This is unquestionably a tough time for paving contractors. The cost of hot mix asphalt has skyrocketed as oil prices have continued their upward climb (drawing back at least somewhat in the late July days before I wrote this). The impact of those increased HMA costs is that many paving contractors have had to absorb a big hit in job profit, overall bottom line, and job volume as some customers are cutting back - putting their paving projects on hold - or shifting their dollars to pavement maintenance efforts. Plus, if you're a paving contractor focused on residential work the bottom has probably fallen out of that aspect of your business so you're scuffling to keep jobs in the pipeline, keep cash flowing in to pay bills, and keep your employees on the payroll.
What's a paver to do?
Veteran contractors and consultants will tell you to pay close attention to your numbers, bid wisely, manage your employees and equipment efficiently - and sit tight. As one paving contractor we talked with on a recent visit states, "The business goes in cycles, just like we're in now," he says. "One thing I learned is don't get ahead of yourself when it's good so you can handle things when it goes down. So when times are good you control yourself, and when times are bad you control yourself." Paving veterans know that over the long run the paving industry will shake itself out. These veterans also know that times like this can spell trouble for contractors who aren't paying attention. "This latest jump in HMA prices will weed out some of our competition, I'm sure, just like it did in 2006," the same contractor told us.
So there are reasons to be wary. If HMA prices remain high, contractors will need to adjust their bidding, bottom line, and expectations accordingly. If HMA prices remain high your customers will have to adjust their numbers and their expectations. If HMA prices fall, we can all breathe a little sigh of relief and get on with business as it was, or at least close to as it was.
So take a tip from veteran paving contractors who have experienced more than just this year's rut in the paving business. They've been here before and they know that through proper management, quality work, and embracing new technologies the paving industry will thrive, just at is has in the past.