Oct. 15 2015 01:07 PM
Price of doing business
EDITOR’S NOTE: Although this study was conducted in 2004, more than 11 years ago, it is still relevant today. We recently spoke with John DeCell about this report, which compared prices for doing the same jobs from the year 1988, and then 2004. “It would be interesting to price these projects today. I’m sure it’s not much different than it was 11 years ago when I wrote this article,” said DeCell. The results are thought-provoking.

John DeCell is the president of Software Republic. He is also a licensed irrigation contractor as well as a certified irrigation auditor.

I was a contractor for a number of years before I started doing designs and opened my software company. In 2004, I went through my records and found three systems that I had installed in 1988. I wanted to see the difference in the cost over those last 16 years. I asked multiple contractors to bid on my old system designs; the prices included a draw design with a rain sensor.

The three systems and the results are as follows:

System Number One:

This was a 30-year-old residence. It is what I consider to be a typical residence, with a lot size of about 100' x 140'. The shrub areas average about four feet deep along the front and back of the house. The garage is detached with a straight driveway. The sidewalk is a straight walk from the center of the residence to the street. There is no sidewalk running parallel to the street. You will not have to go under the driveway, but you will have to go under the four-foot sidewalk twice, each time with ¾" pipe. There is nothing really special about this job; it’s pretty much typical. The project consisted of a total of seven zones with 74 sprinklers.

System Number Two:

System number two was a small backyard area only. The yard measures about 28' x 28'. The entire backyard was landscaped after the irrigation system was installed. All of the existing landscape had been removed. The system was divided into two zones, due to more shade on one side of the yard. This one was really easy. It was a small job and a trencher was out of the question; we dug this one by hand. The job was two zones and nine sprinklers, total.

System Number Three:

System number three is a corner lot that measures 95' x 129'. We irrigated the front and side yard only, nothing in the backyard. The shrub area is about four feet deep on average, and it runs around the front and side of the house. The property has a four-foot walkway that runs straight from the house to the street, and around the perimeter of the lot parallel to the curb. We went under the walkway five times. Other than that, this is a pretty standard job, no major obstacles and was easily dug with a trencher. The job consisted of a total of five zones and 50 sprinklers.

Keep in mind that back in 1988 when we installed these three systems, the cost of a barrel of oil was around $12.58. As of the writing of this article (which, remember, is 2004), oil is at $40.79 a barrel. That’s an increase of 224 percent. We all know that gasoline is more expensive, that certainly is no secret. The average price of one gallon of regular unleaded gasoline in April of 1988 was $0.93. In April of 2004 the average price was $1.83, an increase of 96.77 percent.

Minimum wage back in 1988 was $3.35 an hour. It’s now $5.15 an hour, an increase of 53.73 percent. According to the U.S. Department of Labor, the average total compensation, including benefits per employee in the private sector in 1988, was $13.79 per hour. The average cost in 2003 (figures are not yet available for 2004) was $22.92. That’s an average increase in labor costs of 66.13 percent.

A loaf of bread in 1988 was around 60 cents; in 2004 it is about 98 cents, up 63.33 percent. A pound of chicken was 76 cents, now $1.12, up 47.37 percent. A pound of beef was $1.75, now $2.49, up 42.29 percent.

The Consumer Price Index is compiled by the Bureau of Labor Statistics and is based upon a 1982 base of 100. The Consumer Price Index in April of 1988 was 117. The Consumer Price Index in April of 2004 was 188. That equates to an inflation rate of 60.07 percent. According to the Bureau of Labor Statistics, $1.00 in 1988 has the same buying power as $1.60 in April of 2004.

Remember these statistics are from 2004—can you imagine the numbers today?

Is any of this cost comparison information surprising to you? I’m going to guess that the answer is probably no. Food prices are up, insurance rates are up, equipment prices are up, material costs are up, housing is up, and college tuition is on the rise, just to name a few things. I think it’s safe to say that everything costs more today than it did back in 1988. Well, almost everything!

Now let’s take a look at the pricing of irrigation systems. I requested the contractors and distributors to submit pricing for my projects by the zone or by the sprinkler. Few of the estimates considered the actual cost of materials, labor, overhead, etcetera. Most everyone said that they charge $300 to $400 per zone, or around $40 to $45 per spray head, or $90 to $120 per rotor. I did receive a few estimates that gave a total cost of installation. I am assuming that these people took the time to calculate the actual cost of the materials and the labor for installation.

The price per zone would have job number one ranging from $2,100 to $2,800. The costs per sprinkler would have the same job pricing out anywhere between $2,960 and $3,330. Job number two would go for $600 to $800 per zone cost, or $360 to $405, if priced per sprinkler. Number three ranges from $1,500 to $2,000 per zone, or $2,000 to $2,250 per sprinkler. As you can see, per zone or per sprinkler pricing has the estimated price of these three projects jumping all over the place.

Now that we know how most of the guys say they estimate a job, let’s see what their real estimates came out to be. The price for system number one by today’s standards (2004) actually averaged out to be $2,666. I charged $2,445 for this system on June 6, 1988. Today’s rate is a slight increase in price of 9.39 percent.

System number two’s average price was $708.50; I charged $850 for this job back on April 27, 1988. Today’s rate (2004) is a drop in price of 16.65 percent.

System number three’s average installation rate was $2,063.50, I charged $2,100 for this job on February 20, 1988. Today’s rate (2004) is a drop in the installation price of 1.74 percent.

I wonder how contractors survive today. How do they stay in this business when all of their expenses are on the rise, but they don’t charge anything more than the going rate of sixteen years ago? I definitely was not the cheapest contractor back in 1988, but I also wasn’t the most expensive. How can inflation rise 60.07 percent over the last sixteen years, while the average price of an irrigation system rises only 0.8 percent? This is just my opinion, but I think part of the problem is the lack of professionalism in the industry today. Back when I was installing, most contractors provided a design for every system they installed. Many contractors provided watering schedules and maintenance plans. These full-service contractors seem to be the minority in the industry today. It appears to me that most of the contractors have let the low-ball bidders dictate how they are going to run their businesses.

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