The Race To The Bottom

The race to the bottom is a quick and vicious, fast-paced sprint that ends all in all in tragedy.

The Port of Seattle ran into a problem some years back. According to a Project Manager in the Port, there were a total of five electrical contractors in the entire state of Washington that were even qualified to bid on opportunities at the Port. The problem? The Port could not get the contractors to actually BID on the opportunities. The electrical contractors just, ceased work on the Port. Even direct offers for bidding opportunities yielded dismal results, when there were a minimum-state requirement of only 3 bids to move forward on a contract opportunity. What happened? Why wouldn’t a contractor seek the bragging rights, the honor and prestige of working with the government on something as important as the Port of Seattle? The Race to the bottom happened.

This conversation was my inspiration to begin discussing the Race to the Bottom with clients, co-workers, and even competitors I am friendly with. The discussion revolved around competition. The thrill of the fight. This manifests itself differently for many people, but it is as prominent in Sales as it is in a cage; just another type of fight. Competition can be invigorating, and you feel the glory and pride of the win – and the frigid, cold bite of the loss. Now this idea, though, is interesting. Competition. Competition in the work force was an interesting idea with many merits, and it drove a lot of positive – and a lot of negative – change to the work environment.

The concept of competition was simple – by having different companies/contractors bid against one another, you made sure that you were maximizing the value of the goods or services being provided to the end-user, at the best possible price. It was also the starting point, the runner’s shot, the beginning of the race. What this competition forced contractors to do, was to “sharpen their pencils”, and by the sharpening of pencils, what I mean is finding ways to cut costs. This often came in the form of giving up profit – there is little one can do to be rid of Overhead. This means finding actual costs and productive ways to work and keep things as efficient and lean as possible.

As with any good idea, any idea driven too far becomes a self-sabotaging prophecy easily fulfilled. The race has begun, and a steep uphill climb to the bottom of the barrel is what is found. As was the point of this article, I will sum up my points in four more paragraphs: The Race to the Bottom produces a negative impact on the contractor, on the client/end-user, on the deliverables, and has a MASSIVE impact on growing niche industries still in their infancy.

A deeper look into Seattle’s Race to the Bottom revealed the competition environment created an adverse situation. By constantly undercutting where available, the options were to reduce profit margins on a job, or to “trim the fat” in other places. This could, for the avid job coster, include things like cheaper hotels, more people into fewer rooms, the practicality of working OT to finish jobs sooner than standard 8-hour shifts, and other allocations that may be made for tools, maintenance of vehicles and equipment, or other similar items. This draws you down on the money you can make on a job, and also adversely affects your business in other ways: tools and vehicles may not receive the care you generally budget into other jobs, workers may have to work an unusual and unfamiliar schedule in order to maintain the schedule, and there is a greater impact to roadblocks and difficulties that may be experienced on the jobsite. When looking at a large-quantity project, would you rather lock up a crew for 6 weeks on a non-profitable job, or spend the time doing other jobs that yield a profit margin that provides the ability to grow the business? This is the negative impact of the Race to the Bottom for contractors.

While the idea of a bottom-dollar price may sound enticing for the end-users, there are complications that arise when The Race To The Bottom begins to take hold. Less legitimate contractors who are desperate to cut corners may, unfortunately, cut corners in the wrong areas. While special care is generally taken by reputable contractors in Reporting, Special Inspection, or Deliverables. It seems often the case where a project is deliberately underbid, and Change-Orders are then issued to jack up the price. It’s important to follow design parameters, and more experienced contractors will provide some sort of guarantee or product, process and its effectiveness, and yes, price. Because the margins of a contractor are narrowed just to get the job, allowances cannot be afforded and, often, a contractor will “nickel and dime” the job with Change-Orders, taking up tremendous time of Project Managers, Engineers, and Contractors trying to substantiate the Change Orders, creating both direct and indirect overruns in no small amount. This is the cost of bottom-dollar: contractors less than reputable who are trying too hard to make ends meet.

