WSCA Rumour Mill & Roundupdate Fall 2013

JohnAs the annual bidding and negotiating tournament for 2014 silviculture work winds down I thought I would offer a few of my half-baked opinions on the market. Of course, as you all know, opinions are by definition half-baked, as they are based on the information available at the time. Therefore opinions may be incomplete. Being neither all-knowing, or all-seeing, particularly when it comes to the invisible hand of the marketplace, I extend these thoughts based on what I have heard in the last few months.

First of all thanks to the handful of contractors who contacted me in appreciation for the market information the WSCA produced in connection with our September pricing summit. I found that encouraging. I also found it interesting that most of them were not WSCA members. I mention this not to say they should become members to help pay for this work, (which they should), but to point out that the data we distributed was for everyone’s benefit. It was not some WSCA member conspiracy to mislead the market to higher prices as some skeptics have let on. Also encouraging were the firms that reported later this fall that they had actually negotiated more favourable terms with their clients using WSCA information. I would like to think that that trend was wider spread. Because that really was what we were trying to do; provide some industry-wide analysis of pricing, profits, future demand, safety, regulatory and workforce trends in the hope these perspectives might help with the business case negotiations each firm would hold with customers. We were also hoping some of this information might rub off on the open bidding market. That doesn’t seem to be the case by most accounts. Just as interesting was one particular call, that I think was likely representative of the thoughts of many. In this case the contractor questioned whether the WSCA was trying to tell people what to bid. He made the point that what anyone bids was none of the WSCA’s business. He went on to say that how he ran his business was his business. In particular, because it involved feeding his family. And of course, he was right. I agreed with him and told him all the WSCA was interested in was to offer information intended to help individual contractors figure out what it would take to keep feeding their families and stay in business. After all, no silviculture owner is unique because they are feeding families and trying to stay in business. And I guess that is the point and the central tension in all this: we all participate in the market as individuals, yet we are effected by the collective actions of everyone else. To put it another way the WSCA has no business in what anyone bids. But it does have an interest in what everyone bids. If there was a conspiracy on the WSCA’s part it was to try and steer those cumulative effects and market signals to the point were contractors could draw their bottom lines a little higher than before. That industry-wide objective doesn’t seem to me to be at cross purposes with anyone’s individual business interests. At least that is my opinion. Nevertheless, there was always the risk of blowback from the WSCA getting involved, even at arm’s length, in something as complex, contradictory and fraught as the market. Lots is at stake each year in this industry around bids and negotiations. So maybe not everyone is thinking straight. But some of the criticisms I have heard about the WSCA don’t make any sense. The WSCA is not obviously a cartel. Nor does it actually bid in the market so it can’t be blamed when prices drop. Nor does it have it’s nose in its members’ or any other players’ business decisions about what is bid. How then can it be discredited for trying to pull the industry together in the broadest terms, through communication, sharing of information, and so on, so that the competitive cycle starts heading up rather than down? Trying to improve the overall welfare of the industry does fall under the WSCA’s ambit—it is the ambit—even if it is a challenging goal to set for itself. As I said at the beginning I am working with incomplete information. I don’t know precisely where negotiations have taken contractors who are engaged in long term direct award contracts. I can only infer that those prices are better than the open market. On that point I have to mention one comment that came to me indirectly about a licensee forester complaining that their prices for direct award work amounted to subsidizing BCTS low bid auctions. That would be hard to prove. But there is certainly some circumstantial evidence to support that. It’s an interesting thought that our licensee customers might share an interest with us in improving the tendering and administering of government contracts. Just a thought. Being it is just before Christmas, some happy news. I have heard that the logging sector is having success after months of prolonged negotiations with their industry clients in getting their base rates to rise between 15% and 20% over the next two years. They have also managed some other concessions that should improve their lot. I commend the logging industry for their work and wish them success. I also thank them for their support and encouragement to our sector. They have provided good examples. I will also mention the forest companies and government clients that we rely on for work. We look forward to collaborating with you to keep the silviculture contracting business and its workforce in good shape. In closing I would like to thank the WSCA members and non members who attended this year’s pricing summit last September. I think a lot of good work was accomplished. I also think we have more work to do. I hope that at next year’s summit we will see many of you who didn’t attend this year. As an industry we are obviously very good at minding our own businesses and competing. But over the long term to be successful businesses we have to be part of a successful industry. That requires working together with the same people you often compete with. Learning how to do that takes a different type of commitment and different skills. Every time the industry gets together and shares information we get better at this second requirement which moves us a little more towards a better place. I hope to see all of you at the WSCA Annual Conference and Tradeshow in Kelowna next year, January 29, 30 and 31, 2014, to continue this and other important conversations. Meanwhile Merry Christmas, Seasoned Greetings and a Spicy New Year. Best wishes