An argument for non-binding contracts

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BillAdams
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An argument for non-binding contracts

Postby BillAdams » Tue Sep 21, 2010 7:23 am

There have been some discussions recently about the topic of binding, not to exceed and non-binding contracts.

Which is best?
The short answer is non-binding, as long as you are hiring a reputable mover. Choosing a reputable mover is far more important than getting a binding or NTE contract.

Here’s why:
Binding and NTE contracts are a statement from the mover (aka the sales rep) that their weight estimate and packing count are accurate, and the customer has peace of mind that they are protected against the final charges being higher. Unfortunately, there are too many sales reps that think they need to provide the lowest estimate in order to win the business. Customers have taught them this when they focus on price over service during the estimate process. Too often, the sales rep will purposely underestimate the weight and/or packing count and then give a binding or NTE cap on it. This is doing a major disservice to the driver, the dispatcher, and the customer.

Here’s why:
If the driver suspects the actual weight and packing will be higher, he/she either must be willing to be underpaid to do the move, or challenge the order before starting the job. Challenging means a new contract must be written on the spot, or he/she can refuse the job. Either way someone loses – the underpaid driver, or the upset customer who now must argue their position with a sales rep who likely will not return their calls. The dispatcher is affected by the fact that they planned this load to go on a truck with other shipments. If it actually is larger and takes up more space than planned – somebody’s load is not going to fit. This one, if it’s the last load planned to go on this truck. How do customers feel when their load doesn’t go all at once, and shipped separately? Not happy.

When a customer asks for a binding or NTE contract, they generally have picked the lowest estimate and then they want to protect themselves against their mover for higher charges. Protecting yourself from the people that you’ve asked to help you get all of your most valued possessions to your new home definitely creates an adversarial relationship. What you really need is a trusted partner to work with you to provide a smooth and efficient transfer to your new home.

I believe Rick put it in perspective on a recent post by saying that paying your mover for the actual services they provide is the most fair and equitable arrangement.

I realize that my opinion on this subject is not popular on this site but, with over 23 years in this business, I truly believe that drivers getting paid for the exact services they provide, not more but not less, is the best way for a moving company to retain truly professional drivers long term. Happy drivers = happy customers.

FYI: As a sales rep, when I am asked to provide a binding or NTE contract I am very happy do so, but it is not based on under estimated weight and packing.
"Twenty years from now you will be more disappointed by the things that you didn't do than by the ones that you did do, so throw off the bowlines, sail away from safe harbor, catch the trade winds in your sails. Explore, Dream, Discover."
-Mark Twain

MusicMom
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Re: An argument for non-binding contracts

Postby MusicMom » Tue Sep 21, 2010 8:18 am

I will add my opinion, not as a professional, but as a daily observer on this site.

A Binding Contract (a plain Binding quote, not a Not To Exceed), sometimes called a "flate rate", has begun to creep in as the preferred method of quoting for movers who are not keeping their customers' best intentions in mind, at least since the estimating rules were changed. I've outlined th reasons behind this several times in various places n this forum.

cnoblit
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Re: An argument for non-binding contracts

Postby cnoblit » Tue Sep 21, 2010 9:31 am

There have been some discussions recently about the topic of binding, not to exceed and non-binding contracts.

Which is best?
The short answer is non-binding, as long as you are hiring a reputable mover. Choosing a reputable mover is far more important than getting a binding or NTE contract.

Here’s why:...
Bill, this is a terrific start...however...there are other equally persuasive arguments as to why a binding estimate is not in the best interests of either the customer or the mover.

One such issue is the accuracy of the "Table of Measurements" (aka the "Cube Sheet") which is the inventory list the customer and the sales person create when the customer takes the sales rep on the tour of the origin residence. This tour is called a "Walk Through," a "Survey," or "The Estimate." During this tour the customer points out each item which will be moved and which articles which will be packed into boxes. The sales representative's job is to record each article on the Table of Measurements which then becomes the Binding Estimate "permission slip," listing the articles which the driver will load on move-out day and (assuming the sales rep correctly records that which he or she is shown) it is the customer who controls which items are listed on the Table of Measurements.

