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COMPETITION CAN
COME IN HANDY |
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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?
I’ve been wondering about that lately. I was the
throat that was being squeezed the other day, and I didn’t 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, they’ve 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.
I’ve 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, it’s a replacement) and $5000
for getting the permits (plus fees) and you’re 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. That’s 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 CPA’s
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 we’ve done in your area. But I’ll
give it a try if you’d like."
He was the only game in town, and he was milking it for every
penny. Since he had a profit margin of about, I’d guess, $130,000, he
could afford to look magnanimous and knock $10,000 off the price. I told
him I’d think about it and get back to him.
I thought about it, and I’m not buying. Somehow, somewhere,
there’s got to be another option. No one likes to get bamboozled, and I’m
no exception.
But while the bid was outrageous, was it contemptible? I
thought so at first, but now I’m not so sure. This company provides a
service that no other company wants to compete against. They can bid
whatever they want, because there’s no one to bid against them.
Attorneys charge $500 per hour because they can get it. I’m
in the retail and restaurant business and I’ll 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, there’s really no difference.
Western Dock wants to gouge me because they think they can. There’s 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 I’m exploring other
options, I may not find any. And unless I want to sit on a deck that’s
underwater, I’d better get it replaced very soon.
It’s all about capitalism working its wonders. It just
works better with a little competition. |
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