Gas prices forced us to put expansion plans on hold

March 18, 2012

The rising price of fuel is crippling our small business. Being in the construction industry, projects are normally budgeted out in advance, six months to a year. It’s incredibly difficult to plan for this and makes it very difficult to bid.

Presently, we are in a four-year government contract that does not allow for price adjustments in the fuel cost. We do get a yearly economic adjustment of 1 percent, but there is no way to determine the cost of fuel that far in advance to allow for this kind of increase.  On our four-year contract, we submitted a bid when the fuel prices were at $2.58 a gallon. Today, we are still on the same project with the same workload and driving distance to the work site. However, the fuel price has almost doubled. The 1 percent economic adjustment in no way makes up for the increase of almost 95 percent to our fuel cost.

It is extremely difficult to budget the cost of fuel when the prices fluctuate so greatly. Our private industry contracts allow us fuel price adjustments, but they can only bear so much of an adjustment. However, our government contracts do not.  It’s very frustrating.

When bidding on jobs that are more than $100,000, we are simply just taking a gamble to see if we can complete the job before the fuel price increases again. That, in turn, makes it very hard to compete with large corporations that buy fuel in large volumes. The rising cost of fuel gives big corporations an unfair advantage because they are able to afford fuel and budget appropriately as they have bulk buying power. Many of them can afford to purchase 30,000+ gallon fuel stockpiles, which affords them to buy it at a discounted rate as well. But we, as a small business, can only bulk up on fuel at about 2,500 gallons — which only last around 30 days. Furthermore, it is not enough of a quantity to afford a discount like big companies get.

The high fuel prices take money away from the local economy as well. Now we are not able to afford to expand our business. We are not able to purchase the extra pieces of equipment that we need to stay competitive. We are not able to buy our materials and supplies at a cheaper rate. We are not able to hire more employees, nor offer raises or benefits to help our employees budget for rising fuel cost as well.  As you can see, it is a lose-lose situation, especially for small businesses.

We have gone from a crew of 17 employees down to a crew of only eight employees simply because we are trying to budget for these rising fuel cost.  We are stuck in our contracts and unable to negotiate for a fuel price increase.

We speak with the government contracting officer, but there is no empathy. 

When is it going to end? How are we going to be able to stay in business with all this uncertainty hanging over our heads?  This is not a way to grow an economy.

Robert A. Johnson is owner, supervisor and lead equipment officer for Johnson Trucking and Cascade Rock in Sweet Home, Ore.

Comments
Show Comments
Most Read Business