Now it is move-out day, and -- once again -- it is the customer who controls which items are loaded onto the truck and I guarantee...I g u a r a n t e e y o u... that the customer has added additional items to be moved. Sometimes the customer will add only a few items...most of the time the customer adds many extra items. However (on the day the estimate was performed), if one was to suggest to the customer that he or she will be adding items one will hear denials and protests which will sound much like this: "Oh no!...this is all we will be taking!..we're absolutely certain!" I hear this often and while I find it amusing I'm always quite disappointed that the customer believes they know more then that which my 35 years of industry experience have taught. Instead of issuing protests, why not ask the sales rep: "why do you believe this to be true?" In addition, I believe that the number of articles added by the customer has a direct correlation to the amount of time between the initial estimate and the move-out date. The greater this period of time, the more articles will be added.

Why does the customer add articles? 99.9% of the time it is not done intentionally: most customers have the best intentions and they truly believe that they have shown the sales rep everything to be moved. However, rarely does the customer understand the ramifications of the initial Walk Through\Survey and when performing this exercise: the customer is creating their own moving day binding estimate permission slip and the customer is creating their own moving day binding estimate problems.

So now it is move-out day. The customer has signed a binding agreement which states that 150 articles will be moved for the binding price. The driver has a Table of Measurements which lists these 150 articles. The customer has presented the driver with 180 articles to be moved. And the mover has a dilemma: do they confront the customer with the fact that the customer had added articles? If they do they will most likely have a customer (already as stressed as a human can be by the moving process) who is irate. They may deal with accusations of bait and switch. They may hear charges that they are a scam mover. They may be threatened with an attorney. They may be screamed at. There may be tears. A mover I know once had a gun pointed at him...yes...really...a gun. Does the mover want to put his or herself through this drama? While some will, some won't because...after all..."it's only 30 pieces." But 30 pieces is 20%. 20% on top of the 65% discount the mover has already provided: an additional 20% for a business which, at the end of the year, is marginally profitable.

As a result, more often then not, customers who receive a binding estimate are creating their own problems. Although (when the driver allows the additional items to be moved) they may not hear about the problems, they may then be dealing with disgruntled movers who are handling everything that the customer cherishes. Or, they may be confronted with the problem that they themselves created and they may be forced to own up to the fact that it is not the mover who created the problem: it is the customer.

Movers have most likely already given you their rock-bottom price. I suggest that one should pay for the articles they want to move. I suggest that one should pay for the services one receives. Respect your mover as the professional he or she is. Pay him for the services he or she performs. Non-binding estimates are in the best interests of all concerned. But like all services the end-quality of the service is dependent on the quality, responsibility, and experience of the service provider, so do your homework...do your due diligence...and find a professional mover...not the brand name with the perceived cheapest price.
Christopher Noblit
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Diane
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Re: An argument for non-binding contracts

Postby Diane » Tue Sep 21, 2010 12:11 pm

Like a lot of people, I have moved (or have helped my children move) many times. I will confess right now that during each of these moves, we added items that we didn't initially tell the moving company about. Six extra boxes here, a bicycle, vacuum cleaner and card table there. It just seems to go with the territory. Items take up more room in the boxes than you think they will, you decide not to leave items behind that you MIGHT use in your new location, etc. etc. Obviously I didn't intend to defraud the moving company, and the drivers were gracious enough not to make an issue of it, and I always tipped well. But I agree with Chris that this kind of thing very likely happens in most moves.

My understanding is that all estimates used to be Nonbinding. I remember my parents anxiously waiting for the driver to call to tell them what the weight of their shipment was. I remember my father standing on a bathroom scale holding boxes, trying to estimate what their weight might be in advance of a move. I believe that Nonbinding estimates faded in popularity after the industry was deregulated in the 1980s and - with the floodgates open to dubious companies - movers had to start competing on price. Unless something changes drastically, I don't see that there's any going back.

However, I applaud what Bill and Chris have posted, as well as MusicMom's warning that a Binding estimate offered by the wrong company can be extremely dangerous. I'll go on record as saying that I don't think any moving company should be ruled out simply because it won't offer a Binding estimate.

