The Blank Slate: Do You Work on Spec?

I've rarely encountered a client that has asked for me to work on spec, but I know it does happen to a lot of designers. I've even seen websites where clients post their projects and designers try to land the gig by submitting work on spec. Frankly, I believe this is a problem, and devalues the industry as a whole. For those who have never encountered a spec request before, lets define spec work.
"Spec work (short for speculative) is any job for which the client expects to see examples or a finished product before agreeing to pay a fee." Source: about.com I recently ran across a company that was looking for a designer to produce a poster. Instead of hiring a designer directly for the project, they launched a contest, and invited anyone willing to participate to submit a design for the poster. The winner gets... (wait for it)... paid. The company gets to choose from potentially any number of designs, but they lose the one on one time they would get with a designer to communicate their goals for the project, and have something produced that they had a direct hand in creating. I'm assuming that the company failed to see the value in the this. Why is that? Are clients generally not educated when it comes to hiring someone to do a job? hmmm.... This contest brought up a question...

Do You Work on Spec?

Have you ever entered a design contest? Have you ever had a client request spec work? If so, how did you handle it? How do you avoid spec work in general? Let the WeGraphics community know where you stand regarding this issue in the design industry.