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The Culture of Low-Balling
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Minnesota Community Living May/June 2011

The Culture of Low-Balling

By Gene Sullivan, President, New Concepts Management

Newsweek magazine this last September outlined a phenomenon they entitled "The Culture of Low-balling.” In that article the argument was made that due to a depressed economy, a sharp rise in unemployment, and a housing bubble that had burst causing foreclosures to take place at unprecedented levels, a new mind-set was taking hold with Americans: the mind-set of "Low-balling.”

The mind-set of low-balling according to that Newsweek article came into play due to several factors. The first was a matter of survival. In order to stretch an individual’s buying power, one goes from merely loving a good bargain to now requiring one. Next it was noted that due to these depressed and desperate times, buyers of goods and services have come to the belief that those selling products and services should be grateful for any offer at all and thus be willing to take whatever is being offered to them.

Respected economists from even a century ago, such as John Maynard Keynes, noted this phenomenon and coined the phrase a "paradox of thrift.” The idea is that when everybody saves, they ultimately get poorer, because a crowd mentality takes over. The mind-set of bargain hunting can create a dangerous downward spiral that can make recovery even harder to achieve.

While no one takes fault for someone wanting to save a dollar, one must be careful with how far they let this go.

Painting contractor Mark Schoenfelder, principle, and a past President of the Minnesota chapter of C.A.I. (Community Associations Institute) has seen all too well what can happen when someone allows price to be the deciding factor when it comes to accepting a proposal or contract for work at an association. "When price between contracts deviate between thousands of dollars” he said, "Don’t be too eager to merely accept the lower price. It’s not possible for two contractors to offer the same quality and level of service. Something has to give. The job you think you are getting, and the one you receive could be two completely different things! In this particular case saving money meant only receiving one coat instead of two, and a one year guarantee on the workmanship instead of a guarantee for several years.”

Even when the contractor doesn’t consciously cut the scope of their service, low-balling could have further long term consequences as it may also put the contractor into a tough spot when it comes to being able to maintain the quality of their level of service.

Grounds contractor Kris Birch, principal of Birch Lawn Maintenance, has seen this dynamic take place this winter season already. "When an association accepts a bid that is significantly lower than others being offered, they may unknowingly give the nod to a vendor who doesn’t have the depth to be able to consistently perform.” Birch stated that "Many times a smaller vendor may only have one or two plow trucks, or older equipment that doesn’t cost the same to maintain as a larger company. But as soon as one or more of those trucks go down, that contractor doesn’t have the ability to maintain service to their customers when they need it the most!”

Even though cutting or freezing costs on services may be necessary during these uncertain times, most reputable vendors are of the belief that the cost to maintain a customer is always cheaper than trying to find a new one.

"Talk to us. Be candid in your conversation with us,” says Birch, "If we are doing a good job, let’s see if we can sit down and work something out that will work for the both of us.”

The associations and their boards that can achieve this type of balance with their vendors will many times be able to keep their property’s budget where it needs to be without losing the essential quality and level of service they have come to expect.

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