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Maybe you’d like
to spend all your time moving dirt around, but you have to be business
savvy for your company to succeed. And an important part of attaining
this success requires that you know how to write winning bids—quality,
persuasive bids that convince potential clients you’re the
one for the job. You, over all the others.
Sure, a lot of whether
a bid gets accepted depends on price, especially with public bids.
But often there are many other factors involved too, particularly
with private bids. This article will give you tips on how you can
manipulate those other factors to create effective and winning bids
for your company.
Before the Bid
In addition to writing a great bid, one of the best things
you can do to make yourself more eligible for new job opportunities
is to maintain a level of integrity in how you run your business.
“Successful contractors are known for their honesty, fairness,
and ability to complete the work on time within budget,” says
Bonnie Hartman, invitation-to-bid specialist at Computer Guidance
Corp., a provider of financial, project management, and bid solicitation
software. “What people say about you has a big claim in whether
you will be selected in that bid.”
Oscar Hernandez, president
of Delta Grading/Three-Way Construction, definitely agrees. “It’s
very important in this industry that you deliver on your promises,”
he states. He believes that one way to build and uphold your reputation
is to admit when you’re wrong. It earns trust. “In construction,
it’s common that people don’t take responsibility for
mistakes. This makes it difficult for the developer because it increases
the cost of their project.”
And it’s just common
sense that positive relationships go a long way, too. “Many
of the decision makers pursue other opportunities with other developers.
The more you establish a good relationship with these key people,
the more your customer base will increase,” offers Hernandez.
Be Prepared
Obviously, just as you wouldn’t jump into a new job without
first doing research and developing a plan, you don’t want
to jump into writing a bid before doing the same. “You can
tell who’s prepared and who isn’t,” says Melissa
Aguirre, marketing director of On Center Software Inc., a bidding,
take-off, estimation, and project management software company. There’s
a big difference between someone who has thrown numbers on a sheet
and [someone who submits] a more formal visual presentation.”
To write a strong bid
that smacks of reliability, you have to do your research. You should
also aim to include the following qualities: accuracy, detail, completeness,
profitability (understanding your costs), clarity, and a clean presentation.
To help you do this, following are some basic questions to consider
before you begin writing:
- How can I attain
accurate materials and labor costs?
- What resources (equipment
and materials) do I need?
- What resources are
available to me?
- In what time can
I supply them?
- How much profit would
I like to make?
- What is the simplest,
clearest format in which to present the above material?
Brad Barth, senior vice
president of Product Management at Hard Dollar Corp., an estimating
and job control software company, points out the importance of understanding
the impact of a job’s schedule on your bid. “You can’t
just bid the job in a vacuum,” suggests Barth. “You have
to know when the job will be built and what your resource availability
will be during that time frame. And be aware of how to take advantage
of those situations where there might be early completion bonuses—or
how to avoid late completion penalties.”
Hartman suggests asking
yourself the following questions. “Do you have the ability
to obtain the necessary labor, material, equipment, licenses, and
insurance to complete this work in a timely manner? How much of
this work will you be self-performing, and how much will you need
to sub-contract? Is your current work schedule flexible to accommodate
any work delays by others that prohibit you from completing your
work?”
And do what is asked
of you. “Follow the directions in the bid documents,”
says Hartman. “If you cannot follow the instructions for the
submission of bid documents, the employer will question your ability
to complete the work as designed. Any submission that requires extra
effort to evaluate leaves a negative impression of your company,
and questions your ability to perform.”
Research, Research,
Research
“Winning bids are all about understanding the customer’s
specific project requirements and goals,” says Chris Bell,
market manager at Primavera Systems, a leading developer of project
management systems. “This information isn’t always contained
in the RFP [request for proposal]. It’s only obtained through
knowing your customer, meeting with them, understanding their concerns,
and understanding what—in their minds—demonstrates a successful
project.”
A great place to start
with your research—and it’s often overlooked—is to
attend any and all pre-bid meetings. “Through pre-bid meetings,
you can cover any changes to original plans and specs that were
sent out to you before,” says Greg Duyka, sales manager at
On Center Software Inc., with a 25-year background in estimating
and project management. “Be sure to ask lots of [questions]
here, which will help you clarify the bid requirements.” He
suggests getting everything you’re concerned about out in the
open at the start, asking questions before and during the writing
of your bid, and bringing up issues as they arise.
