Snow Removal Contracts 101
A quick guide to choosing the contract that's right for you
Choosing the best type of contract for snow and ice removal services is a little like gazing into a crystal ball. Snowfall can vary substantially and even with resources like NOAA to turn to for seasonal forecasts, knowing what to budget and predicting costs can be difficult guesswork.
Nonetheless, as discussed in this article, it pays to sign on early with a qualified snow and ice removal provider, but what kind of contract is right for you? Here's our quick guide to help you weigh the options.
Time and Material Contract
With a Time and Materials Contract, you only pay for the services you receive. This can be good if your goal is to pay for services as needed and you are OK with the budgeting uncertainty.
However, you need to be prepared to pay more than expected in the case of above-average snowfall or experience a surplus in a year of less-than-average snowfall. You should also take into account the potential drawbacks and pay close attention to the qualifications and communication protocols of the provider with whom you contract.
Contracting with lesser-qualified providers based on an hourly rate can pose problems if that contractor either doesn't have the proper equipment or experience to get the job done in a timely manner. The initial appearance of lower hourly rates can ultimately lead to larger bills if the provider is less efficient. With inexperienced providers, you may also end up spending more on material fees, such as ice melting chemicals, than budgeted.
Be aware that working with a Time and Materials Contract may require extra diligence on your part to verify the hours spent clearing snow and ice and the amount of materials used.
Per Inch Contract
Also known as a Per Event Contract, a Per Inch contract allows for a clearly defined price based on different snow accumulation levels, such as 1-to-3 inches or 3-to-5 inches. It's great if you want to pay for services as needed, but would like some certainty on what the cost will be based on the extent of the snowfall. It also eliminates the task of verifying work done as opposed to a Time and Materials Contract.
Like Time and Materials, this type of contract can make budgeting difficult. Also, because of the inherent uncertainty involved around storm duration and timing, there are many snow and ice removal providers who prefer not to offer this type of contract.
Again, signing on with a qualified, communicative provider is critical. Prior to signing, discussion needs to take place between you and the provider to determine which services should be incorporated into each incremental price based on the use of the property.
Also keep in mind that ice melt products are often charged per application, so if your property has zero tolerance for ice or snow on walkways or parking areas, this type of contract may not offer enough of a guarantee for your purposes.
Per Push Contract
Also known as a Per Occurrence Contract, a Per Push Contract is a good option if you want to be in control of when services will be performed and how much each service visit will cost.
When engaging in this type of contract, you'll need to clearly define the price for each individual operation, for instance clearing sidewalks, parking lots, salting, etc. In larger events, you will have more than one “occurrence” or push, which, not surprisingly, results in higher expenses. How many “pushes” occur in a storm depends upon duration, timing, weight of the snow, and many other factors.
There are some important points to consider with this type of contract. Similar size storms can have different costs associated with them depending upon the duration and timing of the storm.
Strong communication between you and your provider will also greatly determine the success of this arrangement, especially in the case of longer duration snowstorms where multiple service visits by the provider may be required.
Budgeting is also harder with a Per Push Contract and invoice questions can arise regarding the use or need for multiple plows for bigger or longer storms.
Fixed Fee Contract
Fixed Fee or Lump Sum Contracts are becoming increasingly common in areas where above-average snowfall has been the norm over the last few years. Unlike the other contracts above, this type of arrangement is the only one in which you will know exactly what your snow and ice removal services will cost, regardless of the weather.
Most providers work with clients to arrive at a fee based on average snowfall rates and data that blends below, above, and average snowfall for the client's specific region. Also, it's common that these contracts are multi-year arrangements, rather than one-time, to balance out heavier and lighter winters.
Obviously, in the case of higher-than-average snowfall, you'll save money as opposed to a Time and Materials Contract. During years of lower-than-average snowfall, the provider may benefit, providing some balance compared to the heavier years. Take note that risk is usually shared against extreme circumstances with a fixed fee contract. Most providers cap the amount of services provided so unlimited budget protection on the part of the client is not guaranteed.
With a Fixed Fee Contract, service definition is vital. A good provider will clearly document the service expectation and price in the contract. Be sure you and the provider are clear on what is expected and when it's expected before, during, and after the storm so you can be sure your property is properly serviced for all who use it. Contract disputes can arise with Fixed Fee Contracts, so be certain to sign with a qualified, experienced provider. You want to partner with a provider who understands the risks, can withstand the effects of a heavier winter, and commits to regular communication about services provided and progress towards any contractual cap in any given year.
Ask Questions, Weigh Options
No matter which contract type you prefer, be sure to ask questions and vet your provider carefully before signing. Read our articles on Best Practices for Choosing a Snow and Ice Removal Provider and Questions You Need to Ask.