Price Increases...

I know that some of my readers may be contractors like myself. And if you are, then I'm sure you know about price increases in steel these days. Some suppliers are even revoking price quotes. Well, I may as well tell you that I don't put up with quote revocations. I have had two such revocations recently. First, Deitrich Metal Framing sent out a notice that all price quotes now expire after 30 days unless a contract is signed. I responded by sending a letter to my suppliers stating that if they have bid Deitrich framing on any job that has not been awarded yet they need to get another company to match Deitrich's price and in future I will not accept a price quote from Deitrich unless it states that the quote is vallid until the expiration date regardless of company policy or material price increases and is signed by an officer of the Deitrich corporation. Of course this means that I don't get Deitrich quotes any more, but even though prices are going up the market isn't and it is easy to find another vendor, especially for metal studs!

Last week I got an even worse one. I have a job called the MIC that is contracted already. I haven't signed a PO to Armstrong for the ceilings yet, but I informed them that I intended to buy from them. So I have a price quote and I have told them that I would buy from them. I have sent in all the submittals already. Now they say that they are increasing my grid prices and wont honor their quote. I am in the process of working my way up their chain of command. I told my rep that not only will I not accept this because the price quote is effectively a contract with their company, but that I intended to switch this job and all future jobs to USG and never buy from Armstrong again unless they honored their quote. Needless to say, a few people over at Armstrong are mad at me. And I work for their largest customer in the area and one of their oldest direct contractors. So I'm expecting the president of my company to tell me to back off at any moment. But I still have the choice in what products to use on future jobs and Armstrong will loose a lot more business from me than they will gain if they don't honor their quote.

So why am I so upset by this? Well the way the system works is that an owner calls 3 GCs and asks them to bid on a project. The GCs each call three drywall companies and asks them to bid. Then I call on one or more suppliers and ask them to bid. My suppliers, in turn, could call on raw material producers and ask them to bid, but they don't. I am bound to my price just as my suppliers are bound to theirs. So when a supplier ups their price to me, I directly loose money. And I wont stand for it anymore. There are hundreds of small manufacturers across the country for every type of material. If Detrich doesn't want my business, Allsteel will. If Armstrong doesn't want it, USG will or perhaps Chicago Metallic. The point is that I always have another option and contractors should not just lie there and take price increases without regard for their own profit.

So if you're a subcontractor and you get a price increase notification, respond with a letter that states you accept the increase for jobs that have not already been quoted but their quotes must be honored. If they say no, then tell them that it has been a pleasure doing business with them and you hope that they have success with another company buying from them, because you wont buy from them again.

And remember that the person who thinks long term will always get the last laugh because the next time that prices drop below cost because there is a housing slowdown and they can't give the stuff away fast enough, just ask for 10 bids on a project until you get one that is low enough to make up for the losses you incured before.