And it’s just common
sense to visit the site. “Do a soils testing analysis, confirm
requirements for environmental controls as well as possible costs
related to the existing site and soil conditions,” adds Duyka.
“If you have to haul in material, be up on new material prices.”
Barth also emphasizes
the importance of a thorough site visit and considering such things
as soil issues and traffic control. “A lot of times when you
look at the job on paper, things don’t jump out at you until
you go to the site. The most important thing is to model the job
in your head. And part of that is going to the job site and understanding
exactly what you’re getting into. People often tend to not
think through how the job will be built, but instead approach it
from the perspective of, ‘What have similar jobs cost us in
the past?’ “
“Not doing your
homework will reflect on your proposal,” says Hernandez. “The
grading plans give you a general sense of what the quantities will
be. However, if you do not continue to develop a good basis of information
for your bid, your numbers will not be competitive.”
“Do a take-off,
put all your cuts and fills into a good software program and, with
those, create solid numbers,” he adds. “In our trade,
correct quantities are everything.”
To guide you even more
in your research efforts, Hartman has developed a checklist of other
things to consider.
- What applicable federal,
state, and local government rules, regulations, and required inspections
will affect your ability to perform in a timely manner?
- If you’re bidding
as a subcontractor, are you required to work with the apparent
general contractor low bidder, or only with those to whom you
submit a quotation? And does whoever you’re working with
have a good reputation?
- What are the requirements
for payment for work performed?
Profitability
Obviously, you want to offer a good price to keep you in the
running. But you’re in business to make money, so one of the
most important elements of a successful bid is for it to be profitable.
“Oftentimes in the
construction industry the focus is on securing a large number of
jobs rather than ensuring those winning bids are profitable for
the company in the long run,” says Paul McKeon Jr., president
of BID2WIN Software, a developer of estimating and bidding software.
“What determines whether a bid is profitable or not is how
well you define the cost within that specific estimate. A bid is
a forecast of profit.”
There are several ways
to control your cost. For starters, don’t ever estimate what
the subcontractor’s price will be. Be sure to have them bid
to you. Also, a detailed approach—where you financially account
for every factor in your bid—is the safest way to go. “If
you haven’t fully mapped out the costs when writing the bid,
then you have no blueprint to accurately indicate your profit margin,”
says McKeon. This could also impact profit, in the sense that you
won’t have enough accurate information to give to the people
who are doing the actual work. Additionally, you can forecast profit
by tracking the cost history of previous bids so you have a reference
point to work from. This process can be enhanced by using the appropriate
bidding software.
Conchi Ossa, senior manager
of Bid Express, a Web-based bidding information service from Info
Tech Inc, a construction management software company, suggests looking
at the agency’s published bid tabulations, or a database of
recent bid tabulations, to find out what other contractors have
bid recently. This will also give you a good idea of how to price.
Controlling Your Costs
To control your costs, John Meibers, president of ComputerEase
Software, a project management software company, suggests the following
four steps in setting a price:
- Start with the take-off.
What do I need (equipment, materials, and labor) and in what quantities?
- Verify current day-labor
prices.
- Verify these prices
using the correct labor.
- Calculate your costs,
add on overhead, and then mark-up.
Be sure to give extra
attention to pricing volatile materials, such as steel. “If
you’re bidding on anything with steel and the price of steel
goes up,” explains Aguirre, “you’re stuck honoring
that bid. So you have to do research and maintain a good relationship
with your vendors so you know that they’ll work with you if
the price fluctuates once you’ve made the bid.” She also
suggests writing qualifiers in your bid, such as, “This bid
is good for x amount of time,” to cover yourself as much as
possible.
Barth highlights the
importance of understanding your true equipment cost. “That’s
where we see a lot of fluctuation in this market, and a lot of opportunity
to gain a real competitive edge. If you don’t have a handle
on what your machines really cost, you can easily blow the bid or
get a job you didn’t want.” He suggests using software
that can really track and capture your true equipment costs and
make last-minute adjustments if one of your elements suddenly changes.
