Dear Mr. Olsztynski:
I have just completed the second part of your article(s) that were printed in the National Driller magazine. As I read, I couldn't help but to nod my head in agreement. As a little background, I can tell you that I am a partner in a contract drilling company located near Madison, WI. We have been in business since 1988, providing auger, rotary, dual tube, bucket auger and other related drilling services. We are not a water well driller but do act as subcontractor to these companies for speciality drilling applications.
Everything you related in your article regarding pricing, profit determination and the need for contractors to stop killing each other with low prices is true, in a perfect world. Unfortunately, once a contractor or group of contractors raises their prices, another one steps in to take up the work by underbidding. It is not the fault of this contractor, it is the fault of the bidding public. Until "low price only" is removed as the controlling factor in bid award determination, there will not be a change in pricing trends. Regardless of what customers say (whether they be private individuals or government entities), low price is the primary factor by many degrees which determines project award. Additionally, we have seen other contractors cutting corners with regard to regulations, safety training, proper accounting and employee pay and benefit packages in order to keep their operations solvent. Smaller contractors have been known to take payments in cash in order to avoid income reporting. We all know these things are happening.
At recent drilling-related meetings, I performed informal surveys of our competitors and colleagues in the drilling business. I asked them pointed questions regarding how they determine price, what types of overhead calculations they made, what range of pay and benefits their employees enjoyed and how they were adjusting to the recent fuel price increases. The answers I received amazed me and surprised me. Although I am paraphrasing, the answers I have listed below make it easy to determine the question and to see why our industry is in such a state of price gouging.
"I don't know about overhead, I just figure that if I have money in the bank, I'm okay."
"If my employees want to take time off, that's ok, but I'm not going to pay them for it."
"Once every quarter I just have my bookkeeper come in and he tells me what I owe for taxes."
This just is the tip of the iceberg of ignorance of those in our industry who think a guy being paid $12.50/hr is a good wage. They also believe that a husband/wife business team is doing ok if they are both working fulltime and making $50,000 a year between the two of them. Finally, this is an industry that believes cash flow management is paying vendors that call the most and scream the loudest about overdue invoices. As you can guess, I am not happy about our industry. Why people want to work longer and harder every year with no increase in pay and with bidding prices going LOWER is beyond me. Thank you though for trying to educate the ignorant. We appreciate the effort.
Environmental & Foundation Drilling, Inc.
The problem you describe is common to all the blue collar trades. It stems from a lack of business education. In the plumbing trade there are a few licensing jurisdictions that require contractors to demonstrate a little (too little, in my opinion) business acumen before receiving a master's license, but otherwise the emphasis is solely on technical knowledge. This perpetuates the problem you describe.
I also think it stems from a blue collar bias throughout our society in which everyone undervalues the contributions made by people who provide us with life's essentials - plumbing, heat, water to drink, etc. This is the subject of an article currently germinating in my brain and which you'll probably read somewhere down the road.
Thanks again for taking the time to write,
Mr. Rich Maxwell:
I wanted to take the time to thank you for mentioning me in your recent article 'HDD - 20 Years - 20 Stories.' I found the article to be interesting and fairly accurate. I agree with your comments regarding the three major areas where the HDD industry will mature and evolve over the next 20 years and I definitely agree with your concerns about the full utility corridors. I can envision 'liability landmines' every time a drill bit enters the ground. We experienced this situation some years ago while drilling under a river; we drilled into a structure that had been drilled 10-12 years earlier. Adding insult to injury, it was found that Cherrington was the contractor who had drilled the first structure in that location several years before. The landscape had changed so much over those 10-12 years, we just didn't recognize the site.
I hope to be around to see the progression of the industry. If nothing else, the HDD business will always provide a challenge.
Keep up the good work!