Contractors Forced to Combat Rising Fuel Costs

Aug. 1, 2008
Contractors both large and small have begun implementing measures to mitigate the impact of high fuel costs on their businesses.

Washington — Contractors both large and small have begun implementing measures to mitigate the impact of high fuel costs on their businesses.

Regardless of size, contractors nationwide say the inflated price for gasoline has hit their bottom lines hard.

Rick Sperando, president of Black Diamond Plumbing and Electric in Crystal Lake, Ill., said the cost to fuel his firm's fleet of 26 vehicles has increased by about 30%. He estimated the company is paying $8,000 more per month for gas than last year.

“It's quite a burden,” he said. “We're a service company, and 95% of our work is service. We run a lot of calls during the day, so our trucks are moving a lot.”

In order to offset the cost, Sperando said his company raised its flat-rate prices by about 1% rather than imposing a fuel surcharge on customers.

“We felt that doing that would be better than showing a fuel charge to the customers because they're already hit with fuel charges from everybody else,” he said.

Other contractors are loath to pass along the cost to customers via a surcharge, fearing a backlash.

“We haven't been able to really justify fuel charges and rate increases right now because it's kind of a competitive environment,” said Keith Bienvenu, a co-owner of Bienvenu Brothers Enterprises in Metairie, La.

Bienvenu, whose business operates seven trucks, said his monthly bills for fuel have about tripled, adding that he encourages his drivers to economize.

One contractor that has not shied away from a fuel surcharge is United Air Temp in Springfield, Va. The company instituted a 4% surcharge on its contracts, according to Butch McGonegal, senior vice president.

The move comes when the company's vehicle costs jumped from about $156,000 in the first quarter of 2007 to about $253,000 in the first quarter of 2008, McGonegal said. “When you see that kind of an increase and the impact that it has to your bottom line, you've got to take steps,” he said.

Tim Williford, vice president of Wilson, N.C.-based Southern Piping Co., said his firm is looking at alternatives other than a surcharge, like making changes to its group health insurance plan and eliminating open positions.

Earlier this year, Williford testified on behalf of the Plumbing-Heating-Cooling Contractors National Association, and urged Congress to act quickly to address the constant rise in fuel costs because of the effect it is having on small businesses. Williford estimated his company spent $100,000 in June 2007 on gasoline as opposed to $160,000 in June of this year.

“It would be very difficult for us, or anyone else, to try to pass along those costs to consumers,” he said. “They're having a hard enough time paying their own gas bills, so it's going to be difficult for us to ask them to pay more for ours as well.”

One way Williford said he is hoping to achieve significant savings is by implementing a global positioning system within a year to monitor the company's fleet. Such a system will allow the company to track a vehicle's speed and idling time, he said.

Sperando said his company already uses GPS and recently purchased a second monitor so the main dispatcher can constantly track the contractor's fleet without switching screens.

Bienvenu, however, said he remains skeptical about the advantages of GPS, particularly when it comes to monitoring employees on the job.

“A lot of people think GPS is the magic tune. I really haven't been convinced that it is yet,” he said. “I just don't see that as being an issue with the staff that we have. I feel like they're doing the best that they can at this point right now. I guess maybe I'm naïve, but I just don't see it as an issue where they're abusing the system and going on unnecessary trips.”

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