Good News from NPE on Third Party Provider Front?

One of the best parts of attending National Pavement Expo is the opportunity to talk with contractors of all shapes and sizes over four days. At last month’s NPE in Fort Lauderdale contract sweepers were out in full force, and my conversation with them eventually worked its way around to the scourge of the industry: third-party providers.

But the talk this year was significantly different from third-party provider talk in recent years. It appears there’s been a sea change in how sweepers are dealing with these folks and the change is a proactive approach that could (should) put contract sweepers back in control of their own business. I talked with more than two dozen sweeping industry vets over the four days. Here’s some of what I heard – let us know how it compares with what you know:

  • Sweeping for third party providers has become almost “a necessary evil.” More than a handful of contractors used that term, saying that despite their lousy approach to the market, third party providers have garnished a fairly large share of business – sweeping and otherwise. Because these providers control some big properties sweeping contractors feel they are “forced” to work for them, if only to retain some of the higher-profile properties and to help maintain cash flow.
  • However, many (I don’t know a number but a lot) of the contractors I spoke with have decided to limit the percentage of their business that goes through third party providers. Percentages varied but 15% seemed to come up a lot. The feeling as I understand it is that this enables the contractor to retain some of the accounts and generate some needed cash flow, without exposing their company to too much low-ball pricing or the risk of a provider going under and not paying.
  • Sweeping contractors – some of them anyway – have decided on a “you get what you pay for” approach to working with third party providers. The reasoning is that why should they provide the same service at $30 an hour that they provide for someone else at $65 an hour? Contractors I spoke with admit there are some pitfalls with this approach but they reason that if a property only wants to pay what amounts to $30 an hour for a service that property shouldn’t get the same service of someone paying $65 an hour. Hard to argue -- and if these companies can get their operators to make that differentiation when they’re out sweeping I think they might be on to something (though it’s admittedly not the level of professionalism and job quality the industry wants to provide).
  • Sweeping contractors seem to be being much more selective about the providers they work for. I talked with a number of contractors who have called other contractors to hear their experience with a specific third party provider before signing a contract. The hope by these folks is that increased communication among contractors will help people avoid the shadier, less-than-professional third party providers. The members-only portion of the World Sweeping Association website does a nice job of listing third party providers and also has a place members can comment about that relationship. HUGE!
  • Apparently there are some third party providers for whom contractors don’t mind (I won’t say “like”) working. These providers reportedly still drive bargain basement pricing but the contract terms are less onerous and they pay as promised.
  • Contractors also indicated they are paying much closer attention to the contracts they sign with providers. Many third party provider contracts have so many hoops to jump through that it’s very difficult to jump through them all – and the provider then has a reason not to pay (the purpose, of course, for all the hoops). So contractors said they are scrutinizing contracts more closely and avoiding those with terms (such as getting a signature every time they’re on the property) that could result in nonpayment or that would drive their own costs up.
  • And, perhaps best of all, it seems the backlash that many thought would eventually come has started. I don’t know if I can say all, but certainly almost all of the contractors I talked with said they have decided over the last year or so to NOT work for a third party provider. In some cases they just didn’t bid the work, knowing the reputation of the provider; in other cases they bid the work and then turned down the contract because the rate was too low. Just saying “No” is about the best thing that can happen.
  • Related to the above, I did talk with some contractors who lost jobs to third party providers and then regained them (or expected, based on conversation with the client they lost, to regain them) because the service and job quality provided by the low-ball sweeper is unacceptable to the client. Also good news.