Deliverables to clients suffer greatly as well. We've all been there. Your washing machine breaks, your oven kicks the bucket, your new car stalls out, your Air Conditioner stops blowing cold air. The difficult part of the resilient appliances, vehicles, and remodels is that somewhere along the way, it feels like manufacturers and installers stopped caring. New washing machines and refrigerators feel like they're DESIGNED to break in 10 years. New cars have excellent new features, but sensors fail and cost hundreds to thousands of dollars to fix. Remodels have a life expectancy of next to nothing. This concept is not alien to construction and its advances in technology. After all, if homes, streets and infrastructure were built perfectly and drainage maintained, there wouldn't be a market for us foundation repair contractors. But the market is soaring. Like the artists of the construction industry have fizzled out, their flame suppressed. It's been replaced by tract homes, fast construction that is too quick for its own good, shortcuts and side deals that mar the end product for consumers. There is no difference in the polyurethane industry. Research and Development, superior products, and the proof that something actually works are all a part of cost and OverHead…something that must be included in costing for a job. 

I had the pleasure to work with several engineers who helped me put polyurethane into perspective for the last 17 years. The perspective that seemed as blunt as it got, was that the polymer injection technology was all about “smoke and mirrors” with no real backing except good sales (I’m pleased to report many of our competitors used to say the same thing since it was a technology they did not own and could not provide. I’m also pleased to say pretty much all of them shoot polymer now and it’s a matter of pride for me). This always struck me as a harsh truth. Since hearing it first, less than a month into my employment, contractors that I have worked with have provided leaps and bounds to legitimize polymer injection technology. The Los Angeles Research Division released a Research Report for polymer in LA, accredited laboratories and agencies performed ASTM Testing under accredited guidelines, Liquefaction Mitigation Testing has been extensively researched and the research is ongoing. There is a REASON for all of this: other companies provide substandard polymers that just don’t stand up, their lack of experience lead to rookie mistakes that severely impact the success of a job, and unfamiliar grounds yield frustrating situations. For good reason: there are only two polymers I would ever recommend anyone ever use, no matter the contractor.

What the Race To The Bottom provides then is experience for an end-user. I have found from many end-users that have had the unfortunate experience of utilizing a substandard polymer or contractor that leads to an underwhelming experience, the fault never lies in the contractor who performed the work, nor in the fact that the client purchased the Harbor Freight version of polymer from the Wish App, hand-delivered on the back of a pickup truck that pulled a trailer. Therefore, in an industry that is only 30 years old, the response is a painstaking knife to the gut of the industry itself, when in reality, the harsh phrase is the fact that you get what you pay for. Fact of the matter is, the Craftsman lawnmower is going to burn out on the commercial jobs long before the Honda, and the Ryobi Electric Drill will burn out long before the Milwaukee. While the choice to buy a Craftsman should still belong to the client, roads, bridges, and freeways put lives on the line, and poor quality will kill both the industry (ask me about the crazy project in Eureka!), the ozone layer (ask me about how our solution provides “Green” Energy Savings), and potentially motorists.

The point of this article, is that the law stipulates in many cases that “Bottom Dollar wins the bid”, even though it is written that the job should go to the “cheapest QUALIFIED contractor”. There is a distinct difference (to which I have amply noted in this Article) not just in the quality, but the effectiveness of both Contractor and polymer. The Race To The Bottom, as pointed out by a colleague, is already well underway for California. When laws and entities look to bottom dollar only, the clear mark that the Race To The Bottom is already in a dire place. The thrill of competition mired out and replaced by whomever shaves enough off the job to just throw a number out there. The competition environment consumed by the Race To The Bottom…and the results all over the United States continue to show it.

Competition on merit is what provides quality and value to clients. People who argue this point most often have nothing to compete against merit, so the dollar is the only thing that counts. It’s important for them to undercut the raw effectiveness of a well-oiled machine. I suppose this is truly where “smoke and mirrors” meet legitimacy and professionalism in a head-to-head bout. And every failed project is a testament to the trials and tribulations the professionals have fought to achieve. It is a point of pride, the LARR, the seismic testing, the GTP-9 testing, for both me personally and for the legitimate polymer injection companies.

So these are where my thoughts lie – the Race To The Bottom can either influence greatness or promote the ineffective. But handouts create lazy people I am not impressed with. How do we allow the BEST products to the clients, ones that WORK, to save the industry from tragedy?