By Cheryl Higley
Per-event pricing is getting more face time in some areas of the United States. It is bedeviling snow and ice management professionals who seek clarity on an exact definition of what “per event” means in their market (it varies), and how to construct a competitive proposal that takes its many nuances into account.
Grant Mitchell, senior vice president of provider relations for Divisions, Inc., says he began seeing the pricing model last year. His concern is the disparity in how it is being interpreted—which can lead to uneven competition. “It’s important to have pricing models that are accepted in the industry, but this model is creating confusion,” Mitchell says. “What I am finding is companies are bidding it as per event, but billing it as per occurrence.”
Michael Merrill, CEO of Glens Falls, NY-based North Country Snow & Ice Management, has also seen per-event pricing move into his market. “Depending on the RFP parameters, there are so many variables that it is difficult to come up with a number. If this model is a standard in a particular market and companies are accustomed to it, the bids will be closer together. If a market isn’t used to it, the bids are going to be all over the place,” he says. “In my market, there is no way I’m going to bid a 10-acre retail store on a per-event basis. I’ll take a lot of risks, but I won’t take that one.”
For Neal Glatt, CSP, account executive for Case Snow Management in North Attleborough, MA, per-event pricing is just another day at the office—it’s the dominant pricing model in his market—but he agrees this model can be a wild card in the process. “All of our estimating data is built off the experience of bidding this model, and all of our competition uses the same pricing model. But if a contractor introduces this in a new market, you can get burned,” he says.
Per-event paramaters
Love it or hate it, you need to know how to bid it properly. Following are some of the key points that should be defined in the RFP and taken into consideration (remembering that they may vary depending on your market). For this article, we’ll use the definition from a large retailer’s contract, which states per event is “a period of continuous snowfall or accumulating precipitation within a twelve (12)-hour period of time from any other ‘Event.’ ”
Increments. Per-inch increments are a key component of the pricing model. Pricing for smaller delineators (1-3, 3-6) may be easier to judge than wider ranges such as 0-6 inches. “For us, the difference between a 1-in. and 2.5-in. storm is slim. Our production rates won’t really change,” Glatt says. “I don’t like to see 6-in. increments because I know my price is going to be too low (and I lose money) or too high (and I lose the account).” Like any other contract, you must know your numbers so you know what makes sense for your company.
Merrill agrees that the smaller increments are preferable, but his concern is the differences in the types of storms—not every 2-in. storm is created equal. For example, a short-duration 2-in. storm that ends at 8 p.m. means crews can go out after most retail stores and offices are closed. Compare that to a storm Merrill encountered last year in which an 18-hour storm netted 2 inches, but there was slush and other hazards to contend with. More crews, equipment and materials were needed to service that storm.
“In event pricing, you get paid the same amount no matter how many resources you have to dedicate to it,” he says. Another factor to address is what happens if snowfall exceeds the top tier of service. If accommodations are not included, make sure it is clarified. Otherwise, if the top tier is 9-12 and it snows 15 inches, your company is getting paid for a 9-inch storm. To combat that possibility, Glatt says Case bills per inch after snowfall exceeds the top limit.
Scope of work. The RFP should, obviously, include a complete scope of work. But when it comes to event pricing, a red flag for Glatt is the new trend toward all-inclusive pricing. Typically, the company’s per-event pricing does not include deicing services. Case shies away from all-inclusive whenever possible because that’s where cost controls are jeopardized.
“We’re seeing more people ask for all-inclusive, and it’s tough to price,” Glatt explains. “The plowing component is easier. But depending on the type of precipitation, I can see a big variance in my cost. That is a dangerous proposition.”
David Gallagher, director of success for LandOpt who is familiar with the event pricing structure, agrees: “A big concern is when a contractor doesn’t build enough service into the price.”
Time. Another area where contractors may see differing requirements is the time frame that defines an event or when a new event begins. Some contracts stipulate, for example, that a new event will commence after 6 hours with no precipitation—others say 12. Again, make sure it is spelled out in the contract. Even if it is explicit in the contract, you (and key employees) must make a special effort to understand the time frame, and that your billing is accurate and reflects it. The last thing you want is a disagreement with the customer about when an event stopped or started, because that will take time and effort to resolve.
Verification. To minimize disputes, it is important that both event start/stop times and official snowfall amounts are documented and verified—and that the approved-upon verification source is named in the contract. If you work with a third-party weather reporting company, make a sustained effort to have the system you work with included as the verified source for accumulation. If you do not work with such a company, exercise caution when looking at per-event pricing.
“You must have a reporting agency that is accurate,” Gallagher says. “This is especially true for markets in which there could be a large variability of snowfall within a few miles.”
Merrill agrees, but cautions contractors to make sure they know where those measurements are being taken: “If you have 18 inches of snow on your site but the airport has 6 and the service you choose measures totals at that site, you’re going to get paid for a 6-inch storm.”
Data Collection & Billing. For Glatt, the biggest benefit to per-event pricing is ease in billing. With a verified snowfall total, administrative time is greatly reduced and invoicing can happen more quickly. “If we’re billing per event, I don’t have to see the plow sheets. Once the snow stops, I can check my report and that determines the bill,” he says.
Gallagher says that while contractors may understandably be skittish about per-event pricing, with good data collection, and an understanding of your market and your costs to do business it can be manageable.
“It needs to be understood from a potential revenue generation perspective,” he says. “It allows snow and ice management companies to build a forecast of revenue in a simpler manner and helps customers project their costs more easily.”
Cheryl Higley is editorial director of Snow Business magazine. Contact her at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
