State of the Market Update

Every once in a while I’ll pass along some insights provided by contractors, just to offer a sense on the state of the market. Generally I’ll pass this information along without identifying the contractor or the specific market, but hopefully it will offer some insights into what’s going on out there, at least anecdotally or regionally. For the first “state of the market†report we turn to Rocky Mountain Region, where winter can’t come too early if you’re a skier (or ski lodge owner) but can never come too late if you’re putting down hot mix. A phone call from a veteran contractor in that region of the western United States reports he’s suddenly contending with bigger paving contractors for mid-size jobs, such as overlays of bank parking lots, and that at least one local Big Paver (read HMA producer and/or highway paver) has laid off one of its paving crews. We haven’t heard much of that this year (so far, anyway), but I’m not surprised at all. As I reported a few days ago, construction is doing fine – except for the areas these Big Guys lean on for work: residential, streets, and highways. And after 17 years writing about the paving and pavement maintenance industry it’s become clear that when work for the Big Guys gets squeezed they look elsewhere to generate cash flow. And can you blame them? The HMA producers and the big pavers not only have significant dollars tied up in plants and equipment, they usually have a large workforce to support. So they need money coming in, and they turn to whatever paving jobs are out there to get it. Talk about tough competition! Here’s the guy who’s producing the mix now bidding jobs against his own customers. Obviously the HMA producer’s mix price to himself is going to be less than the price to the paver customer, so his bid will be lower too. So there’s no question this shift by the Big Guys does impact the small-to-mid-sized paving contractors, who also have their own bills to pay. There are a number of ways to fight this, the most obvious being lowering your bid to get the job at a reduced profit level. But that’s probably not the best way to go considering the HMA producer/paver can probably always go lower than you can. The thing to keep in mind, while you’re fighting this infusion of unexpected competition, is that these Big Guy pavers are not interested in that mid-sized paving work for the long haul. They want jobs requiring long pulls that place a huge volume of mix, so even if they’re causing you some problems they aren’t going to be causing them forever. And don’t forget parking lots are your business! You know the problems and pitfalls better than they do. Plus (and this is not taking a shot at the Big Guy pavers) the work you do is likely of a higher quality simply because you and your crews are used to working around light poles and islands, and you’re used to fine-tuning the paving to keep that commercial client happy. Any contractors interested in relating the state of their market – in any segment of the market – can just comment on this entry, give me a call (708-354-7039), or drop me an e-mail at allan.heydorn@cygnusb2b.com.

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