CON 280: Source Selection and the Administration of Service Contracts

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Presentation transcript:

CON 280: Source Selection and the Administration of Service Contracts Market Research Exhibit Landscaping/Grounds Keeping

Market Research: Landscaping/Grounds Keeping ddd Market Research: Landscaping/Grounds Keeping Key Market Research Topics Data Market Segmentation Largest services segments: Lawn maintenance (40.8%), Basic Landscape Design and Installation (20.8%), and Lawn Care (13.2%) Other smaller segments: Tree and Ornamental Care (7.1%), Snow and Ice Removal (4.9%), Irrigation (4.2%), and Other (9%) NAICS code 561730 Market Size $59.2B market Market Growth From 2006 to 2011: -0.6% Projected growth 2011-2016: 3.7% Market Share Over 350,000 businesses provide this service The top 4 players account for 6.3% of the available market Government Market Government and institutional clients make up 3.9% of the market Source: IBIS World; Censeo Analysis

Market Research: Landscaping/Grounds Keeping ddd Market Research: Landscaping/Grounds Keeping Key Market Research Topics Data Value Chain Basic services value chain, with inputs of Time, Knowledge, Equipment, and Systems Cost Structure Labor is the major cost component (34%) The purchase of lawn care equipment and materials is another primary cost component. Cost Drivers Local and job-specific wage rates Use of labor-saving equipment Pricing During the recession, industry operators have relied on price competition, leading to falling revenue Firm fixed price contracts Different response times and service levels are associated with different price points (i.e., higher service levels cost more) Source: IBIS World; Censeo Analysis

Market Research: Landscaping/Grounds Keeping ddd Market Research: Landscaping/Grounds Keeping Key Market Research Topics Data Small Business 86% of the businesses in this industry have fewer than 10 employees Competitive Dynamics Low barriers to entry Light regulation High level of competition Market Trends Low levels of technology change Potential changes in regulations of chemicals used Best Practices Use of labor-saving equipment Use of more eco-friendly chemicals Industry is moving away from “scheduling” requirements (e.g., mow the lawn twice a month) towards “outcome” requirements (e.g., maintain the lawn to keep pathways clear) Source: IBIS World; Censeo Analysis

Market Research: Landscaping/Grounds Keeping ddd Market Research: Landscaping/Grounds Keeping Key Market Research Topics Data Performance Metrics Generally based on: Response time Complaints threshold Examples: Response within 4 hours 90-95% of the time (examples vary) No more than 0-2 complaints per quarter (examples vary) Source: IBIS World; Censeo Analysis

Market Research: Landscaping/Grounds Keeping ddd Market Research: Landscaping/Grounds Keeping Key Implications for the Acquisition In an industry with such a high percentage of small businesses, there may be political issues if small businesses risk being displaced by an IOSS contract The industry is projected to be entering a period of recovery, so key players may be hungry for additional business There is a high level of competition in the industry, which is generally good for potential buyers If our required service levels are higher than average, we may be a more expensive customer to serve and should therefore consider changing our requirements to be better aligned with Industry