The owner of one of the companies that MovingScam endorses in New York City, All Star Moving, has been talking with me recently about his own problems in this regard. Everybody wants him to bind the hours on local moves in and around the city. But he says that he tries to reason with people, telling them that unless they pay for the actual time the move takes, he can't pay his workers a fair price for their labor and also cover his materials and truck costs, to say nothing of possible parking tickets. He says that he sometimes even lists his expenses for customers, and sometimes they agree then to accept a Nonbinding estimate based on hours. But it's an uphill battle, especially in New York with its many marginal companies and abundant immigrant labor.

cnoblit
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Re: An argument for non-binding contracts

Postby cnoblit » Tue Sep 21, 2010 12:28 pm

...I believe that Nonbinding estimates faded in popularity after the industry was deregulated in the 1980s and - with the floodgates open to dubious companies - movers had to start competing on price. Unless something changes drastically, I don't see that there's any going back...
Thanks Diane. I believe that "binding estimates" are a tool employed by unethical movers and unethical sales persons to secure a move by seducing the customer with a low "guaranteed" price. In addition, it seems to me that the first guy (or gal) who puts a unethical binding estimate on the kitchen table often sets the pricing bar for the others who follow.

My company -- located in one of the most expensive areas of the United States -- charges $32.00 an hour for a professional who is as skilled in his trade is as my Honda mechanic (@ $95.00 per hour), my plumber (@ $100.00 per hour), or my electrician (@ $100.00 per hour). And when I tell a customer that I charge $141.00 per hour for 3 men and a $75,000.00 fully truck I get "...ohhhh...that's high and "...are you willing to flat rate the hours..."

We do what we do well. Very well. Just...please...don't tell us how to do it and...please...please...pay us for doing it.
Christopher Noblit
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BillAdams
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Re: An argument for non-binding contracts

Postby BillAdams » Tue Sep 21, 2010 12:50 pm

I agree with Chris in that roughly 100% of my customers make changes between estimate day and move day. By asking for a NTE or binding contract, the customer must commit to all of the specifics related to their move, and they lose all flexibility to make changes. Not many people I meet on estimate day can do that.

I also agree with Diane in that the customer isn't really adding things. They just didn't purge the amount they thought they could before load day. And with a binding contract, they are even less motivated to sell or donate unwanted items because it won't cost any more to have them moved.

The biggest problem is that consumers of movers forget that what they're investing in is people. Everyone likes to be paid appropriately for their efforts. If you pick the mover with the lowest weight, or you understate what you'd like moved or packed, and then demand a binding price from your mover, you have just planted the seed for arguments. Who has the energy for that?
"Twenty years from now you will be more disappointed by the things that you didn't do than by the ones that you did do, so throw off the bowlines, sail away from safe harbor, catch the trade winds in your sails. Explore, Dream, Discover."
-Mark Twain

cnoblit
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Re: An argument for non-binding contracts

Postby cnoblit » Tue Sep 21, 2010 1:38 pm

...The biggest problem is that consumers of movers forget that what they're investing in is people. Everyone likes to be paid appropriately for their efforts. If you pick the mover with the lowest weight, or you understate what you'd like moved or packed, and then demand a binding price from your mover, you have just planted the seed for arguments. Who has the energy for that?
Bravo Bill. Throughout the years moving has been recognized as one of the most stressful times in one's life. It has been ranked up there with death of a family member and divorce. As a result, initiating a chain of events which (pretty much) guarantees there will be more problems (during one of the most stressful times of one's life) doesn't make a whole lot of sense. Obtain estimates from quality movers and then pay the mover for the work that they do. Don't overpay them…but don't underpay them either.
Christopher Noblit
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Rick
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Re: An argument for non-binding contracts

Postby Rick » Tue Sep 21, 2010 2:26 pm

There are only two estimate options considered under the current FMCSA regulations that govern the transportation of household goods in interstate commerce - actual weight and binding (or fixed price).

The third variation, the one most often discussed in these forums and supported by some of MovingScam's lay moderators, is the 'guaranteed-not-to-exceed' (GNTE) variation of the binding estimate. This option was introduced by industry after 1995 as a method to console consumer fears that they were being taken advantage of by the mover.

A GNTE combines the price certainty aspects of a 'fixed price' binding estimate but still allows the estimator to include a 'fudge factor' to allow for some of the normal variance that the estimate plus 10% protection allows carriers in actual weight estimates.

Prior to 1980, there were very few consumer complaints against movers. Everybody charged the same price for the same service. To compete in the marketplace, licensed household goods carriers had to 'amp' their moving equipment and personal moving and storage services to remain financially viable.

Responding to voter pressure to lower relocation pricing, Congress passed the Motor Carrier Act in 1980 which repealed interstate motor carrier regulation to promote in­creased competition in the marketplace. This is birth year of the binding estimate. Coincidentally, it's also when movers began having their reputations tarnished by penny-pinching consumers who were desperately trying to get somthin' for 'nothin'.