Meibers—among others—points
out the importance of having historical records from past performances
so you are aware of your production rates. “You can’t
know them accurately if you’re not tracking that information
on your past jobs. You need to know production rates and per unit
costs.” He also stresses having an accurate figure for your
labor costs. “If you say you will charge x dollars per hour,
you need to know this is legitimate.”
Even when you’re
looking at cost history, you obviously can’t always assume
that each job will require what past ones have. Sometimes you just
have to use your best judgment. So when you don’t feel comfortable
quoting something that isn’t completely quantifiable in a concrete
way, you may want to put provisions for unforeseen circumstances
in your contract.
Be Detailed and Specific
These two elements are the keys to instilling confidence in
the owner. “You want to make it apparent that you thoroughly
thought through the process,” says Barth. And you achieve that
by actually doing just that.
“You don’t
want them to have to call you up and ask you questions,” says
Duyka. “You want to make sure they have as much information
as necessary to see that you have everything covered.” What’s
particularly important is to include detailed inclusions and exclusions,
which really show your attention to detail and ability to predict
and prevent future problems or misunderstandings.
“Some people think
the less things you list the better off you are, so the owner can’t
hold you to anything you wrote,” starts Barth. “But typically,
an educated owner will force you to list all issues and potential
issues. Not doing so could make you come off as sloppy or like you’re
trying to sneak something by. Ideally they should specify what they
want to see, but it’s the contractors job to bring them up
if [they’re] not addressed by the owner. If you get the owner
to rely on you as the expert, you can get out of the price wars
that drive down your margins.”
Presentation
“I think certainly you want to show a professional appearance,”
says Barth. “But I also think some people tend to get carried
away at times. What the owner wants is to have confidence that they’re
dealing with a professional company and that this company has gone
through a process to arrive at their proposal.”
“Most owners we
talk to,” he continues, “say the biggest factor is the
price. But right behind that is the confidence level that the jobs
will get done on time and on budget. So the more professionally
you present your bid proposal, and the more complete and professional
it is, the more you will elicit that confidence.”
Your bid and the way
you present it can be seen as a reflection of your methodology.
So you shouldn’t take it lightly. When Hernandez’s company
submits a bid, presentation is everything. They make sure it’s
well-written, detailed, includes a video, and is branded throughout.
Hernandez says this approach really helps them stand out from their
competitors because most contractors don’t put this much effort
into the presentation of their bids. His philosophy is, “When
a developer sees that a contractor has it together on a proposal,
they can assume they’ll get quality service out on the field.”
However, Jennifer Teufel,
president of Pathway Developments (a general contractor in Tucson,
AZ), who reads grading and excavation bids several times a week,
puts no value on the physical presentation of the bid except for
“basic completeness, legibility, and organization.”
Presentation is hardly
limited to the visual aspect. You should also think in terms of
how you want to communicate to your audience through the language
you use. Be clear on who your reader is and think about how they
would best receive the information you’re conveying. “For
smaller proposals,” Hartman recommends, “make sure you
write in the language of your intended reader. Homeowners, for instance,
may not understand the technical terms of your special field.”
To Software or Not
to Software?
Although some contractors and subcontractors still use Excel
for their bid template, at this point the general consensus among
industry sources is that it’s a bit old-fashioned. Bidding
software saves time and is more accurate, so the question is really
why wouldn’t you want to use it?
“If you’re
detailing the cost of a project, spreadsheets are not the right
solution,” says McKeon. “They can be inefficient and are
only as good as the formulas someone writes in them, which can lead
to costly errors. Plus, there is a degree of inefficiency because
you cannot have more than one person working on a bid at the same
time.”
“Bidding software
can save contractors a lot of time and effort,” adds Ossa.
“Bidding errors can be reduced or eliminated by using software
designed for the bidding industry to prepare bids, and by using
an online bidding service that can perform mathematical calculations
and detect errors with the bid before it’s submitted.”
“With the right
software,” says Barth, “you can integrate the estimate
with the schedule. You can make changes to the schedule and see
what that does to your estimate.” If the owner asks you if
you can get this job done in two weeks instead of four, there’s
a relationship between cost and how quickly you can complete the
job. The right software can calculate how these factors will effect
your cost.”
