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Friday, July 3, 2009

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Recession and cost cutting clean out janitorial firms By VERNON CLEMENT JONES ~ Guardian Business Editor ~ vernon@nasguard.com: The recession has trashed incomes for many of the established janitorial companies, that the finding of a Guardian Business investigation identifying a growing number of clients prepared to cancel contracts, cut them to the bone or farm them out to the ballooning number of unlicensed contractors working below cost. "It's the hardest it's ever been for a man out there running a janitorial business," 20-year veteran Vincent Baker told Guardian Business this week. "We've seen growing number of unlicensed firms — run by people who used to work with you — approach your clients and undercut your prices so that you can't match them (and even meet costs). "The clients — especially government — is willing to hire them and they have been." He's not the only industry operator complaining about the state of the once-lucrative industry. Guardian Business interviewed several of the country's largest and well-established firms, most voicing the same sort of concerns as Baker. They've seen government contracts dry up, as ministry officials have allowed long-standing agreements to expire over the last year. In many cases they've then transferred those accounts to what industry veterans charge are unlicensed players, willing and able to offer pricing well below standard rates. It's a competitive edge facilitated, they assert, by the growing us of illegals, even at government buildings. One operator points to the loss of a ministry of education contract last month as particularly devastating. Still, general service contracts in the private sector has also been roiled. It's a reflection of the tight economy, said Mr. Sands at another well-known cleaning firm. Businesses are cutting back, often starting with their janitorial budgets. "We've seen them cancel the contracts or they take contracts that were for two or three times a week and reduce them to once or twice a month," said Ambrose Smith. "We've also seen them decide to fire the contractor who uses a team to clean the office after hours and (turn) to an individual person who works during the day. "It's like we can't do anything about it because we are professionals with employees but they're looking at the cost only and deciding that way." The net effect for many firms has been to reduce their own crew sizes. Unfortunately that move has had a cannibalizing effect with many of those workers, often undocumented, left trolling for contracts of their own. It's a "catch-22 situation" that can't be helped, said another operator, with one of Nassau's largest firms. There's almost a race to the bottom going on now in terms of pricing, suggests Baker. Others are pegging the year-over-year decline at 30 to 35 percent, with an increasing number of clients now expecting contractors to come in as much as 40 percent below existing contract prices as a prerequisite for renewal. That may not change any time this year, as even financial service companies — the Cadillac of janitorial clients — grapple to cut costs as revenue shortfall drag down their bottom lines. Friday, July 3, 2009