Volume 42, Issue 2 - February 2007

Contract Glazing

Glaziers Speak Out About the Impact of Fuel Surcharges

Everyone has been hurting from increasing transportation and fuel costs and the glazing industry is no different. In fact, the situation introduced a new phrase to industry lexicon: fuel surcharge.

When manufacturers incur additional costs, those costs are passed to the fabricators, who pass them along to the contract glazier who has no choice but to pass it along to their customers—or absorb it. There was a time when prices would escalate and a company would have to make a decision on whether or not to pass additional costs along. Today, it’s no longer a matter of “if” that additional cost will be passed along but “how much” of that cost will be passed along down the line. The surcharge issue has fueled debate and brought about much discussion among industry professionals.

Kevin Forman, project manager for W & W Glass of Nanuet, N.Y., sees more surcharges. 

“Fuel surcharges have become a part of the supplier’s cost structure and they are passing them along as an added line item to their invoices,” he said. “We mostly see the charge in the form of a percentage, but some companies charge a flat fee to cover their costs.”

Operating from a small, rural area in southern Indiana, Larry Rodgers, president of Linton Glass Co. in Linton, Ind., gets hit with his share of surcharges because most of the companies from which he orders glass and aluminum products are out of state. “We order a lot of glass from Louisville Plate Glass in Kentucky for our commercial projects and have fuel surcharges with every order,” said Rodgers. “The costs we are assessed depend upon the cost of the fuel at the time of delivery. What I appreciate about Louisville Plate Glass is they will lower their charge to us if their costs drop, unlike a lot of other companies that don’t lower them once they have been raised.

Even though its supplier gives it flexibility in pricing, Rodgers still faces a competitive disadvantage because of the fuel situation.

“A bigger problem that I face in my area that directly relates to the surcharge issue is with my competition,” Rodgers said. “We have a lot of mom-and-pop type operations that don’t factor in these additional costs to their bids nor raise their prices in a timely manner. I have to compete against companies that haven’t raised their prices in over a year. When they are awarded the job because of the lower bid it hurts both of us. They may get the job but they then operate at a loss and struggle to stay afloat. Meanwhile, we lose the bid simply because of the difference in price in some cases.”

Rodgers pushed his prices multiple times in 2006, creating more opportunity for that price disadvantage.

“We have had to implement more increases this past year than we have in the history of our company,” Rodgers continues. “Typically, we increase prices twice a year. Last year, we had to raise prices six times on aluminum and four times on glass to keep up with the escalating prices and surcharges. While glass will fluctuate, once aluminum goes up, it never comes back down.”

Jim Conley, president of Accent Glass & Mirror, a small glazing contractor that focuses on renovation and rehabilitation throughout the state of Ohio and contiguous states, sees fuel surcharges as an opportunity. 

“I personally see it as a way to raise your prices on your customers without saying you are raising your prices,” Conley said. “We handle the issue of surcharges by factoring in the percentage we feel it will cost us during the time of the initial bid and hope we are close in the end. Sometimes we are right on and sometimes we fall short. If we fall short, we lose money and have to eat the shortfall.”

Conley justifies this strategy by saying that everyone is charging more because of energy costs.

“Surcharges are a way of life and consumers are getting hit with additional surcharges for goods and services across the board,” Conley said. “Currently, the surcharges on glass are at about the lowest [between 7.5 and 8.5 percent] they have been for some time. They were really high over the summer months. The bottom line is we look at surcharges as just a part of doing business today and hope we can recoup that added cost with each job.”

-by Peggy Georgi
(see related article, page 120)

SBA Proposes Surety Regulatory Changes

The Small Business Administration (SBA) proposed a number of regulatory changes that are designed to make improvements to its surety bond guarantee (SBG) program and to encourage more participation by small businesses, including small glazing contractors.

Frank Lalumiere, associate administrator of the Office of Surety Guarantees, U.S. Small Business Administration, said a final rule is expected to be published by early April. There are six proposed changes:
• SBA will increase its guarantee percentage to 90 percent to prior approval sureties for bonds written on behalf of veteran-owned and service-disabled veteran-owned firms. Currently, SBA guarantees 80 percent of a surety’s loss unless the contract is $100,000 or less, or the bond is issued on behalf of a disadvantaged or HubZone firm; 
• Preferred surety bond (PSB) sureties will be able to charge premium rates that are permitted under applicable state laws. The current regulation limits the charge to the Surety Association of America’s published 1987 premium advisory rates;
• The requirement to perform annual audits of all PSB sureties will be changed to require audits of PSB sureties at least once every three years;
• Affiliates of PSB sureties will be able to participate in the prior approval program;
• The proposed rule will clarify that the PSB Program has been made permanent; and
• SBA will require that the surety submit its surety fee to SBA within 45 calendar days of SBA’s approval of the guarantee agreement. 

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