A game played with cues on a billiard table in which the players use a cue ball to pocket the other balls in a set order.
Trick, entice, or trap: “They were snookered into selling their services at too low a price.”
by Ranger Kidwell-Ross
I was recently invited, along with other business leaders in my area, to participate in an all-day conference intended to create a platform that would facilitate businesses and individuals to think and act independently and with the goal of advancing their own interests. In a nutshell, the idea was to develop a simple model whereby people can recognize what is actually occurring in their lives and in their businesses, and then enable them to use the collected information to make positive-based, rather than fear-based, decisions. A significant portion of the discussion throughout the day centered around what a consensus of us defined as the increasingly widespread tendency of large corporations to take unfair advantage of their customers, suppliers, and providers.
As the day progressed, I found that many of the concepts discussed fit into the current third-party vendor situation that is currently plaguing the United States marketplace for sweeping services. Although not all third-party vendors should be painted with the same negative brush, overall the reported experience of sweeping contractors who have had dealings with a number of these organizations have been far more negative than positive.
During our brainstorming session, the word “snooker” was brought up as an allegory to what the participants believe is happening in a number of areas in today’s business climate. Many instances were cited that illustrated how large companies were acting unethically “because they could.” By the end of the day, our group identified a number of concepts, several of which have I realized had application to the current proliferation of unscrupulous companies in the third-party vendor business community. The following are some of these, along with my own analysis of how the concept relates to the contract sweeping industry.
As far back as the year 2000, when a company called NLS defaulted on paying contractors the money it had collected from its client, Target Stores, unscrupulous third-party vendors have been taking a toll on the American sweeping community. By far the majority of third party vendor stories I have heard in the intervening 13 years have emphasized negatives: the dictating of unrealistic prices per sweep; the inexplicable “losing” of invoices and other documentation required for contractor payment; time-consuming reporting requirements; “bait and switch” tactics used to get a contractor to sign; the stretching of payments out far past what has been agreed to; the requirement of signing onerous, unrealistic contracts that place contractors at an enormous disadvantage.
Central to many of these third party providers when they pitch their customers–typically big-box stores, large property management companies and other large property ownership conglomerates–is that a significant savings can be generated from contractors with no loss in service quality. While I agree that some savings are possible given that only one check needs to be written to the third-party vendor, rather than multiple checks written to multiple contractors from each store location, true savings beyond that are improbable.
The margins contractors currently have, given the competitive nature of the US marketplace, can at best be characterized as a “low end normal profit.” That is not to say that further savings are not possible; however, the overriding reality is that any such savings will come at the expense of a lower quality of service and/or reduced frequency of sweeps. Those who believe otherwise are fooling themselves. This is especially true when a third-party is taking an additional cut of the pie.
This reality check information needs to be communicated to the purchasers of third-party vendor services. Until the truth of the above information is recognized by those who are buying into the unrealistic vision that unscrupulous third-party vendors paint, both they and the service providers doing the work on their property will continue to be controlled by a system that, in large part, is not working.
Many contractors were hit hard when Walmart canceled the USM contract a few years ago. To its credit, Walmart has gone to another business model via the use of ServiceChannel for reporting, and the system gets generally positive reviews. However, in contrast, the recent bankruptcy proceedings of Oxford property services has resulted in severe losses for a number of contractors throughout the United States.
We have received reports of losses that range from a few thousand dollars to tens and hundreds of thousands. In total, the overall loss to the U.S. service industry is very significant: It appears that Oxford may have absconded with over $30 million of money that was paid to it by DDR, Inc. About $17 million/month was reportedly collected by Oxford from DDR last November and December. All but 3% was earmarked to be passed on to the contract service providers in sweeping and a variety of other service areas. Now, in the wake of Oxford’s bankruptcy proceedings, there may be little the affected contractors can do since the contract they signed with Oxford was so stacked against them.
Then, as a further financial insult and in order to keep their DDR business, the affected contractors–at least some of whom were out over $200,000–were required to sign a document stating they would not sue DDR for the money they were owed for sweeping DDR properties. As one contractor who is owed in excess of $100,000 related to me, “If I keep my DDR accounts I have a chance to hold onto my business. If I lose all my DDR accounts, my business will undoubtedly go bankrupt.” How’s that for a ‘rock and a hard place’ scenario?
With the 20/20 vision of hindsight, none of these contractors should have signed the Oxford property services contract to begin with. Yet, I am told that Oxford would allow no addenda or other deviation from its take-it-or-leave-it contract. The question is: Why should any contract be signed that does not allow the servicing contractor to collect money from the property owner for services performed in the event of nonpayment by the property owner’s third-party vendor representative?
It also appears that Oxford was, in addition to taking its stated 3% from the contractors, marking up the contractor invoices prior to sending them to DDR for payment. One sweeping contractor reported that when he took over the DDR business directly, it was discovered by both DDR and the contractor that Oxford had been marking the contractor’s invoice up an additional 17+%. The implication appears to be that this particular third party vendor, in any event, was unethical in its dealings with both its clients and its contractor providers.
There are clearly lessons here that need to be learned by the US sweeping contractor community, as well as by those in the market for third party vendor services.
The proliferation of unscrupulous third-party vendors appears to be continuing apace, if not accelerating significantly. There is no question that a concerted, industry-wide, effort needs to be made in this regard. Hopefully, other service industries can be included such that the reaction–and action–becomes widespread in scope.