Consumer complaints against movers accelerated even more after Congress passed the ICC Termination Act of 1995 (ICCTA) which announced the death of the Interstate Commerce Commission. This act further removed more regulatory control in favor of greater price competition. This is the year that general freight common carriers first considered offering bare bones freight transportation services to shippers wanting to move their household goods and personal effects for a lot less money.

Consumer choice and customer satisfaction became even more complicated (and illusive) when the moving industry experienced another drastic regulatory change when the Surface Transportation Board announced the decision to end “collective ratemaking” in 2008. In this new environment, anxious shoppers are now faced with 8400+ unique competitive price and service options when selecting a well qualified, properly licensed interstate household goods carrier.

This highly competitive moving marketplace is exactly what consumers wanted when they voted for this dog-eat-dog pricing environment. It wasn't movers who suggested they should sacrifice service and customer loyalty for cheaper rates.

The moving industry is quickly going the way of the national railroads and horse-and-buggy. It's way too expensive to operate and far too inconvenient to clean up after. The ones' being hurt the most by consumers shopping for the cheapest prices are the ones leaving the industry the quickest – the drivers.

Prior to the introduction of the electronic inventory in the '90s, most van operators couldn't tell if they were being taken advantage by customers adding a few extra items here-and-there when they loaded a binding estimate because they weren't required to weigh each customers shipment.

As the use of hand-helds became more widespread, the number of freebies HHG van operators were handling for each customer became much more evident as displayed on the electronic inventory and detailed packing list surrendered to each person paying the bill - at the START of the move. The nail was driven deeper into the wound (and the resentment EVEN deeper) each time a weight was taken on a GNTE that showed the customer was moving significantly more than what they agreed to pay for.

The industry will undoubtedly be slapped with a whole lot more unfair criticism as the ranks of these moving professionals continues to drop. Unfortunately, professional movers - the men and women leaving the moving business - can't feed their families on their customers' greed.

Eventually consumers (including the old and infirmed) will either have to 'pump their own gas' or 'bag their own groceries' to accomplish their own local, long distance, or international relocation plans. They'll either be forced to do-it-themselves or else, as Chris so aptly pointed out, be willing to pay an honest day's wage for an honest day's work.

Meanwhile, those that foolishly insist on shopping only for the cheapest pricing option will continue to get ripped off when their expectations are both met and fulfilled. Fortunately, they can always find solace and emotional support at consumer oriented complaint sites like MovingScam – where they're encouraged to let the entire world know what's going on in the moving industry right now.

I agree with Bill and Chris! Actual weight pricing is the most honest method of contracting interstate moving services for everyone involved in the transaction.

Let's call it the "No Surprise Pricing" option.

cnoblit
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Re: An argument for non-binding contracts

Postby cnoblit » Tue Sep 21, 2010 2:35 pm

...This highly competitive moving marketplace is exactly what consumers wanted when they voted for this dog-eat-dog pricing environment. It wasn't movers who suggested they should sacrifice service and customer loyalty for cheaper rates...
This entire post is the most concise, pointed, and compelling synopsis of the moving industry I have every read. I doubt I will ever read anything which summerizes the moving industry better. It made me feel like crying. Seriously. Thank you Rick.
Christopher Noblit
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Rick
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Re: An argument for non-binding contracts

Postby Rick » Tue Sep 21, 2010 2:54 pm

Thanks, Chris, but I can't take all the credit. Recently Eric Reed, Director of Business Development at Berger/Allied, allowed me to republish several pieces he wrote for the Worldwide ERC reflecting his opinions 'bout what's happenin' in the movin' business.

Crossroads in the moving & storage industry - May, 2010

Analyzing the Perfect Storm: the present state of the moving and storage industry - June, 2010

cnoblit
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Re: An argument for non-binding contracts

Postby cnoblit » Tue Sep 21, 2010 3:02 pm

He did a heckuva good job Rick. Don't tell him he brought tears to my eyes, eh? :wink:
Christopher Noblit
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Diane
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Re: An argument for non-binding contracts

Postby Diane » Tue Sep 21, 2010 3:02 pm

I regret that as one of the "consumers" who is apparently responsible for the current sorry state of affairs in the moving industry, I can't participate further in this discussion. I'm too busy today trying to research moving company reviews here so MovingScam can give more of the good ones a :thumbsup: rating to help their business. I just found that Corrigan is eligible for such a rating because one of its complaints posted in 2008 was actually about the hauler, not about Corrigan as the booking agent.

