Ken McKenna hasn’t raised prices in three years. If anything, he’s dropped them to compete.
So when he’d lose a project to a lower bid, he sometimes wondered if his competitor cut corners or otherwise cheated. He’d speculate about how they did it and occasionally grumble to others.
Then the accusations turned his way. “My distributor told me that another company said I was low balling,” explains McKenna, who is president of Tampa Bay Pools in Brandon, Fla., a Pool & Spa News Top Builder.
“It made me realize that getting mad at other companies without really knowing what’s happening is pointless, because it’s probably not the truth.”
Some builders are doing virtually anything to get work — They may avoid payroll taxes, neglect workers’ compensation insurance or cut corners on construction. This causes resentment to stew, accusations to fly and rumors to spread. But in some cases even above-board contractors are swept into the fray, accused of the same questionable tactics as their less-reputable peers. Looking to the future, industry professionals ponder the long-term effects.
The frustration is understandable. Builders discount prices, only to lose work to someone charging 20- to 30-percent less.
“It’s very tough to get beat out by somebody who’s selling a pool for a lot less than you know it should be sold for,” McKenna says. “So I think there’s bitterness there.”
Several forces conspire to create hostility and suspicion among certain builders. First off, let’s face it: Consumers smell blood. As such, many these days shop based only on price.
“Today people have a completely different attitude because they are buying with cash that they took a long time to save,” says Cecil Fraser, owner of Swan Pools in Lake Forest, Calif., a Pool & Spa News Top Builder. “They say, ‘If I can get a deal that I won’t possibly ever get again, I might buy a swimming pool. If I can steal it, then I’ll buy it.’”
When builders underbid, it only feeds into the low-price mentality.
Many believe it hurts the industry as well as an individual builder’s ability to make a decent profit. All the experience and credibility a builder has accumulated, the craftsmanship and salesmanship, have been reduced to that one little number at the bottom of the bid. So the suspicion starts to grow. When one builder sees or hears a seemingly impossible bid from another, words like “cheating” and phrases like “stealing work” are used.
Part of it is fed by rumors — stories may even spread that a builder is purposely charging next to nothing in order to gain market share. For their part, competitors read that as, “They’re trying to put me out of business.”
Other times, it boils down to speculation, with one builder saying something like, “They must be doing something illegal, otherwise how could they charge that?”
This anger and suspicion may not always be properly directed.
For one, some of the resentment about low-ball bidding could be based on bad information. In their effort to get the best deal, many consumers have become hustlers themselves, pitting one contractor against the other by misrepresenting a competitor’s price.
Meanwhile some take issue with negative characterizations of certain business practices. What one builder considers unscrupulous may be seen as fair by others.
For instance, a contractor may accuse a rival firm of pricing only to cover costs, a move some consider shortsighted and even harmful.
But others believe this can be a valid strategy — at least for a while. Fraser, who says his company’s bids tend to fall in the mid-range, did it for a few months. He charged at or just above his costs for a set period of time, expecting that the economy would begin climbing within that period. He asked his subcontractors to do the same. The goal was to maintain market share, and he considers this fair game, as long as the builder is offering a comparable product and doing it legally.
“It doesn’t make sense to build a product for no profit over any extended period of time. That’s just suicide,” Fraser says. “But it makes sense if you believe the market’s coming back and you’re trying to
protect your resources. Your resources are your people, and if you lose the people, then when business comes back, you have to do rehiring and retraining, which is a huge investment.
“In the short term, can I give away some profit to maintain market share? Isn’t that called business? It’s fair play if you provide the same product.”
Others in the last year or so have begun advertising loss leaders to get business in the door. Some think it’s a bait and switch, claiming the company fully expects to sell a more expensive pool than the one advertised.
Not only that, they say, but it hurts the industry by creating unrealistic price expectations among consumers.
Those doing it, however, disagree. “I can build a pool for that [advertised] price,” says Michael Holland, CEO of Holland Pools & Spas Inc. in Longwood, Fla., a Pool & Spa News Top Builder. “Most of them won’t buy that pool, but we can do it if they want.”
Some observers already are seeing the effects of this accumulated anger.
In one area, a builder who was accused of charging too little pulled out of association meetings. One observer, who wished to remain anonymous, suspects it could be embarrassment. “We had discussions earlier in the year about certain companies undercutting the market, and then this company became one of them soon afterward,” said the contractor. “We haven’t seen that person at our meetings since. Maybe he didn’t want to look other builders in the eye.”
This type of resentment may chip away at bonds within the industry. For decades, many have lamented a lack of involvement or cohesion among pool and spa professionals, and experts are concerned this will become another reason to stay alienated.
“In some areas where there’s a lot of bitterness, nobody wants to work together,” McKenna says. “There are things we should be [collaborating on] that we used to three or four years ago, but now nobody seems interested.
So, for example, you wind up having to individually fight your battle with the building department. We’re not coming together as a group to work together and develop standardized ways to address issues.”