CICs have traditionally had their snow removal services budgeted by the month or season, while commercial properties budget hourly or per time.
Why monthly? In a heavy snow season, like last season, board members are trying to explain why they’ve blown the budget by 50-100 percent. Is this the smartest way to budget your snow removal? It depends on the winter and the contractor. We are seeing major shifts from contractors and HOAs this fall because of last winter. HOAs and contractors are moving in opposite directions! HOAs that had large snow hauling bills are asking for more "all inclusive” contracts and some respected snow contractors are refusing to bid some management companies contracts that are all inclusive and they are asking for more revenue options for heavy snows and for icy conditions, so what’s the answer?
First, realizing there’s no such thing as a free lunch. When you ask for an all-inclusive bid (meaning all salting and hauling is included in the contract), you’re telling contractors they better figure in all their possible costs when submitting their price. The good contractors will figure in responsible amounts of equipment, manpower and materials and will have a higher price. The less experienced contractors will forego this step and submit a low bid. You might take the best contractors out of the running and be only considering the poorer contractors. If a contractor with few resources runs into problems, you could be left with an unplowed lot or hazardous conditions.
Here’s what happens behind the scenes when you ask for snow removal bids.
The contractor goes out to the site and estimates the number of hours it will take to fully clear out the snow. He multiplies that per price bid by the number of snow events he expects. This part is highly subjective. Even when the Farmers Almanac says we will get a heavy or cold snow season, Mankato or LaCrosse or St. Cloud could have differences of 30 percent snow totals for the season. So when going with a seasonal price, you are banking on average to heavy snow for the season. This has many benefits and a few drawbacks. On a lighter snow season, the residents might complain about paying a monthly price when no service has been provided. Benefits are many. Except for hauling snow off the property and salting, you already know your budget. The other benefit is the realization that a snow event requires a lot of equipment and people at the ready.
During the 150 days of the snow season, that equipment sits for about 100 days. By giving the contractor a monthly amount, he’s able to keep more equipment and people on hand to ensure your property gets taken care of. There are a dozen or so lawn/snow contractors in the Twin Cities that really specialize in townhomes. Because CICs are usually seasonal priced accounts, I believe these contractors do a better job because they specialize in townhomes and because you have given them the monetary resources to respond to the needs of your community ASAP. This also means that CICs should expect better service when they make this upfront commitment.
What about hourly or per time bids? Unless you have someone up all night watching the parking lots, you have to have a contractor you can trust doing hourly work. Also, commercial per time or hourly contractors tend to have more subcontractors working on them. It makes sense. With an hourly price, a national company can hire subs at $60 per hour and charge $70, collecting a risk free, guaranteed 17 percent gross profit. Not so safe with a monthly contract.
I also detailed in an earlier article that because of the high snow amounts last winter, pickup trucks became essentially useless after January because they couldn’t lift snow above the piles on the corners. So, looking at a contractor’s equipment list heavy, in-skid loaders might be a plus because they can stack the snow while piling, reducing the need for expensive hauling.
What if you just don’t have the funds? Twenty years ago, HOAs had trigger depths of 2 to even 4 inches. A trigger depth is the snow depth at which snow removal operations started. In the last 5 years, trigger depths have been lowered to an inch, a half inch or on some condos even a trace! Raising the trigger depth from 1 inch to 2 inches might save 25 percent or more.
What’s the recommendation? If there are adequate reserves and cash flow is not an issue, a per time can contract be a cheaper method in the long run. If cash is tight and you really need solid budgeting, then a monthly/seasonal contract is the way to go. You might want to consider the condition of the board of directors. Some boards are unfairly "under siege” because they put forth some unpopular policies or tackled difficult issues. Having a set budget amount is more unassailable than a large budget buster. No matter which direction you choose, if you have a contractor that is in sync with your manager, board and homeowners, keep them and nurture that relationship; you’ll be glad you did.