COMPETITION CAN
COME IN HANDY

    Capitalism is a beautiful thing, but it does raise some questions. For instance, when you have someone by the throat, how hard should you squeeze?
    Iíve been wondering about that lately. I was the throat that was being squeezed the other day, and I didnít like it. But I questioned whether I would have acted differently if I was the squeezor instead of the squeezee.
    The problem was a simple one. We happen to live on the shore of San Francisco Bay, with a deck that hangs over the water. The deck is held up by a seawall of wood piles and wood planking. And since our deck is slowly but surely collapsing into the bay, I thought it might be time to replace the seawall.
    So I called Western Dock Enterprises, the only company in the area that has the equipment (shallow water barges, cranes and drills) to do the job. In other words, theyíve got you by the throat.
    A nice man named John came out almost immediately and took some measurements. We had a very pleasant meeting and I made every effort to create a caring and sensitive relationship. I practically begged him to be gentle with me.
    I got his bid last week. It was for $197,000 for an 80 foot long, six foot high wall, with 10 wood pilings driven into the mud.
    Iíve built a house for less than that. It was outrageous. It was insulting. It was highway robbery. It was capitalism at its worst, or best, depending on how you look at it.
   I had asked him to break down the bid, and he did. $25,000 for "Mobilization," which means telling your guys to get to work. $36,000 for taking out the existing wall (that might take a few hours), $78,000 for putting in the new one and $38,000 to remove and replace the 800 square foot redwood deck. Not the framing, just the planking. Add $15,000 for engineering (uh, itís a replacement) and $5000 for getting the permits (plus fees) and youíre sticking the client for $197,000.
   "Are you nuts?" I politely asked when I got him on the phone.
   "It came in a little higher than I expected," he replied. "I know it sounds like a lot, but we have to use union labor."
   The way I figured it, he was paying his guys about $900 per hour. Thatís one helluva union.
   "You can do the deck on your own," he continued. "You could probably get it done for less than us. That could save you some money."
   No kidding. I could hire four attorneys and a couple of CPAís and give them hammers and get it done for less. I asked him if this was his final offer.
   "I can look at it again and see if I can cut anywhere, but I know my costs from some other jobs weíve done in your area. But Iíll give it a try if youíd like."
   He was the only game in town, and he was milking it for every penny. Since he had a profit margin of about, Iíd guess, $130,000, he could afford to look magnanimous and knock $10,000 off the price. I told him Iíd think about it and get back to him.
   I thought about it, and Iím not buying. Somehow, somewhere, thereís got to be another option. No one likes to get bamboozled, and Iím no exception.
   But while the bid was outrageous, was it contemptible? I thought so at first, but now Iím not so sure. This company provides a service that no other company wants to compete against. They can bid whatever they want, because thereís no one to bid against them.
   Attorneys charge $500 per hour because they can get it. Iím in the retail and restaurant business and Iíll charge whatever the market will bear for a particular article of clothing or for a piece of salmon. If it means more than the standard profit margin, good for me.
   When I thought about it, thereís really no difference. Western Dock wants to gouge me because they think they can. Thereís no ceiling. They could have bid $250,000 for the little seawall, and maybe I would have bit. They obviously thought $197,000 was the limit to the exploitation.
   And they may still get it. While Iím exploring other options, I may not find any. And unless I want to sit on a deck thatís underwater, Iíd better get it replaced very soon.
   Itís all about capitalism working its wonders. It just works better with a little competition.
 

Home     |      About     |    Columns     |     Contact          

© 2006-2017 hoppecolumns.com 
All rights reserved.