Yesterday too I spent a lot of time composing a long post about the van line rating system to try to bring more transparency to the process. I wanted to give people a tool they could use to ask their sales reps better questions about quality rather than focusing wholly on cost. As far as I know, this is the first post of its kind and it took me a long time to research.

http://www.movingscam.com/forum/viewtop ... 778#134778

Some of us "consumers" are trying to make a positive difference here by rewarding merit when appropriate and exposing bad performance when necessary to protect others. Although Rick's post (apparently partly borrowed) is eloquent, it's terribly simplistic to pin the whole blame on greedy consumers for the current mess. In 1980 no one could have foreseen all the ramifications of deregulation. I might just as well pin the whole blame on UniGroup for killing the legislation that would have repealed the Carmack Amendment. Both positions are too extreme.

I am getting really annoyed by this constant kvetching and blaming the victim! Let's all work to improve things rather than being so negative all the time!

cnoblit
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Re: An argument for non-binding contracts

Postby cnoblit » Tue Sep 21, 2010 3:12 pm

...Although Rick's post (apparently partly borrowed) is eloquent, it's terribly simplistic to pin the whole blame on greedy consumers for the current mess...
Ummm...well...errr...he did leave out the part where movers could "JUST SAY NO." DOH! 8)
Christopher Noblit
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Rick
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Re: An argument for non-binding contracts

Postby Rick » Tue Sep 21, 2010 4:06 pm

Sorry that you're obligated to other concerns, Diane.

Once again, though, I don't understand why an unpaid volunteer is saddled with the immense responsibility of manually maintaining MovingScam's feedback information, especially when it's the owners who benefit from the site's expanded revenue stream who have final say on what is publicly shared and published.

My opinions about which of the two moving estimate options are the best for all parties concerned was not meant to place blame on anyone. MovingScam already does an excellent good job of that. Instead I tried to support my choice from a historical perceptive.

Recently, I watched Inside American Airlines: A week in the life produced by "TODAY" show travel editor Peter Greenberg http://www.cnbc.com/id/15840232/?video= ... 763&play=1 . It's worth watching if you can.

The episode talked openly about how the airlines arrange their pricing since Georgia's favorite son deregulated them in 1980. It also explains why a customer whose paid $1600 for his ticket now sits next a someone who only paid $150.

In the piece, American Airlines chairman publicly acknowledged that since air travel (like moving) has became a commodity in consumers eyes, his company's profitability is much more important than their service record. Some full transcontinental flights, incidentally, only manage to make a $200 profit.

Peter Greenberg reports what I've always suspected. Consumer are more concerned about what's in their pocketbook then the quality of service they receive. Moving, like air travel, has become a commodity for which there is shrinking consumer demand, but which is supplied without informed qualitative differentiation across a highly competitive marketplace.

Incidentally, Carmack applies to the airline industry also. And, in fact, the whole transportation industry! What will consumers do when there are no professionals left in business to move them after all the frivolous lawsuits are settled? Call U-Pack?

Diane wrote:
Yesterday too I spent a lot of time composing a long post about the van line rating system to try to bring more transparency to the process. I wanted to give people a tool they could use to ask their sales reps better questions about quality rather than focusing wholly on cost. As far as I know, this is the first post of its kind and it took me a long time to research.
Is this going to become a sticky? If not, the information will be buried by the end of the week.

Instead of you doing the research, Diane, wouldn't it be a whole lot easier for Tim or Jeff to ask each advertiser (or corporate representatives willing to participate) to explain their company's quality service initiatives and how individual scores are calculated?
Last edited by Rick on Tue Sep 21, 2010 7:05 pm, edited 2 times in total.

Diane
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Re: An argument for non-binding contracts

Postby Diane » Tue Sep 21, 2010 5:13 pm

Now THAT'S a positive suggestion. :D

I do think it would be great to have my post, or some form of it, be a sticky. I was actually waiting for you to comment on it since I know that metrics are an interest of yours. But you didn't.

With regard to asking each van line or independent company for info about quality control measures, you and I can make suggestions all we want but Tim and Jeff are not very "active," shall we say.

When I speak with the person at Suddath about how to present her company on the website, I'll ask her whether she will share how United or Suddath determines performance ratings for the 16 offices, some of which I understand are military so they use a different rating system. That would be a start.


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