Under the Hood: Janitorial Pricing

Under the Hood: Janitorial Pricing

Download our white paper: "5 Things Janitorial Companies Know About Their Price, That You Don't"

Pricing Methodology

Methodology is important for establishing professional, expert pricing that delivers value to the buyer. We believe it is important to understand pricing so an accurate comparison of value can be made between competing offers. There is another good reason to detail pricing. Experience and discussion with industry buyers has taught us that the RFQ/RFP process, however carefully prepared and organized, rarely produces the results desired by buyers and other users like facility managers.

Why? So many variables affect pricing. Many variables can and are typically understood from the RFP, but because of limited time and resources during a short RFP process, just as many can only be gained after awarded the contract. Consider the following variables:

Cleaning Production Rate Variables

Typically Gained before Bid

  • Cleaning Frequencies
  • RFP Stated Expectations
  • Cleaning System
  • Facility Type
  • Building Age
  • Geographic Location
  • Facility Size
  • Architectural Design
  • Building Surfaces
  • Labor Market

Typically Gained after Awarded

  • Organizational Culture
  • Local Customer Expectation
  • Quality of Supervision
  • Budget Constraints
  • Type of Equipment Used
  • Labor Market Demographics
  • Weather
  • Occupant Density
  • Quality Levels

Understanding a RFP price rarely produces a perfect or real-life price number which underscores the importance of a long-term, open and transparent relationship if further price savings are to be obtained. The real-life price is found by working a process once the account is awarded. A guarantee to hold bid price protects buyers from inflation due to bidding mistakes, but what about savings gained from efficiencies? Buyers should benefit from those too. Varsity Facility Services philosophy and approach make that possible.

Varsity’s Pricing Arithmetic

Once you have considered all of the variables above, the janitorial service price becomes mostly a function of two things:

  1. Scope and expectation
  2. Production rates

Using an example, the calculation for the routine cleaning (biggest labor cost) is as follows:

routine-cleaning-calculationNotice the key cost drivers are the weekly frequency (6), the production rate (5,800 ft2/hour) and the wage per hour $9.00.   Frequency is the customer’s choice and wage is 8 parts market and 2 parts retention strategy—meaning if retention and low turnover is important to you, then you should have your contractor aim to pay 20% over market rates. The production rate is derived from the contractor’s  expertise, which accounts for the complexity from all of the variables listed in the “Cleaning Production Variables” table above. By far, production rate is the most important factor in determining whether the given price is feasible given the scope. Production rates are also greatly affected by:

  • Structured process combined with expert supervision
    • Less supervision (smaller the building or lower the overhead) the lower the production rate because process follow-up and improvement are more difficult.
  • Customer expectations
    • Higher expectations and service levels lead to lower production rates.

Based on your desire for high service levels, the following productions rates are appropriate to start a contract:

  • 5,400 for large facilities with sufficient onsite supervision
  • 4,500 for medium to small facilities with local area manager
  • 2,500 for small facilities

You can conduct a quick comparison of competing bids through the following simple calculation:

Simply divide the portfolio’s total square feet by the total daily routine labor hours bid:

1,729,563 / 364.9  = 4,740

Having a comparison to work with, you can evaluate competing offers and determine validity. Many malpractices exist in order to low-ball a competing bid. You should expect contractors to provide the numbers upfront and to have flexibility plan should your business situation change. Open disclosure gives Varsity’s customers peace mind that they getting the best price for their level of expectation.

Download our white paper: "5 Things Janitorial Companies Know About Their Price, That You Don't"

Marc Collings

Senior VP of Sales and Marketing at Varsity Facility Services
Marc Collings is Varsity's Vice President of Marketing for Varsity Facility Services. Marc oversees the company's growth, branding, positioning, customer support and analytics. In this role, he has positioned the company as a customer solutions leader for lowering cost and improving quality. He also led the company-wide rebranding and strategically positioned the company as a sustainability leader, serving on a committee for the EPA, obtaining the Ashkin Group award for sustainable leadership, leading Varsity's CIMS Green Building certification with honors, and developing Varsity's S.H.A.P.E. sustainability strategy, which improves service results along five dimensions: Safety, Health, Asset Preservation, Productivity and the Environment.

In 2011, Marc's team won the large company category, "Best in the Industry" marketing materials from the Building Service Contractor Association International (BSCAI). Marc also directs Varsity's proposal writing, sales process and tools development, marketing campaigns, corporate website SEO performance and customer support center.

Marc has spent his career developing strategic capabilities that enhance value to customers and the company. A Lean Sigma Green belt himself, he developed the company's Lean Sigma offering, providing an innovative solution to customers' need to lower cost while raising quality. He led the development of JanOPS, an industry-leading janitorial operating system, which brings standardization and service consistency to large campus and geographically disperse national accounts.

Prior to this position, Marc was responsible for strategic management at Varsity. He has initiated or directed multiple strategic technology initiatives, ranging from a corporate website, a corporate intranet, a web/smartphone based quality control system, a learning management system, a corporate content manager and knowledge wiki, salesforce.com deployment and customization, and an Android app which facilitates the GROW sales process he has developed.

Marc is the author of several leadership and management training manuals, field guides, marketing collateral and case studies. He speaks Portuguese and Spanish and holds a bachelor degree in English/Technical Writing and a Masters of Business Administration in Finance from Idaho State University. Marc enjoys mountain biking, skiing, fishing and golf. He is happily married, and he and his wife Victoria enjoy raising and spending time with their four children.

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