Software can also help
you build up good history. “Contractors can see in real-time
how estimated costs and production compare against actual costs
and production—both while the job is in progress and upon completion,”
says Fred Ode, CEO of Foundation Software, a developer of construction
accounting software. “The contractor can then use this historical
data to help estimate future job bids more accurately. This eliminates
any guesswork, as job estimates are based off of true, historical
numbers as opposed to mere speculation.” He also points out
that companies who do not track historical data run the risk of
losing money on specific aspects of their jobs without even knowing
it. “For instance, a contractor could do great on site preparation
but lose money on water lines.”
Bell concurs with Ode
on the importance of historical data. “One of the best ways
to be prepared is to have a centralized repository for project costs.
That’s why a project management application is so important.
This is different from estimating in that it tracks what really
happened on the job and then that information is used to improve
your estimate for the next job. You can break down the actual costs
into both units and time so that your estimate precision improves
dramatically.”
Hernandez has found that
the importance of software for the grading and excavation industry
varies depending on the size of the job. “For big jobs, yes,
it’s important. For smaller jobs, like fine grading, it’s
not so important. The big projects do require software because it
helps you calculate quantities. For mass grading we work off of
a cubic yard measurement. Without software you won’t know what
this is. Software is very important to determine your quantities,
which will determine accurate pricing.”
Other Pointers to
Keep in Mind
Again, the importance of asking questions can’t be emphasized
enough. It’s the basis for clear communication. “As a
subcontractor, you should be just as meticulous about bidding to
the contractor as the contractor is in bidding to the client,”
says Duyka. “Many people don’t realize how important this
is.”
“And when following
up, it never hurts to ask the client if there’s anything you
haven’t covered in your bid that they want to see,” says
Aguirre.
Tuefel says when she
receives bids, what really turn her off are hourly rates, cap rates,
overly abundant exclusions beyond appropriate for the job and, of
course, any clear indications that the sub does not understand the
scope of the work.
Hernandez believes it’s
very important to adopt a corporate mentality. “Contractors
tend to have this mom and pop mentality and they often don’t
look very professional. The more of a corporate mentality you have,
the greater chance of earning the trust of developers.”
And always, always, double-check
your work. “Some contractors get sloppy and don’t double-check
their bid package for errors,” says Ossa. “Some of the
biggest mistakes are often simple omissions. Often contractors fail
to verify their math on extended prices or sums, or neglect to apply
all amendments issued on the project. Sometimes they fail to attach
a required bid document such as their bid bond.”
So—bottom line—be
sure to have as many people as possible proofread and double-check
your bid.
The Power of a Good
Bid
So, how much impact can a good bid have even if the price is
not the lowest? The general consensus among those interviewed is
quite a bit.
“In almost all bid
situations,” says Hartman, “the bid speaks for itself.
But remember, it also speaks for you. A coffee-stained, dog-eared
submission in pencil, red ink, and black ink, with unit price numbers
that are hard to read and columns that are added incorrectly—with
missing signatures and certifications—makes a clear statement
of the quality of work that you might perform if hired.”
“Many times, well-written
bids can override or provide compelling evidence why someone should
choose your firm, regardless of price,” says Bell. “However,
you need to give the customer a compelling reason to choose your
service over those with less expensive bids. All of this starts
with client intimacy. That means knowing your client better than
your competitors do, for this starts a trusting relationship, which
is far more valuable than a few thousand dollars difference.”
Speaking as an ex–general
contractor, Duyka strongly believes in the impact power of a good
bid, especially in its ability to build the comfort level of the
employer. “A general contractor has the biggest risk. He stands
to lose the most. When a subcontractor can recognize that risk and
help reduce it by providing a complete and concise proposal, the
general contractor and subcontractor both stand to win. A good bid
builds credibility. That’s where you get the preferred bidder
status—from having a complete scope, a clear explanation, open
communication lines, and accessibility.”
Barth’s sentiments
parallel Duyka’s. “When you think about what the owner
has to base their decision on, price is certainly a big factor,”
he says. “But more and more, that’s not the only factor.
And a lot of times it’s not the number one factor. The decision
is based on the confidence level the owner has in the contractor.
And unless you have a really great existing relationship with that
owner already, your bid proposal is the best chance to get that
confidence across.”
Amy Sorkin is an LA-based
journalist who speciaizes in marketing communications.
GEC
- May/June 2005
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