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Understanding the Estimating Process — Part 3 of 12

Mar 23, 2011 5:11 PM, By Linda Candels, Candels Consulting

Knowing when and what to bid

You know your business, and your potential customers know you, so what’s the next step in the estimating process? It’s time to look at available jobs to bid on and the companies soliciting bids. The number of bidders, the “signals” you are receiving from those soliciting a proposal — and whether you have the tools, equipment, bonding, or pre-approval required — are all items you must consider before you even think about starting your take-off.

You can find available jobs on various bid boards and websites as well as by networking with general contractors (GCs). Once you have found one or more that pique your interest, pay attention. Review the drawings. What is the quality? Are there “engineering holes” because the project is still in the design phase, and the GC may just be looking for a budget price?

Do you understand the scope of the work, and do you have experience in this area? If not, you may be open to potential pitfalls that could result in escalated labor or material costs — or both. Do you have the appropriate manpower, tools, and equipment to complete this type of work? If not, renting or purchasing certain items will certainly raise your job costs.

Which GCs are bidding the job? Do you have a relationship with them? Remember, you may need to submit several bids to a GC before you are awarded a job. In addition, beware of providing “check prices.” If the project is a public bid opening, it will be awarded to the lowest bidder, provided the company meets pre-approval and bonding requirements, if any. If there are several electrical firms bidding, the plans are marginal, or you do not have a relationship with the GC, walk away. Spend some time looking for projects that really suit your company instead of wasting your time and overextending yourself.

It’s also important to remember that time is a critical factor. Job schedules are often extremely tight. As a general rule, the more condensed the schedule — and the more trades on-site at the same time — the less productive your labor force will be. Factor potential overtime wages and labor inefficiencies into your proposal.

Does the job require a bid or performance bond? Bonding capacity is a critical part of a contractor’s portfolio, which minimizes the financial risk faced by project owners and developers. A performance bond provides a legal guarantee that the contractor holding the bond will perform specified work or face financial penalties. Bid bonds guarantee that the bidder will sign a contract if awarded the job and uphold his price. A payment bond protects the owner if a subcontractor fails to pay its suppliers, which helps the owner avoid mechanics liens. Make sure to give your bonding agent plenty of time to prepare the bond so you can meet your bid day requirements.

Beyond bonds, many projects require pre-approval to not only work at a site, but also to submit a bid. Don’t wait until the last minute to address this issue, as there could be a mountain of paperwork to complete, which may require the assistance of your accountant or bonding agency.

By paying close attention to bid opportunities, you will have a better handle on choosing the right jobs to bid. In this economy, all contractors have to bid more jobs to get the same amount of work as they did in previous years. Bidding smarter will give your company the short- and long-term edge it needs to succeed.

Next month, we’ll start getting into the meat and potatoes of estimating. Once you’ve decided to bid a job, what comes next? Check back with us in April to see the answer.

Candels is president of Candels Consulting, an electrical estimating consulting firm in Niantic, Conn. She can be reached at lacandels@candels-consulting.com.

 

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