how and when to enact it.

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