The anger of those affected by the Oxford situation, as well as other similar stories, needs to spread from those who happened to get caught up in them to the many contractors who are a hair’s breadth away from their own disastrous scenario. Part of what will allow that to happen is communication among contractors regarding the reputation of the various third party vendors. WSA is actively working to procure this type of third party reputaional information so it may be provided to the membership.
I often hear contractors say “If I don’t accept the work at the unrealistically low rate, and/or accept a contract whose wording I don’t agree with, someone else will.” My question to them is: Why would you take on business where you have no margin, let alone risk your financial future by signing a contract that has the potential for you to lose large amounts of money and potentially even bankrupt your business?!
A number of contractors have also told me privately that, even though there is no way for them to provide the specified services at the unrealistically low rate, what they do is take on the contract but not actually provide the specified level of services. Some have confided that they simply don’t show up on some of the nights when they’re scheduled to sweep; some with GPS units have said they have their operators just go onto the property and zip around in order to be able to prove they were there, perhaps stopping to handpick any large debris that stands out.
Others, saddled with contracts where they have to get a quality slip signed by a manager during the day, have their employee do a quick day portering on the days when they did not actually sweep there the night before. My question to these contractors is: How can you believe you can build a viable business in the long run by operating it with such a complete disregard for your own morality? Do you think you can retain quality employees when they see that you operate your company with such a complete disregard for ethics?
However, in a reference back to the headline of this section; the above are contractors who do not believe they have a way to fight, let alone win. Other contractors are in full flight, or frozen like a deer in the headlights of an onrushing train on a collision course they feel powerless to affect.
In our brainstorming while developing the Crosshairs for Change curriculum, we developed several overarching, generalized solutions. One of these is the recognition that visions that are resourceful, and which offer better alternatives to the individuals in charge of the entities now in control, will be seen as positive vehicles for change. In my educated view, the third-party vendor situation would seem to lend itself to a variety of win/win solutions.
For one, we need to break through the illusions that are being proffered by some companies in the third-party vendor business sector. One such is that, via the addition of a middleman company, contractors can be persuaded to do the same quality of work for 15% – 20% less than they are currently charging. Since most contractors do not have that large of a profit margin to begin with, this is an entirely unrealistic premise. Fortunately, with a little education it is also one that professional property managers should be able to recognize. Yes, it’s possible to reduce the amount contractors charge; however, the property will not realistically get the same level of service.
We also need a vehicle that allows the industry to get away from only having an individual, company-by-company reaction to unrealistic contracts and pricing available. Rather, we need to move as an industry toward the widespread recognition that when someone offers a large number of new customers but at a price per sweep that will not bring a reasonable profit, do not get involved.
What is required is a measured, preventive response that is industry-wide and sustainable for all involved parties; contractors, third party vendors and their clientele. By contrast, today we have third-party vendors telling the top managers of large chain operations that they can deliver savings at a rate that, while financially attractive, should be seen as what it is-–unrealistic if the expectation is that the same level and quality of service will be achieved.
Once this recognition is in place, then national property managers will be faced with a realistic decision tree: Third party vendors can supply a cost reduction based on the savings of check-writing at individual locations vs. dealing with one or a few regional or nationwide third party vendors. However, that’s it. When they are promised any further reduction in cost, they need to understand that their properties will receive a lower level of service quality. Once that realization is in place, then they can move forward with using a third-party vendor or not, but do so based on a realistic understanding.
In the meantime, I urge sweeping contractors to run their business like a business. Do not put your financial stability and moral compass at risk by signing an onerous contract, or by providing services at a rate that will not bring in a normal profit. Yes, someone else in your area may well do so. Your best course of action is to let them do so. The fact is, if you know your costs, if you are running a tight ship, and if you have a vision that encompasses a successful future that includes retaining quality employees, maintaining and replacing your equipment and retiring someday, then your best and only course of action is to “Just Say No!”
Finally, if you are owed money by Oxford or any other third party organization that is refusing to pay, or that wants you to take a significant discount due to their ineptness or lack of planning, say “No” to that, as well. Put on all the pressure you can, from writing to the Attorney General in their state of incorporation and your state of operation, to contacting the Better Business Bureau and any other organization that might prove helpful. World Sweeping Association will have an area that will contain the results of our survey on many of the third party providers, along with comments from contractors about their interaction with those particular companies.
We have to band together and communicate the current facts on these companies throughout the industry, as well as have each sweeping company work diligently to effect change in the way business is getting done. As my Father used to say about his stint in the military, “They couldn’t really make any soldier do something they refused to do; however, what they could do is make you wish you had.” The only way the sweeping industry is going to get this situation changed is by refusing to play ball anymore.
Until then, unscrupulous third party vendors will continue to snooker you and your company into getting involved in unsustainable, unprofitable business agreements that have every long-term likelihood of ending in personal and business disaster.
Ranger Kidwell-Ross is a graduate economist and executive director of the World Sweeping Association, as well as editor of WorldSweeper.com. He has been involved with the power sweeping industry since 1988. The company that is hosting the conference referenced in this article, which ended up with the title “Crosshairs – a Visionary Economy Conference,” is located on the web at UnitingCreatives.com.
A central goal of the World Sweeping Association is to take action designed to affect the third-party vendor situation in ways that are positive for the contract sweeping community. If you are reading this article but are not yet a member, we encourage you to use the link at the top of this page to join. The larger WSA becomes, the more impact we can make.