Your main competitors always get the better jobs, and they seem to know exactly how much to charge. What's their secret? It may be they use bidding software.
The bidding and estimating functions are so intertwined, you can consider bidding and estimating software to be the same. Most software developers do; thus, if you buy a bidding program, it does estimating; and vice-versa. This article uses "bidding" to describe either bidding or estimating. And bidding software makes a powerful tool to add to your arsenal. In an upcoming article, we'll see the mechanics of using such software. Let's look now at how you can use this software as a competitive business tool.
Tip 1: Build your inventory. Bidding software allows you to know the cost of the materials you'll use for a job. From the bidding program, you can "take off" the details you need for building your physical inventory. If you have an inventory database, you can use a Windows-based bidding program to interact with it.
Tip 2: Get ready. Gather all the information you need, or ensure easy access to it. The more accurate your information, the more accurate your bid. Develop standard costs you can tap into. For example, determine the cost of travel to a particular location.
Tip 3: Aim for the best price. The sidebar lists some things that allow bids to hit their targets. In 1996, a company bid $1.2 million on a job, while competitors bid as high as $3 million and as low as $700,000. Obviously, not everyone knew how to hit the target. How did this company come up with the $1.2 million figure? They built a spreadsheet model of the labor and materials needed to complete the project, and let the computer spit out the price (they could have done the same thing for less work, had they used bidding software). They used job histories to ensure they weren't plugging in bogus numbers. Despite this effort, they were not the low bidder. Do you think they got the job? The next tip explains what happened.
Tip 4: Let your ammunition work for you. When the company met with the client, it arrived with printouts of the worksheets used to arrive at its cost. They showed only the categories accounted for, not the actual numbers. This level of detail impressed the client enormously. None of the other bidders had used a scientific method to arrive at their bid price. The contract went to the firm that did it in software! A further development: this same firm got the nod for the other parts of the overall project, which ran close to $40 million. The small investment in software paid for itself. You, too, can hit your target; when you're prepared.
Tip 5: Know your stuff. This company's employees knew exactly what their costs were and how much they wanted to make from this job. Thus, they were able to negotiate from a position of strength. And because they didn't try to gouge the customer, they were able to negotiate from a position of integrity. This is perhaps the biggest benefit of being able to quantify what it takes to do a job. Finger-to-the-wind estimates may work fairly well; but it takes only one poor bid to wipe out your company. You can't afford to talk price without knowing your cost.
Tip 6: Show your stuff. You may need to lay your cards on the table and show the potential customer why your cost is accurate. The bid forms the basis for your contract. In many jobs, an accepted bid is a de facto representation of the contract. In case of a dispute, the bid would count for more than what the customer says you meant. Are you bidding on the same project your customer thinks you are? Make clear what you are going to do.
Tip 7: Show you know. Use the bid to show you know the job. A plant engineer once was forced to accept a low bid from a contractor he didn't like. He had used them before, and they cut too many corners. He rewrote the bid requirements such that each contractor had to submit a detailed work plan and bid. He was able to drop the undesirable contractor on that second round. It's common for a "cheap outfit" to get the job by providing too little information. As shown in Tip 4, you can force the competition to a higher standard; or out of the bidding.
Tip 8: Decommoditize the bidding process. Use the bid to show where you are adding value. In Tip 7, you might show what steps you'll take to conform to the National Electrical Code. But, are you providing your own lift, or are you using the customer's? In a vague bidding situation, everyone looks alike. Get the customer to ask your competitors to say what they plan to do. You then must compete on price, instead of workmanship and competence. Make your value clear; bidding software is the perfect tool for doing this.
Tip 9. Plan your work. Wouldn't it be nice if you could plan your work several months in advance? You can. The more accurate your bids, the more consistent your "hit rate" in getting work. So, you can determine some value, such as 40%, of all bids end up in sold jobs. As soon as you do a bid, plot the labor hours needed per craft or discipline on a spreadsheet or calendar; but first multiply the number by your "hit rate." You can then see what labor, training, and equipment you will need in upcoming months.
Tip 10. Find out why bids die before getting approval. If your price is too high, don't make the mistake of lowering it the next time around. Don't simply cut costs. Look for ways to improve efficiency and eliminate non-value-added steps. Your bid can give you information for doing this. For example, did you plan several trips from your supply house to a distant location? Why all the trips? Maybe you could have ordered over the Internet.
Both content and presentation are key factors in bid acceptance. Maybe you lost the bid because you were off the mark as to what your customer really wanted. Maybe you need to make sure the bid includes a concept statement or executive summary. Maybe your bid was so detailed the customer just refused to look at it; or too skimpy for your customer to take seriously. Maybe your bid was excellent, but something else happened.
Here's an example of a sales presentation gone wrong. Company A sent a delegation to a bid on a major project. They came equipped with spreadsheets, laptops; the works. Company B sent one person. Company A had an inferior bid, in terms of quality, price, and value. However, Company A got the job. What was the deciding factor? Company B did not act like they wanted the work. This was a $12 million deal. The customer left that meeting knowing which of the two companies would care more about him. And that's exactly what you need to show with each and every bid. Look through your bid and sales process, and see if this is what you are showing. If it's not, then you need to make a change.
Sidebar: Bid Considerations
You need to consider many costs beyond labor and materials. Most bidding software will cover the whole gamut. Here are some things many estimators fail to account for:
• Davis-Bacon Wage Act
• Mobilization and transportation costs
• Regional differences in materials costs
• Local ordinances, fees, permits, and licenses
• Cleanup costs
• Contingency factors
• Warranty costs
• Interactions with inspectors and outside agencies
• EPA compliance costs
• Bonding costs