How to Budget for Snow Removal
Snow removal: It’s going to cost WHAT?!?!?
The State of Connecticut budgeted $38 Million for snow and ice removal for 11,000 lane miles of state highways and roadways.
Let that be your (very exaggerated) worst case scenario…
This post provides everything you need to know about how contractors charge for snow removal and how to budget for the services needed during unpredictable weather conditions.
We can’t predict the weather and as far as we know, neither can you. However, we can structure a snow and ice removal contract to fit your level of comfort prior to the season start to bring (at least a smidgeon of) peace of mind.
There are numerous ways contractors charge for snow removal services. Ultimately it can be broken down into a few categories: “Time and Materials”, “Per Push or Per Inch or Per Storm” or a “Seasonally Fixed”. We’re going to explore each of these options to help you figure out what makes sense for your business.
Types of Snow Removal Contracts
Time and Materials Contract
A “Time and Materials” contract is quite simple. You only pay for the contractor’s service delivered i.e. their labor time and materials used. In this case, you’ll have a contracted hourly rate and material costs as line items.
There are many variables in this scenario that will effect the total cost of snow removal services. The most obvious factor is the volume of snow and ice that accumulates during the storm. Another factor is the efficiency of the laborers and equipment operators as well as the type of equipment available for use effects the total time it takes to complete the services. Is Joey sick and working slower than usual? Is the snow blower maintained properly? Is the plow sufficient to complete the work?
Time and Materials Budget Considerations:
- In light snow and ice years your costs will be low and in larger volume snow and ice years it will be high.
- The volume of snow will be a factor but so will the efficiency of the snow removal professionals and the equipment available for use.
- This pricing is difficult to budget for because of the number of unpredictable factors that come into play.
- It’s also difficult to verify contractor invoices because the snow totals don’t necessarily directly convert into labor time.
FM Pro Tip: Use this method if you have a strong, trustworthy relationship with a high quality contractor.ONE SOURCE OPERATIONS TEAM
Per Push Contract
In a “Per Push” or “Per Inch” or “Per Storm” contract, pricing will be set per storm based on the volume of snow, rather than the time it takes to complete the services. The price is set per storm, per inch. The only variable you have to consider is how much it snows each storm.
Per Push Budget Considerations:
- Price is set per storm based on the volume of snow rather than actual time to complete the services.
- Easy to confirm snow totals and charges per storm if you set a standard source for snow accumulation. We recommend WeatherWorks
- Difficult to predict seasonal spend (No one can predict the weather).
- Requires some attention to detail on invoices.
FM Pro Tip: This is easiest to budget for because you can look at historical data and make an assumption based on average snow accumulation.ONE SOURCE Finance Team
Tiered Pricing Example:
0″ – 2.9″
3.0″ – 6.0″
6.0″ – 12.0″
Every 6″ over 1′
“Seasonally Fixed” or “Guaranteed Minimum” snow pricing is a fixed contract amount for the entire snow season. This type of contract establishes a set price and budget assurance.
Seasonal Budget Considerations:
- Contractor gets paid the contracted rate or season minimum weather it snows or not.
- You typically take priority because resources such as labor and equipment have been allocated.
- Easy to budget for.
Your contract price should include a guaranteed minimum and additional hourly rate.
FM Pro Tip: Negotiate your payment terms and build it into the contract. Communicate your invoicing procedures ahead of time so both you and your contractor know when invoices will be submitted after a storm and how quickly they can be paid. Look at all your options!
Final Thoughts: Structure your snow and ice removal contract price in a way that makes most sense for your business. Consider historical snow accumulation data, past season invoices, and business continuity needs. This will give us a general expectation of volume and help us make a decision on how to structure pricing in future snow removal contracts.
Additional Resources for Snow and Ice Management
Your snow removal contract should include:
- Contract Period
- Scope of Work
- Trigger Depth
- Business Continuity Requirements
- Payment Terms
- Service Location
- Communication Plan
- 24/7 Contact Information
SIMA: Snow and Ice Management Association is a thought leader in the industry. Download their free resources for additional information on this topic.
From a Contractor’s Perspective: https://www.brightview.com/resources/article/snow-removal-contracts-101