Electrical Estimating Basics
Since January, we have been discussing the estimating process. Now, it’s finally time to submit your bid. The take-off is complete and checked for accuracy. You’ve applied labor adjustments, reviewed the quotes, and written a detailed scope or proposal letter to support your final figure.
There are two bidding situations that are likely to occur — a public bid opening or a private bid. If your job is a publicly funded project, it will be a public bid opening at a specified place and time, meaning you are bidding “plans and specs,” and usually no exclusions can be taken. In a public bid situation, you might be bidding as a prime or a sub, depending on how the job is being put together. In other words, you might be bidding on the electrical bid package, or you may be submitting your electrical price to a general contractor who will be bidding as the prime. In either scenario, you typically do not get a second chance. The low number wins the job, precluding any problems in the scope review, which we will discuss later.
For privately funded projects, the bid process is quite a bit different. You prepare your proposal the same way, but what happens when you submit your bid is anyone’s game. Again, you may be bidding as the prime contractor or as a subcontractor to a general contractor or construction manager. In this situation, there is a specific strategy to follow. You need to be careful about whom you submit your price to, when you submit it, and the number you actually submit. For example, if you have a good working relationship with a general contractor, you will probably give him a better price than someone with whom you have never worked.
Even if you have worked with a contractor before, be careful about submitting your price too early. By doing so, you make yourself a “target” or “that number to beat.” If you get hounded for a number early, you may want to respond with something vague like, “I am thinking around $1 million; is that number in the ballpark?” Based on the feedback you get, you may have some inside information about how your bid is being viewed. Although you will have a specified date and time at which the bids are due, unlike a public bid opening, your numbers will not be read in public. Oddly enough, the low bidder may not actually be awarded the job. How could this happen? The answer comes down to negotiation.
Before a job is awarded, the entity that has solicited the proposals will conduct scope reviews, typically with the three lowest bidders. During this process, the plans and specs are reviewed. At this point, you will be asked whether or not you covered certain items in your scope of work. This process helps to level the playing field. In a private bid situation, you can exclude items from your bid, unlike the public bid opening arena. During the scope review, you will have a chance to clarify why you included or excluded an item. Subsequently, you may be asked to add something to your bid based on the outcome of your scope review.
There can be a lot of game playing in the bid process. The general contractor may tell you that “your price is in the mix, but someone else’s is lower.” In these situations, there are a number of strategies you can employ. The one we recommend is the direct sales approach. Ask the question, “What do I have to do to get this job off the street today?” Remember, the idea is to actually close the deal. At the same time, I would caution you never to chase someone else’s number unless you are sure you can do the job for that price. Of course, you should also always complete a detailed take-off before you bid any job so that you know your costs.
Another word of caution: Never bid a job below your cost, thinking you are going to make it up in change orders. Although change orders still are issued on jobs, this economy is not like the “good ol’ days” when the value of the change orders often exceeded the original contract value. Sometimes, especially lately, there are bidders that put out an extremely low number. Once this bid is submitted, it now becomes the number to beat because, let’s face it, people want to put as much money in their pockets as possible. This is a dangerous situation. The general contractor will want to buy the job for this price; however, this low number probably was not based on a take-off — and if it were, something was undoubtedly missed. This is a tough situation to combat. Reiterating this point from earlier, my best advice is don’t chase someone else’s number unless you are certain you can do the job for that price. However, if you are privy to information about the low bidder that may affect his job performance, then by all means, sell your bid and your company’s strengths versus your competition’s. As the old saying goes, “it ain’t over, ’til it’s over.” As with most situations, persistence is the key. Never give up unless you know the job is really gone.
Next month will be the last article in this series — where we sum everything up and give you some final thoughts to ponder.
Candels is president of Candels Consulting, an electrical estimating consulting firm in New York City. She can be reached at: firstname.lastname@example.org.