The right-of-way maintenance business is not for the faint of heart. It’s extremely low-bid-driven and equipment-intensive. Contracts can be lucrative, but are often somewhat fleeting. Needless to say, contractors like Todd Olerud are under quite a bit of stress.
But that’s just how it goes in the right-of-way maintenance business, Olerud says, so you have to learn how to live with it. Over the course of his 20-plus-year career, Olerud has definitely learned how.
“We have a lot of competition, so margins are pretty tight,” says Olerud, owner of New Age Tree Service in Spring Grove, MN. “Historically, many clients (rural utility co-ops) simply looked for the contractor that came in at the lowest hourly rate. But that’s starting to change, which is a good thing.”
Focus on improving production
Olerud started New Age Tree Service back in 1994 after racking up years of experience working for another right-of-way maintenance company. Olerud actually started out with a partner, but the partner backed away after just six months. Olerud continued, determined to see his vision through.
“One of the reasons I started my own company was because I had a lot of ideas for how to do this type of work more efficiently,” Olerud says. “This work is very labor-intensive (40% of sales), but was even more labor-intensive back when I first started out. I saw an opportunity to create a more mechanized operation that was focused on high production as opposed to maintaining a low hourly rate.”
Initially, this concept was anything but an easy sell. The rural utility co-ops looking to hire contractors such as Olerud were fixated on the lowest bidder. At that time, lowest bidder equated to whomever said they would perform the work at the lowest hourly rate. Thus, contractors with inferior machinery, personnel and operating systems often won bids.
“Years ago, the co-ops were happy with two guys and a bucket truck,” Olerud tells. But today, due to tighter budgets and a better understanding of long-term costs, co-ops are more interested in higher production and job quality. Some co-ops have even put full-time arborists on their own staffs to help ensure that contractors are completing the work like they’re supposed to.
“Many bids now are production-based,” Olerud points out. “Lump-sum bidding has also become quite common. For example, we might be asked how much we’ll charge to do an entire 110-mile-long substation, based on the co-op’s specs.”
This works to Olerud’s advantage. His fleet of bucket trucks, Terex track loaders and productivity-boosting attachments—together with his veteran staff of skilled employees—help put him in a good position come bid time.
Olerud and his team have devised an assembly line-like approach to completing jobs.
- Track loader with mowing attachment comes through (see photo)
- Track loader with tree shear attachment removes danger trees, rotten trees and dead trees
- Bucket truck comes through to trim remaining trees (see photo)
- Track loader with grapple attachment moves all logs to the side and the lighter brush to the middle
- Track loader with mowing attachment comes through once more to grind all of the brush stacked in the middle
- Track utility vehicle comes through to spray herbicide (see photo)
Sounds easy? Well, it is—and it isn’t. This approach, Olerud says, has definitely led to an increase in productivity. But these jobs are big jobs, taking a long time to complete and often leading employees far from home.
“There’s a lot of variance from one job to the next, and a lot of that depends on how much neglect took place before we started our work,” Olerud points out. “Some projects are like tree trimming jobs, but others are almost like logging jobs. I guess it’s fair to say that most of these projects take six months or so.”