Earlier this month, it was widely reported Wal-Mart is dissolving its exterior facilities maintenance contracts with USM Services, Inc. in multiple states. USM’s official statement is that client contracts cannot be discussed for privacy issues. Contractors are ready to start bidding, but has the national contract damaged the market?
Earlier this month, it was widely reported Wal-Mart is dissolving its exterior facilities maintenance contracts with USM Services, Inc. in multiple states. Future services will be contracted by individual store managers or from within Wal-Mart, according to a memo received by a number of landscape, power washing and lot sweeper contractors. USM’s official statement is that client contracts cannot be discussed for privacy issues. Wal-Mart officials have not answered repeated requests for comment.
Though he hasn’t received a memo for snow removal, Doug O’Bryan in Akron, Ohio, isn’t waiting for news.
Instead, he plans to pursue the contract with his local Wal-Mart, even though he isn’t positive about a result. “Just because this happened doesn’t mean a floodgate of work opened up,” he says. “We’ll make some phone calls, we’ll chase it a little bit. Because you know there are already going to be two contractors who are going to be bidding at it and bidding low: the contractor from before and the contractor for USM.”
Will he propose contracts competitive with USM’s recent rates? Probably not, he says, but he doesn’t expect those prices to change just because the chain might be hiring individually.
“We’ll bid it out at our regular rates,” says O’Bryan. “I don’t know that anything will change as much as just who’s signing the checks.”
USM’s wearing down of market prices could have some lasting effects for the industry, says industry consultant and Snow columnist John Allin.
“The damage that USM did could be fairly significant now,” he says. “If store managers were privy to the pricing structure before, they’re used to getting those services at a low price. They’re going to ask, ‘Why can’t we get that now?’ They’re going to try to get the same numbers. It could take a few years to come out.”
Allin says USM’s problem with Wal-Mart was more tactical in nature, taking on the Wal-Mart chain too late to handle the contracts effectively. But the damage was done when USM’s low contractor offers encouraged snow professionals not equipped for the size of the job to take on more than they could handle to high standards for the money paid.
“They opened up the door for unqualified workers to do the work and allowed them into the game,” Allin says. “The qualified guys knew what it took to do the work.”
O’Bryan, who works with USM for several of his accounts, is happy about the work he’s done for the chains through them, though the contract price isn’t as viable as some of his other work. “They kind of tell you what they’re willing to pay, so there isn’t a lot of negotiation,” he says. When USM lost a few chain stores to another national with even lower prices near O’Bryan last season, he says he “was certainly concerned for the work, but I was a little happy because it put USM in the same position they’ve put others in by low-balling price.”
To O’Bryan, when he’s able to afford the work through USM, it helps fill a part of his business. “To deal with USM is a lot of work. I’m happy with the work I’ve done with them,” he says. “Like any job, you have to put your best foot forward. It’s not that they don’t have a lot of loyalty. In the machine, they don’t have a lot of room for loyalty.”
Snow contractors still waiting on payment are worried about that loyalty. The memo issued to some exterior facilities maintenance contractors states they will be paid “per the Subcontractor Agreement for all service completed prior to the Termination Date.” No information has come yet determining whether that means contractors will still be paid in full, as USM pays contractors as USM is paid, according to O’Bryan.
“These guys are still getting squeezed,” says Allin. “The fallout from this could take a couple years to right itself. How many small contractors is this going to sink this season?”